Tieton Capital Management

4700 Tieton Drive, Suite C
Yakima, WA  98908
(509) 965-6488

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February 18, 2015

February 18, 2015 By admin

Portfolio Change Update

Purchased Barrett Business Services (BBSI):

  • Outsourced human resource services provider for small and medium sized businesses
  • Historic misstep managing workers’ compensation costs led to large charges last year
  • Share price tumbled as investors lost confidence
  • Bulked up staff and engaged experienced external workers’ comp actuary
  • Research led us to conclude that for the first time the company is now adequately reserving
  • Look for existing branches to increase number of clients served
  • Additional branch openings anticipated
  • Company forecasted approximately 18% revenue growth in 2015 off strong 2014 growth
  • Share price jumped when Barrett reported fourth quarter earnings and provided 2015 guidance
  • Still, shares trading at approximately 11x 2015 estimates

Added to Vera Bradley (VRA): 

  • Designer, retailer, and distributor of women’s handbags
  • Believe improvement in product selection and offering will meaningfully drive business
  • Expanding department store distribution
  • Full management team now in place after several changes
  • When initially bought shares, only purchased partial weighting
  • Increased confidence in turnaround, combined with lower share price, led to buying a full weighting

Trimmed Francesca’s Holdings (FRAN): 

  • Own over 500 women’s boutiques
  • Share price rallied following announcement of increased sales guidance and new CEO
  • Led to overweighting in the portfolio and decreased upside relative to our two-year price target
  • Confidence continues in our catalysts
  • Therefore, retained normal portfolio weighting after trim

Trimmed Innospec, Inc. (IOSP): 

  • Specialty chemical company
  • Well run business with excellent management team
  • Share price rose following dynamic acquisition
  • Above average weighting was trimmed down to average holding size due to share price rise

Trimmed Merge Healthcare (MRGE): 

  • Medical imaging and information management software
  • Increased investor confidence in business led to share price increase
  • Position was trimmed as upside relative to our two-year price target diminished

Trimmed TETRA Technologies (TTI): 

  • Energy service company
  • Decreasing confidence in our company specific catalysts
  • Trimmed holding in recognition of lower confidence

Trimmed Vonage Holdings (VG): 

  • Provide voice over internet (VOIP) telephone services
  • Share price moved up rapidly following exit of an underperforming business and an acquisition in medium size business market that could accelerate growth rate
  • Trimmed shares to normal weighting

Filed Under: Portfolio Change Updates

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