Tieton Capital Management

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

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February 27, 2020

March 2, 2020 By Lora Leavenworth

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

 

 

Filed Under: Portfolio Change Updates

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  • December 21,2020
  • February 27, 2020
  • April 18, 2019
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