Crabtree Asset Management offers portfolio management for investors who seek exposure to growth equities. Our primary product is the Crabtree Fund, a technology-centric, multi-cap growth-equities model portfolio.
The goal of the Crabtree Fund is to outperform the Merrill Lynch Technology 100 Index (MLO) by providing superior risk-adjusted returns over periods of time measured in quarters and years. Crabtree Asset Management clients can invest in the Crabtree Fund via the Crabtree Technology portfolio offered by Covestor, a Registered Investment Adviser based in Boston.
Barry Randall is the Chief Investment Officer of Crabtree Asset Management and the portfolio manager of the Crabtree Fund. He began his professional financial services career in 1993. In 21 years in the financial services business, he has progressed from junior sell-side analyst to award-winning senior portfolio manager, personally responsible for public and private portfolios of as much as $650 million in assets.
Morningstar has rated the Crabtree Technology portfolio Four Stars (out of Five) for Overall, 3-Year and 5-Year performance, for the respective periods ending September 30, 2014. Morningstar compares the risk-adjusted return of our model portfolio to the returns of other technology-focused vehicles and strategies in its Separate Account database.
Our Web Site is designed to educate you about our investment process, strategy and philosophy. But we hope you’ll start by viewing our introductory video below:
September 2, 2014
Today we performed our quarterly re-balance of the Crabtree Technology portfolio. While we typically re-balance in late August, we elected to wait until early September for better market liquidity. We sold the following eight positions: AudioCodes (AUDC), Heartland Payment Systems (HPY), Hexcel (HXL), Mobile TeleSystems OJSC, Netgear (NTGR), Perficient (PRFT), QLogic (QLGC) and Raytheon (RTN).
We purchased eight new positions: Advanced Semiconductor (ASX), Covance (CVD), Camtek (CAMT), ChipMOS Technologies (IMOS), MKS Instruments (MKSI), R. R. Donnelly (RRD), Vistaprint (VPRT) and Zebra Technologies (ZBRA). The first seven of these came, as usual, from our quantitative model that was run in mid-August. Zebra Technologies is, like existing holding Aspen Technology, one of the occasional exceptions that we make to account for high-performing companies that our quant model would typically exclude because of a relatively high profile.
We also trimmed our Echo Global Logistics (ECHO) holding because it had grown materially larger than our standard 2%-of-the-portfolio position. As noted in the comments below, we are watching the news around Crabtree holding Shutterfly quite closely. At this time, it appears several private equity firms have bid for the company, although credible reports suggest that the prices being offered are not quite what SFLY’s board of directors was hoping for. Nonetheless, since the company itself initiated the bidding process, it would be hard for them to turn down a credible cash-based offer. We are monitoring the situation closely and are prepared to act instantly to protect our investment.
August 14, 2014
Thestreet.com reported today that several private equity firms, including TPG Capital and Carlyle Group, have either made private bids to Shutterfly’s board or intend to do so. The source was the obligatory “people familiar with the situation.” (Which as we noted below in our July 2 note, is almost certainly the investment bank Qatalyst Partners, reportedly hired by Shutterfly to shop the company around.)
As we noted in our July 2 note, if Shutterfly is for sale, there is no guarantee a sale will be consummated. And if it is sold, there’s no guarantee it will be at a price higher than it is today, $49.67. But where there is smoke there is fire. Qatalyst is clearly trying to log-roll a deal. And given Shutterfly’s dominant position in its industry and its prodigious cash flow, a deal seems very likely to happen. So we will continue to wait.
July 2, 2014
This morning it was reported by Bloomberg News that Shutterfly (a holding in the Crabtree Fund) has hired an investment bank to seek the possible sale of the company. Shutterfly stock rose roughly 15% on this news. After some consideration, we have elected not to sell our position.
Typically, news of a possible sale like this is leaked by the investment bank or the company itself as a strategy for determining a fair price for the company. Sometimes this occurs when the company being shopped around has attracted no interest, and the investment bank uses this strategy to make sure any potential buyers are aware of the situation. We believe, however, that in this case, Shutterfly has probably attracted some interest, so the leak of the information is being used to home in on an equitable price.
There are no guarantees that Shutterfly will be sold, or that it will be sold at a price higher than the $50/share it reached today. But the company is currently firing on all cylinders, and with its prodigious cash flow and unique business model, would be an accretive acquisition for many suitors. So we plan to wait for now.
May 27, 2014
Today we performed our May quarterly re-balance of the Crabtree Technology portfolio. We sold NIC, Inc., Finisar, Measurement Specialties, Methode, Nordion, Ntelos, Silicon Motion, TurkCell, Take-Two Interactive and Virtusa. We replaced these holdings with new 2% positions in Broadcom, Facebook, ESCO Technologies, Trina Solar, Ultra Clean Holdings, Diodes, Echo Global Logistics, ARC Document Solutions, RadNet and PAREXEL International. We also added to our existing positions in AudioCodes and in Green Dot Corp. and trimmed back to 2% our Insight Enterprises holding.
