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Today we performed our quarterly re-balance of the Crabtree Technology portfolio.

We began by selling eight of our existing Tech positions including Arcturus (ARCT), Bumble (BMBL), Cognizant (CTSH), Extreme Networks (EXTR), EyePoint Pharmaceuticals (EYPT), Hewlett Packard Enterprise (HPE), InMode Ltd. (INMD) and Medpace Holdings (MEDP).

These were replaced by eight new holdings, each representing 2% of the portfolio: Cognyte Software (CGNT), Elevance Health (ELV), Jacobs Solutions (J), Leidos Holdings (LDOS), Euronet Worldwide (EEFT), Moog Class A (MOG.A), Organon (OGN) and Riskified Ltd. (RSKD). All of these candidates were sourced from our quantitative models.

After this we trimmed three holdings that had grown materially above our standard 2%-of-the-portfolio size. These included: Viant Technology (DSP), Itron (ITRI) and Parsons (PSN).

Lastly, we added to nine positions that had fallen materially below our standard position size but which still qualified for inclusion. These were: Axcelis (ACLS), BioNTech SE (BNTX), Coursera (COUR), Corsair Gaming (CRSR), Ooma (OOMA), Perion Network (PERI), Spok Holdings (SPOK), Yelp (YELP) and Yext (YEXT).

Today we performed our semi-annual re-balance of the Crabtree SCG portfolio.

We began by selling 15 of our existing SCG positions including The Andersons (ANDE), Abercrombie & Fitch (ANF), Pathward Financial (CASH), Clearwater Paper (CLW), Consolidated Water (CWCO), Ennis (EBF), Extreme Networks (EXTR), Quanex Building Products (NX) ON Semiconductor (ON), Rush Enterprises (RUSHA), Carrol’s Restaurant Group (TAST), Urban Outfitters (URBN), Weatherford (WFRD), Wabash National (WNC) and Expro Group Holdings (XPRO).

These were replaced by 15 new holdings, each representing 2 1/2% of the portfolio: AdeptHealth (AHCO), Astrana Health (ASTH), Adtalem Global Education (ATGE), Blue Bird (BLBD),  Cognyte Software (CGNT), Criteo S.A. (CRTO), Viant Technology (DSP), Frontdoor (FTDR), Huron Consulting (HURN), OSI Systems (OSIS), The Pennant Group (PNTG), PriceSmart (PSMT), LiveRamp Holdings (RAMP), Construction Partners (ROAD) and Strategic Education (STRA). All of these candidates were sourced from our quantitative model.

After this we trimmed four holdings that had grown materially above our standard 2 1/2%-of-the-portfolio size. These included: Griffon (GFF), Modine Manufacturing (MOD), Oscar Health (OSCR) and Powell Industries (POWL).

Lastly, we added to seven positions that had fallen materially below our standard position size but which still qualified for inclusion. These were: Axcelis (ACLS), Aviat Networks (AVNW),  Ooma (OOMA), Perion Network (PERI), Tactile Systems Technology (TCMD), Thermon Group Holdings (THR) and Yelp (YELP).

This morning before the market opened,  SCG holding Carrols Restaurant Group (TAST) and Restaurant Brands Int’l (QSR) announced that they have reached an agreement for RBI to acquire all of Carrols issued and outstanding shares that are not already held by RBI or its affiliates for $9.55 per share in an all cash transaction, or an aggregate total enterprise value of approximately $1.0 billion, representing a 23.1% premium to Carrols 30-day VWAP as of January 12, 2024 and a 13.4% premium to the January 12, 2024 closing price.

Carrols is the largest Burger King® franchisee in the United States today, operating 1,022 Burger King restaurants in 23 states that generated approximately $1.8 billion of system sales during the twelve-months ended September 30, 2023. Carrols also owns and operates 60 Popeyes® restaurants in six states. We plan to hold the TAST until we re-balance the Crabtree Small Cap Growth portfolio in about 6 weeks.

