Purchased Bonanza Creek Energy (BCEI):
- Colorado oil & gas producer
- CEO joined the company nearly two years ago
- Operating discipline and production growth have been remarkable under new leadership
- Anticipate production continuing to grow at least 15% due to strong property position
- Joint venture with Anadarko could accelerate production growth in two years
- If oil prices rise, will directly benefit cash flow
- Purchased initial position in early January
- Stock price declined with falling oil prices in response to coronavirus news
- Used opportunity to complete purchase of full portfolio weighting
- Trading at less than 50% of book value and under 4x estimated earnings
Purchased Green Brick Partners (GRBK):
- Home builder in fast growing metropolitan areas
- Expect increased number of selling communities leading to accelerated growth
- Lower interest rates should benefit sales activity
- Expanding into entry level homes, initially in Dallas, then Houston
- Will likely enter additional high population growth markets
- Trading under 10x this year’s consensus earnings at time of purchase
Added to Apogee Enterprises (APOG):
- Leading commercial glass and frame manufacturer
- Position was trimmed in third quarter after good earnings led investors to push stock price up
- Stock price dropped in December following a temporary pause in the framing segment
- Met with management day earnings reported and concluded hiccup will be short-lived
- Increased holdings approximately $10 below price trimmed in Q3
- Trading around 11x next year’s estimates at time of purchase
Added to Fluent, Inc. (FLNT):
- Digital marketing services company
- Earnings weakness in third quarter caused by higher costs from new initiatives and a revenue slowdown management said reversed by mid-October
- Stock price fell when third quarter earnings were reported
- After meeting with management in New York chose to purchase additional shares
- Early January preannounced strong Q4 results and stock price jumped
Added to TriState Capital Holdings (TSC):
- Novel bank and asset management organization with impressive leadership team
- One of most innovative, efficient, branch-free banking models we have evaluated
- Anticipate exceptional loan growth will continue in their lending niches
- Unique lending categories with incredibly low losses
- Leading deposit growth generating low cost funding source
- Searching for accretive money management acquisitions to further build recurring revenues
- Foresee slower expense growth, leading to earnings growing faster than revenues
- After initial purchase stock price moved up due to above consensus third quarter earnings
- Stock price recently declined when an original private equity owner sold their shares
- Used resulting stock price decline to purchase additional shares to full weighting
- Trading at approximately 12x this year’s earnings estimates and 1.1x book value
Sold Barrett Business Services (BBSI):
- Outsourced human resources provider and consultant for small and medium sized businesses
- Management executing strategy
- Substantially increased efficiency and expanded margins over last two years
- Stock price rose following strong first half results
- Forecasted upside less than portfolio average
- Previously trimmed to create cash for companies with higher anticipated upside
- Remaining shares sold
Sold Helix Energy Solutions (HLX):
- Own & operate specialized offshore oil & gas well intervention vessels
- Management executing business plan
- Our research identified three important contracts ending next year
- Concerned contract renewals will be at lower prices than current contract rates
- Trimmed early last year to mitigate future risk
- Share price now higher; sold remaining shares to generate cash for Bonanza Creek purchase
Sold SandRidge Energy (SD):
- Mid-continent oil & gas producer
- Small weighting in portfolio
- Were waiting for indicators new Chief Executive Officer would transform company
- CEO departed less than a year after joining company
- Prior to departure announcement, CEO involved in acquisition discussions to grow business
- Sold company on day CEO departure was announced
Trimmed Regional Management (RM):
- Small loan consumer lender
- Strong stock price increase led Regional to be one of largest portfolio weightings
- New loan loss accounting rule may provide a headwind during 2020 transition
- Combination higher stock price with loss accounting uncertainty led us to trim weighting