With the exception of Facebook, all of the new purchases in the fund came from our quantitative model. Nordion was being sold because of its pending acquisition by Sterigenics, as we first discussed in our note on March 28, 2014.
March 28, 2014
After the close of trading today, privately held Sterigenics offered to buy Crabtree holding Nordion (ticker: NDZ) for $11.75/share, a 12% premium from $10.41, the price at which Nordion closed today. Sterigenics is owned by GTCR (“Golder Thoma”) LLC, a well known Chicago-based private equity firm. Sterigenics is a global leader in medical sterilization procedures and is based in Deerfield Illinois.
Nordion’s board of directors has unanimously approved the transaction and strongly urges Nordion shareholders to approve it as well. The offer is an all-cash deal, backed by debt financing and Sterigenics’ cash holdings. We’ll review the transaction further in the coming few days to decide whether to sell our position right away, or hold until closing, which is estimated to be sometime in the second half of calendar 2014. The most likely outcome is that we’ll hold our NDZ stock until our next scheduled re-balance in mid- to late-May, 2014.
February 24, 2014
Today we ran the quarterly re-balancing for Q1 2014.
We sold 11 positions, bought 11 positions to replace them, trimmed six existing holdings that had grown to more than 2.4% of the portfolio, and added to four positions that still qualified for inclusion in portfolio, but which had fallen below 1.6% in size.
Sold from the portfolio were CalAmp, Chinia Telecom, Geeknet, KT, LSI, Motorola Solutions, ReachLocal, Echostar, Spirit AeroSystems, Stamps.com and Telecom Argentina. Our new 2% positions include Broadridge Financial Solutions, Mobile TeleSystems OJSC, Methode Electronics, Newport, Insight Enterprises, Netgear, ON Semiconductor, Raytheon, Super Micro Computer, Stantec and TE Connectivity.
Trimmed back to 2% positions were AudioCodes, Cray, Electronics for Imaging, EnerNOC, EPAM Systems and MaxLinear. Adds included were NTELOS, Sizmek, TurkCell and Verizon.
December 16, 2013
This morning, Crabtree Technology model holding LSI (Ticker: LSI) received a friendly takeover offer from Avago Technologies (Ticker: AVGO). Avago is offering $11.15 in cash, or a 41% premium over LSI’s closing price on Friday, December 13. We are very confident the deal will be consummated at the stated terms because:
– Avago is a well-capitalized and credible semiconductor company;
– The boards of directors of both companies have already approved the terms of the transaction; and
-Avago believes the deal will be “significantly and immediately accretive to its earnings.
Consistent with our disciplined process, we will likely sell our LSI holdings before the next re-balancing in February 2014 and replace it with a 2% position chosen from our quantitative model.
This marks the 15th time a Crabtree Technology model holding has been the subject of a takeover offer since the model’s inception on March 31, 2009. Most recently, The Active Network Company (ACTV) agreed on September 30, 2013 to be acquired by private-equity firm Vista Equity Partners for about $1.05 billion, or $14.50/share in cash.
November 25, 2013
We completed the fourth quarter re-balancing of the Crabtree Fund today.
We sold fourteen positions, bought fifteen new ones, trimmed five holdings and added to three existing holdings.
Sold were Ambarella, America Movil, Anika Therapeutics, Aeroflex, Cambrex, Cynosure, Jiayuan.com International, eHealth, Himax Technologies, M/A-Com Technology Solution Holdings, MagnaChip Semiconductor, Simcere Pharmaceutical, Silicon Graphics and TE Connectivity.
Brand new 2% positions included Marvell Technology, Brocade, QLogic, Finisar, Silicon Motion, Motorola Solutions, , NTELOS Holdings, China Telecom, TakeTwo Interactive, XO Group, KT Corp., Atlantic Tele-Network, ShoreTel, Geeknet and Aspen Technology. All of the new positions, except Aspen Technology, came from our quantitative model.
Trimmed back to 2% positions were CalAmp, Euronet Worldwide, Hexcel, Inteliquent and RigNet.
Raised back to 2% positions were AudioCodes, Catamaran and EnerNOC.
Our mid-November quantitative model yielded 100 candidates, down from 122 when we ran the model in mid-August. This was in-line with expectations considering the recent market-wide price appreciation.
Our valuation parameter is excluding more candidates because the apprciation hasn’t been accompanied, in general, but an increase in operational and share-gain performance. None of this is predictive of the market in general and shouldn’t be interpreted as such.
November 1, 2013
Today we sold our position in The Active Network (ACTV). On September 30, the company, which manages online registration for marathons, business conferences and other events, agreed to be acquired by private-equity firm Vista Equity Partners for about $1.05 billion, or $14.50/share in cash. At the time, this price represented a 27% premium over the closing price on Sept. 27, the most recent trading day. Active’s board endorsed the offer, recommending that all stockholders tender their shares.