On December 4, 2023, Crabtree Technology portfolio holding EyePoint Pharmaceuticals reported positive topline data from a Phase 2 trial of the company’s macular degeneration drug, known internally as EYP-1901. The candidate drug achieved all of its primary and secondary endpoints.

Shares of EYPT reacted favorably to this news and rose in excess of 200% when trading began on Monday morning, December 4.

Since Eyepoint still qualified for inclusion in our quantitative model, we decided to trim the position back to 2% of the portfolio and continue on with a larger-than-usual cash balance. This rewards us for having been correct to own EYPT in the first place, while still remaining exposed to the company and we’ll participate in any additional upside, should the stock rise from here.

On November 27, 2023, we performed our fourth quarter re-balance of the Crabtree Technology portfolio.

We first sold nine positions, including Cohu (COHU), Digi Intl. (DGII), Diodes (DIOD), Genmab (GMAB), Magic Software (MGIC), Hello Group (MOMO), Omnicell (OMCL), Playtika (PLTK), and TTEC Holdings (TTEC).

Replacing our sells were nine buys, including Arcturus (ARCT), Bumble (BMBL), Coursera (COUR), Eyepoint Pharmaceutical (EYPT), MiMedx Group (MDXG), NerdWallet (NRDS), Spok Holdings (SPOK), Taboola (TBLA), and Twilio (TWLO). All of the new positions were sourced from our quantitative model.

Next we trimmed nine of our existing holdings back down to our standard 2%-of-the-portfolio size. These trims included Apogee Enterprises (APOG), Cadre Holdings (CDRE), Flex (FLEX), Fabrinet (FN), General Dynamics (GD), Jabil (JBL), McKesson (MCK), LiveRamp Holdings (RAMP) and Super Micro Computer (SMCI).

Lastly, we added to Extreme Networks (EXTR), Perion Network (PERI) and Tactile Systems (TCMD) because they had drifted more than 20% below our standard position size.

On September 11 and 12, 2023, we performed our third quarter re-balance of the Crabtree Technology portfolio.We first sold thirteen positions, including Civeo (CVEO), Euronet Worldwide (EEFT), Harmonic (HLIT), International Money Express (IMXI), The Interpublic Group (IPG), Juniper Networks (JNPR), Methode Electronics (MEI), Omincom Group (OMC), Pfizer (PFE), Perficient (PRFT), ProPhase (PRPH), Vertex Pharmaceutical (VRTX) and Vishay Intertechnology (VSH).

Replacing our sells were 13 buys, including BioNTech (BNTX), Cadre Holdings (CDRE), Corsair Gaming (CRSR), Cognizant Technology (CTSH), Viant Technology (DSP), Hewlett Packard Enterprise (HPE), Itron (ITRI),  Omnicell (OMCL), Parsons (PSN), TTEC Holdings (TTEC), Veeco Instruments (VECO), Vimeo (VMEO) and Yext Inc. (YEXT). All of the new positions were sourced from our quantitative model.

Next we trimmed nine of our existing holdings back down to our standard 2%-of-the-portfolio size. These trims included CDW (CDW), Extreme Networks (EXTR), Fabrinet (FN), Jabil Inc. (JBL), Medpace (MEDP), Nature’s Sunshine (NATR), LiveRamp (RAMP), Transcat (TRNS) and Yelp (YELP).

Lastly, we added to Tactile Systems (TCMD) and Thryve Holdings (THRY) because they had drifted more than 20% below our standard position size.

On September 7, 2023, we performed our third quarter re-balance of the Crabtree Small Cap Growth portfolio.We first sold eleven positions, including Buckle (BKE), Cavco Industries (CVCO), First BanCorp (FBP), Haverty Furniture (HVT), International Money Express (IMXI), MasterCraft Boat Holdings (MCFT), Methode Electronics (MEI), Marten Transport (MRTN), Onto Innovation (ONTO), U.S. Silica Holdings (SLCA), Thryve Holdings (THRY).

