Late summer adjustments for the Crabtree Technology portfolio
August was business-as-usual at Crabtree Asset Management. We sold nine positions, bought nine new ones and trimmed six other holdings.
Sold were Audience (ADNC), American Public Education (APEI), Cerner (CERN), Demand Media (DMD), DSP Group (DSPG), GenCorp (GY), PhotoMedix (PHMD), Tetra Technologies (TTEK) and VimpelCom (VIP).
Brand new 2% positions included AudioCodes (AUDC), Digital Generation (DGIT), Perficient (PRFT), Turkcell (TKC), Inteliquent (IQNT), Nordion (NDZ), Stantec (STN), American Movil S.A.B. (AMX) and The Active Network (ACTV). All of the new names came from our quantitative model.
Trimmed back to 2% positions were Anika Therapeutics (ANIK), Cray (CRAY), eHealth (EHTH), EPAM Systems (EPAM), Green Dot (GDOT) and Stamps.com (STMP).
Note that in mid-September, we divested our position in Stantec (STN) because its trading volumes proved insufficiently liquid. We will be replacing it shortly with another eligible candidate from our quantitative model.
This is very rare and in fact it is the only time in the 4½ year history of the Crabtree portfolio that it has occurred. We are always very vigilant to make sure our positions are liquid and 100% replicable by our distribution partners.
There were no shortage of candidates for new Crabtree model positions because our mid-August model yielded 122 public companies. This was unusually high for a period of time close to a market high.
Typically, our “fame” or valuation parameter will exclude a lot of candidates near a market high. In this case, it has been offset by an unusually large number of candidates exceeding our “execution” parameters. I believe this is a testament to how well so many public companies are performing in 2013 (the S&P 500 Index is up over 19% year-to-date as I type this in mid-September).
Overall performance for the Crabtree Technology portfolio in August was mixed – falling on an absolute basis but outperforming relative to its benchmarks.
September marks the end of summer and the end of the traditionally weakest time of year for technology companies. Semiconductor companies and their fabrication partners are building inventory for the end-of-year holiday sales rush, while sales right now are typically weak.
Software companies find it hard to get signatures on contracts when buyers are literally still at the beach. And we noticed that for perhaps the first time in five years, decision-makers overall decided to actually go on vacation in August, perhaps feeling more secure in their jobs. Their absence makes it hard for their technology supplier to close sales contracts.
Meanwhile, third quarter earnings season will be arriving shortly and we’re ready to process the abundance of information that brings. As always, if you have any questions or comments, you can reach us any time at info@crabtree-am.com.
The investments discussed are held in client accounts as of August 31, 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.
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