This represents the 14th time since the inception of the Crabtree Fund that one of our positions has received a takeover offer. Except in a few instances, we typically sell our shares, rather than wait until deal closure to dispose of the position. After all, we’re equity investment managers, not risk arbitrageurs, so there’s no need to wait around for a marginal improvement in price, at the risk of the deal coming apart and the stock price falling back to its pre-offer level, or worse.
So adieu, Active Network, and we thank you!
August 26, 2013
We completed the third quarter re-balancing of the Crabtree Fund today.
We sold nine positions, bought nine new ones and trimmed six other holdings.
Sold were Audience, American Public Education, Cerner, Demand Media, DSP Group, GenCorp, PhotoMedix, Tetra Technologies and VimpelCom.
Brand new 2% positions included AudioCodes, Digital Generation, Perficient, Turkcell, Inteliquent, Nordion, Stantec, American Movil and The Active Network. All of the new names came from our quantitative model.
Trimmed back to 2% positions were Anika Therapeutics, Cray, eHealth, EPAM Systems, Green Dot and Stamps.com.
Our mid-August quantitative model yielded 122 candidates. This was unusually high for a period of time near a market high. Typically, our “fame” or valuation paramter 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. This is a testament to how well so many public companies are performing in 2013.
May 28, 2013
We completed the quarterly re-balancing of the Crabtree Fund today.
Sold out of the fund were Accelrys, American Software, Asiainfo-Linkage, Aviat Networks, Bruker, Cabot Microelectronics, CareFusion, IBM, ICU Medical, Magic Software, Mine Safety, MTS Systems, Portugal Telecom, Telenav and XO Group. Asiainfo-Linkage was the target of an M&A transaction and Bloomberg reported in early May that ICU Medical was working with J. P. Morgan Chase to sell itself.
Replacing these 15 companies were new positions in MaxLinear, Simcere Pharmaceutical Group, Electronics for Imaging, Euronet Worldwide, M/A-Com Technology Solutions, Telecom Argentina, Sagent Pharmaceuticals, Greet Dot Corp., Spirit AeroSystems, VimpelCom, TE Connectivity, DSP Group, Himax Technologies, ICON plc., and inContact. The first 13 of these new names were from our quantitative model and the last two were exceptions that we reserve for deserving firms that possess the three Crabtree attributes, but which our model won’t select, typically because they have premium valuations.
Additionally, six existing positions that had appreciated substantially, were trimmed back to standard 2% positions. These were Ambarella, CalAmp, Gencorp, Measurement Specialties, RigNet and Virtusa.
Overall, our mid-May quantitative model contained 88 names, down slightly from the mid-February model. The Crabtree Fund itself continues to hold 50 names, as always.
February 25, 2013
Today we completed our quarterly re-balancing of the Crabtree Fund.
Sold out of the fund were Broadridge Financial, Bio-Reference Labs, CONMED, Spansion, CoStar Group, Computer Task Group, Liquidity Services, OSI Systems and Teleflex.
Added to the fund were Hexcel, Cabot Microelectronics, Portugal Telecom, Aeroflex, Silicon Graphics, Aviat Networks, Jiayuan.com, Telenav, Ambarella and Mine Safety Appliances.
Additionally, we trimmed three positions that had growth substantially, making them once again roughly 2% of the portfolio: Audience, EnerNOC and Shutterfly. And we added more to names in which we are confident, but whose performance had recently dropped them below 2%: Demand Media, eHealth and LSI.
As usual, we don’t anticipate making any further changes until our next re-balancing in May.
December 19, 2012
Today we sold our position in TNS Inc., which on December 11 accepted on offer to be bought by Siris Capital Group for $21/share in cash. Because Crabtree Asset Management is not a risk arbitrage firm, we have elected to take $21.80/share, forgo the $0.20/share arbitrage return and absorb the transaction cost of the sale.
In the past, we have sometimes chosen to hold an acquired Crabtree position until the transaction closing date, but only in instances where the M&A history of the acquiror (e.g. SAP, IBM, Thoma Bravo) was of sufficient quality to virutally guarantee deal closure. Siris Capital may be well-intentioned, but it is not IBM.
We expect to re-deploy the cash raised in this transaction in another holding shortly, bringing the total number of holdings in the Crabtree Fund back to its standard 50-position limit.
December 11, 2012
Today, Crabtree holding TNS, Inc., a maker of networking products, agreed to be acquired by an investor group led by Siris Capital Group. Siris, a private-equity firm, has offered to pay $21 a share in cash for TNS. This represents a 43% premium over the closing price on December 10 and a 47 percent premium over the stock’s average price over the past month. The companies expect the deal to close in the first quarter of 2013.
This represents the twelfth time that a Crabtree Fund holding has been purchased in an M&A transaction since the Fund’s inception on April 1, 2009. Most recently, Mediware Information Systems was acquired by private equity firm Thoma Bravo on November 9, 2012.