Replacing our sells were 14 buys, including Addus HomeCare (ADUS), Abercrombie and Fitch (ANF), Cadre Holdings (CDRE), Hawkins (HWKN), Limbach Holdings (LMB), Modine Manufacturing (MOD), Nature’s Sunshine (NATR), Ooma, Inc. (OOMA), Rush Enterprises (RUSHA), Sterling Infrastructure (STRL), Carroll’s Restaurant Group (TAST), Tactile Systems (TCMD), Tennant Company (TNC), Yelp, Inc. (YELP).

The three additional buys vs. the number of sells reflects the busy M&A environment during the past six months, during which SCG holdings Ruth’s Chris (RUTH), Heritage-Crystal Clean (HCCI) and Veritiv (VRTV) were all purchased by third parties. Thus, prior to this re-balance, the SCG portfolio was down to 37 positions.

Along with the new holdings completely replacing the old ones, we trimmed five of our remaining positions that had grown more than 20% larger than our standard 2.5%-of-the-portfolio size. Trimmed were Axcelis (ACLS), Consolidated Water (CWCO), Extreme Networks (EXTR), Oscar Health (OSCR) and Powell Industries (POWL).

Lastly, we “topped” up two of our surviving holdings back to the standard portfolio weight. These adds included Clearwater Paper (CLW) and Wabash National (WNC).

Before the open of trading this morning, August 7, SCG holding Veritiv Corporation (VRTV) announced it has entered into a definitive agreement to be acquired by an affiliate of Clayton, Dubilier & Rice, LLC. Under the terms of the agreement, each share of Veritiv common stock will be entitled to receive $170 per share in cash, representing a nearly 31% premium over Veritiv’s 30-day volume-weighted average price of $129.89.

Veritiv’s Board of Directors has unanimously voted to approve the transaction.

The transaction remains subject to shareholder approval and other customary closing conditions, including the receipt of required regulatory approvals, and is expected to close in the fourth quarter of 2023.

But at least one important shareholder is already on board: Funds managed by Baupost have already  entered into a Support Agreement under which they have agreed to vote their shares in favor of the transaction.

VRTV closed today at $169/share, up 20% from the previous close and only $1 away from the offer price. As we’ve stated previously, we’re not risk arbitrageurs at Crabtree. We think the price is more than fair and unlikely to be raised before closing. So we expect to sell our VRTV position in the next few days.

Before the open of trading this morning, July 20, SCG holding Heritage-Crystal Clean (HCCI) announced it had entered into a definitive merger agreement to be acquired by an investment affiliate of J.F. Lehman & Company (“JFLCO”), a leading private equity investment firm focused on the aerospace, defense, maritime and environmental sectors, in an all-cash transaction that valued Crystal Clean at approximately $1.2 billion. Under the terms of the merger agreement, JFLCO will acquire all the outstanding shares of Crystal Clean for $45.50 per share in cash.

The purchase price represents a premium of approximately 24.9% to Crystal Clean’s 60-day volume-weighted average price on July 19, 2023, the last full trading day prior to today’s announcement. Crystal Clean’s Board of Directors has unanimously approved the merger agreement and recommends that Crystal Clean shareholders vote in favor of the transaction. The transaction is expected to close in the fourth quarter of 2023, subject to customary closing conditions. Since HCCI closed at $46.60 today (up 11.1% and above the current offer price) and closing isn’t expected for several months, I expect to sell our HCCI shares in the next few days.

On June 12, 2023, we performed our second quarter re-balance of the Crabtree Technology portfolio.

We first sold seven positions, including Allied Motion (AMOT), ASGN Inc. (ASGN), Catalyst Pharmaceutical (CPRX), Forrester Research (FORR), Insight Enterprises (NSIT), Onto Innovation (ONTO), and Vishay Precision Group (VPG).

We then replaced these with seven new 2%-of-the-portfolio positions, all of which came from our quantitative model. These were CACI International (CACI), Nature’s Sunshine (NATR), Playtika Holdings (PLTK), LiveRamp Holdings (RAMP), Standex International (SXI), Tactile Systems (TCMD) and Yelp Inc. (YELP).

As is our practice, we trimmed some of our existing positions that had grown larger than 2% of the portfolio but which still qualified for inclusion. These trims included Axcelis (ACLS), Photronics (PLAB), Super Micro Computer (SMCI) and Thryve (THRY). And lastly we added to several positions that had fallen slightly below our 2% threshold. These included Apogee (APOG), General Dynamics (GD), Juniper (JNPR), Magic Software (MGIC), ProPhase (PRPH) and Sanmina (SANM).

On the morning of May 3, 2023, Crabtree Small Cap Growth holding Ruth’s Hospitality Group (RUTH) and Darden Restaurants (DRI) announced an agreement whereby DRI will purchase RUTH shares at $21.50/share in cash. This represents a 34% premium to RUTH’s closing price on May 2nd. As we type this, RUTH’s share price is $21.38.

Parsing the details, RUTH has a board-approved, all-cash offer at a reasonable valuation from a well-capitalized, strategic buyer who hopes to close the deal in less than two months. We believe the deal is likely to go through…but the middling price leaves room for a higher offer. So we plan to hold on to our shares until the deal closes in mid-June. Or another suitor shows up.

Today we performed our quarterly re-balance of the Crabtree Technology portfolio.

We sold eight positions, including Amkor (AMKR), Alpha and Omega Semiconductor (AOSL), PC Connection (CNXN), Veradigm (MDRX), Everspin (MRAM), ePlus (PLUS), Ultra Clean Holdings (UCTT) and Varex Imaging (VREX).

We replaced these positions with eight new ones, including Criteo S. A. (CRTO, Euronet Worldwide (EEFT), Forrester Research (FORR), McKesson (MCK), Matereon Corp. (MTRN), Omnicom Worldwide (OMC), Pfizer (PFE) and Super Micro Computer (SMCI). All of the new positions originated in our quantitative model.

Next we trimmed four positions that had grown materially larger than our standard 2% size. These trims included Axcelis (ACLS), Jabil (JBL), Hello Group (MOMO) and Perion Network (PERI).

Lastly, we added to three of our holdover positions that – while still qualifying for inclusion in the portfolio – had decreased in size from our standard 2%.  These adds included Civeo (CVEO), Magic Software (MGIC) and Ooma (OOMA).

Today we performed our semi-annual re-balance of the Crabtree Small Cap Growth portfolio.

We sold fourteen positions, including A-Mark Precious Metals (AMRK), Alpha and Omega Semiconductor (AOSL), American Axle (AXL),  BlueLinx Holdings (BXC), PC Connection (CNXN), Matson (MATX), MKS Instruments (MKSI), ProPhase Labs (PRPH), Gibraltor Industries (ROCK), Ryerson Holding (RYI), Sparton Nash (SPAR), Tronox (TROX), Universal Forest Products (UFPI), Universal Logistics Holdings (ULH) .

We replaced these positions with fourteen  new ones, including The Andersons (ANDE) Arcos Dorados (ARCO), Pathward Financial (CASH), Cavco Industries (CVCO), Stride (LRN), Mastercraft Boat (MCFT), Oscar Health (OSCR), Perion Network (PERI), Powell Industries (POWL), Ruth’s Hospitality Group (RUTH), Thermon Group Holdings (THR), Urban Outfitters (URBN), Wabash National (WNC) and Expro Group Holdings (XPRO).

After that we trimmed four positions that had grown materially larger than our standard 2 1/2% size. These trims included Axcelis (ACLS), Belden Corp. (BDC), Methode Electronics (MEI), Marten Transport (MRTN) and Weatherford (WFRD).

Lastly, we added to two of our holdover positions that – while still qualifying for inclusion in the portfolio – had decreased in size from our standard 2 1/2%.  These adds included Consolidated Water (CWCO) and U.S. Silica Holdings (SLCA).

Today we performed our quarterly re-balance of the Crabtree Technology portfolio.

We sold four positions, including Commscope (COMM), Logitech (LOGI), Smart Global Holdings (SGH) and Tronox (TROX).

We replaced these positions with four new ones, including Apogee Enterprises (APOG), Cohu (COHU), KBR (KBR) and Hello Group (MOMO). Apogee is an existing holding in the Crabtree Small Cap Growth portfolio and the latter three adds all came to us through our quantitative model.

After that we trimmed six positions that had grown materially larger than our standard 2% size. These trims included Extreme Networks (EXTR), Flex Ltd. (FLEX), Harmonic (HLIT), Medpace (MEDP), Perion Network (PERI) and Sanmina (SANM).

Lastly, we added to three of our holdover positions that – while still qualifying for inclusion in the portfolio – had decreased in size from our standard 2%.  These adds included ASGN (ASGN), ePlus (PLUS) and Thryve (THRY).

Today we performed our semi-annual re-balance of the Crabtree Small Cap Growth portfolio.

We began by selling out of eighteen positions, including Atlas Air Worldwide (AAWW), AdvanSix (ASIX), Daeske (DSKE), Funko (FNKO), Forrester Research (FORR), Haynes International (HAYN), Stride (LRN), Medifast (MED), MYR Group (MYRG), Natural Grocers by Vitamin Cottage (NGVC), Owens Minor (OMI), Primerica (PRI), Schnitzer Steel (SCHN), SciPlay (SCPL), StepStone Group (STEP), SunCoke Energy (SXC), The Container Store (TCS) and Lending Tree (TREE). Recall that Atlas Air Worldwide was the target of an M&A transaction announced in August.

We replaced these positions with eighteen new 2.5%-of-the-portfolio positions in Apogee Enterprises (APOG), American Axle & Mfg. (AXL),  Belden (BDC), The Buckle (BKE), Clearwater Paper (CLW), Consolidated Water (CWCO), Ennis (EBF), First BanCorp. (FBP), Matson (MATX), Quanex Building (NX), ProPhase (PRPH), Ryerson Holding (RYI), Sanmina (SANM), StoneX Group (SNEX), Spartan-Nash (SPTN), Thryve (THRY) and Universal Logistics Holdings (ULH). All of these new positions came to us via our quantitative model.

After that we trimmed six positions that had grown materially larger than our standard 2.5% size. These trims included Aviat Networks (AVNW), Extreme Networks (EXTR), Griffon Corp. (GFF), Heritage-Crystal (HCCI), International Money Express (IMXI) and ON Semiconductor (ON).

Lastly, we added to four of our holdover positions that – while still qualifying for inclusion in the portfolio – had decreased in size from our standard 2.5%. These adds included Alpha and Omega Semiconductor (AOSL), MKS Instrument (MKSI), Gibraltar Industries (ROCK) and  and Tronox Holdings PLC (TROX).

Today we performed our quarterly re-balance of the Crabtree Tech portfolio.

We began by selling out of eight positions, including Casa Systems (CASA), CSG Systems (CSGS), ChannelAdvisor (ECOM), eXp World Holdings (EXPI), HP Inc. (HPQ), Leidos (LDOS), PetIQ (PETQ) and EchoStar (SATS). Recall that ChannelAdvisor was the target of an acquisition earlier in September.

We replaced these positions with eight new 2%-of-the-portfolio positions in ASGN Inc. (ASGN), Commscope (COMM), Harmonic Inc. (HLIT), Allscripts (MDRX), Onto Innovation (ONTO), ProPhase (PRPH), Science Applications Intl. (SAIC) and Vishay Precision (VPG). All of these new positions came to us via our quantitative model.

After that we trimmed seven positions that had grown materially larger than our standard 2% size. These trims included Allied Motion Technologies (AMOT), Aviat Networks (AVNW),  Catalyst Pharmaceutical (CPRX), Digi International (DGII), Fabrinet (FN), International Money Express (IMXI) and Vertex Pharmaceutical (VRTX).

Lastly, we added to six of our holdover positions that – while still qualifying for inclusion in the portfolio – had decreased in size from our standard 2%. These adds included Alpha and Omega Semiconductor (AOSL), Logitech (LOGI), Photronics (PLAB), Perficient (PRFT), Smart Global Holdings (SGH) and Tronox Holdings (TROX).

This morning, Crabtree Technology holding ChannelAdvisor (ECOM) announced it had entered into an agreement to be acquired by CommerceHub, an industry-leading commerce network. Under the terms of the agreement, ChannelAdvisor stockholders will receive $23.10 per share in cash, representing a premium of approximately 57% over ChannelAdvisor’s closing stock price on September 2, 2022, the last full trading day prior to this announcement. The boards of directors of both companies have unanimously approved the transaction.

The proposed transaction is not subject to a financing condition and is expected to close in 2022. The transaction is subject to customary closing conditions, including receipt of regulatory approvals and approval by ChannelAdvisor’s stockholders. The companies will operate independently until the proposed transaction is finalized.

Given the all-cash offer, the unanimous approvals by both boards and the fact that we’ll be re-balancing the Tech portfolio next week,  we’ll simply hold our position until then.

This morning, Crabtree Small Cap Growth holding Atlas Air Worldwide (AAWW) announced that it has entered into a definitive agreement to be acquired by an investor group led by funds managed by affiliates of Apollo Global Management, Inc., together with investment affiliates of J.F. Lehman & Company, LLC and Hill City Capital LP. The purchase price of $102.50 per share in cash represents a 57% premium to the 30-day volume-weighted average trading price per share of Atlas as of July 29, 2022.

Given the pedigree of the purchasers, the all-cash offer and the fact that Atlas’s board of directors has already unanimously agreed to the deal, gives us high confidence in the consummation of the transaction. Therefore, we’ll simply hold our position until we re-balance the Small Cap Growth portfolio in roughly mid-September.

Today we completed the second quarter re-balancing of the Crabtree Technology portfolio.

We sold out of six positions, including Cambium (CMBM), CACI International (CACI), Covetrus (CVET), Donnelly Financial Solutions (DFIN), Lockheed Martin (LMT) and Teladoc (TDOC). In addition, we trimmed five positions that had grown materially larger than our traditional 2% size. These trims included Digi International (DGII), HP Inc. (HPQ), Jabil (JBL), Photronics (PLAB) and ePlus (PLUS).

Note that Covetrus was sold because it was the target of an M&A transaction back on May 20 (see below).

Replacing our six sells were new 2% positions in Civeo (CVEO), PetIQ (PETQ), Sanmina (SANM), Smart Global Holdings (SGH), Thryve Holdings (THRY) and Vishay Intertechnology (VSH). All six buys came from our quantitative model. We also added to six existing positions that – while still qualifying to be in the portfolio – had shrunk to materially below our standard 2% position. These adds included eXp World Holdings (EXPI), InMode Ltd. (INMD), Everspin Technologies (MRAM), Ooma Inc. (OOMA) and Ultra Clean Holdings (UCTT).

This morning before the market open, Crabtree Technology holding Covetrus (CVET) announced it had received a letter from Clayton Dubulier & Rice and TPG offering a “non-binding proposal to acquire all of [Covetrus’s] outstanding shares for $21 in cash.” The price offered represents a 35% premium to Covetrus’s 30-day VWAP. Note: CD&R already ows 24.2% of CVET’s existing equity. This is a close call, but given the quality of the suitors and the cash offer, I plan to wait until I re-balance in two to three weeks before selling the position. This represents the 46th time a Crabtree holding has become an acquisition target by a credible suitor.

Today we completed the first quarter re-balancing of the Crabtree Technology portfolio.

We sold out of nine positions, including Amneal Pharmaceutical (AMRX), Accuray (ARAY), Audiocodes (AUDC), Calix (CALX), EMCORE (EMKR), OSI Systems (OSIS), QuinStreet (QNST), TravelZoo (TZOO), and Vertiv (VRT). In addition, we trimmed several positions that had grown materially larger than our typical starting size of 2% of the portfolio. These trims included Axcelis (ACLS), CACI Intl. (CACI), CSG Systems (CSGS), Digi Intl., (DGII), General Dynamics (GD), International Money Express (IMXI), Juniper Networks (JNPR), Leidos (LDOS), Lockheed Martin (LMT), Perion Network (PERI) and Vertex Pharmaceuticals (VRTX).

Replacing our nine sells were Amkor (AMKR), PC Connection (CNXN), Catalyst Pharmaceutical (CPRX), HP Inc. (HPQ), Insight Enterprises (NSIT), Photronics (PLAB), EchoStar Corp. (SATS), Teledoc (TDOC) and Tronox Holdings (TROX). All of these except Teledoc came from our quantitative model. And we added to four existing positions that still qualify to be in the portfolio, but which had fallen materially below our typical 2% position size. These adds included Cambium Networks (CMBM), ChannelAdvisor (ECOM), eXp World Holdings (EXPI) and InMode (INMD).

For those of you wondering, portfolio turnover for the Crabtree Technology portfolio was 73% in calendar 2021. This was higher than the 48% recorded in the Covid-affected year of 2020, but solidly lower than in the three prior years of 2017 (92%), 2018 (90%) and 2019 (78%). As for tax-efficiency, although we don’t make investment decisions in the tech portfolio with taxes in mind, it’s worth mentioning that 80% of capital gains realized in 2021 were classified as long-term, consistent with recent yearly trends.

Today we completed the fourth quarter re-balancing of the Crabtree Technology portfolio.

We sold out of eight positions, including Aztenza (AZTA), Collegium Pharmaceutical (COLL), Generac (GNRC), Himax (HIMX), Netgear (NTGR), Puma Biotechnology (PBYI), SciPlay (SCPL) and Vonage (VG). Additionally, we trimmed eight other positions back to their standard 2% size. These included Axcelis (ACLS), Allied Motion (AMOT), Alpha and Omega Semiconductor (AOSL), AudioCodes (AUDC), CACI Intl. (CACI), Calix (CALX), Extreme Networks (EXTR) and Transcat (TRNS).

Replacing the outright sells were eight new 2% positions in Accuray (ARAY), CSG Systems (CSGS), Donnelly Financial (DFIN), International Money Express (IMXI), The InterPublic Group (IPG), Everspin Technologies (MRAM), Textron (TXT) and Varex Imaging (VREX). All of the new positions  came from our quantitative model. Additionally, we added to seven existing positions that – while still qualifying for inclusion – had dropped materially below our preferred 2% position size. These adds included Aviat Networks (AVNW), Casa Systems (CASA), Cambium Networks (CMBM), Covetrus (CVET), eXp World Holdings (EXPI), Logitech (LOGI) and TravelZoo (TZOO).

Today we completed the third quarter re-balancing of the Crabtree Technology portfolio.

We sold out of six positions, including Airgain (AIRG), CytomX (CTMX), Fluent (FLNT), Itron (ITRI), MagnaChip (MX) and TrueCar (TRUE). Additionally, we trimmed seven other positions back to their standard 2% size. These included Axcelis (ACLS), Diodes (DIOD), eXp World Holdings (EXPI), Generac (GNRC), Magic Software (MGIC), Perion Networks (PERI) and Perficient (PRFT).

Replacing the six sells were six new 2% positions in Allied Motion (AMOT), Extreme Networks (EXTR), Flex Ltd. (FLEX), InMode (INMD), ePlus (PLUS) and Vertex Pharmaceuticals (VRTX). All of the new positions except InMode came from our quantitative model. Additionally, we added to six existing positions that – while still qualifying for inclusion – had had dropped materially below our preferred 2% position size. These adds included Casa Systems (CASA), