The Ironwood SMID Cap Value Strategy was virtually unchanged for the month in what was a challenging equity market environment. The portfolio’s energy and utility stocks positively impacted performance, while technology stocks detracted from last month’s performance.

Some of the better performing stocks were Halcon Resources (HK), Weatherford (WFT) and Dynegy (DYN). We believe, one of the reasons these stocks performed well because they showed progress on the execution of the transition strategy that we identified as a potential catalyst for stock price appreciation when we initiated our positions.

We did not initiate any new positions, but we did eliminate one stock, Comverse Inc. (CNSI), that failed to deliver on expected revenue growth and hurt the portfolio’s performance.

The portfolio has held Comverse, a telecommunications solutions provider, since early 2013. In 2012, the company was spun off from its troubled parent, Comverse Technology.

A new management team led by CEO, Philippe Tartavull, hired in August 2012, was pursuing a two-pronged strategy that would rationalize costs to improve margins and pursue growth opportunities to drive sales growth. Unfortunately the transition and turnaround were pushed out due to order weakness in the Asia Pacific region, particularly India. The lack of new orders translated into lower revenues and led to the company’s operating margin goal being pushed out.

We were concerned that revenues and margins assumptions going forward will be permanently reduced. Given the combination of these factors, we determined the transition story was impaired and we sold the stock in April.

DISCLAIMER: The investments discussed are held in client accounts as of April 30, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.

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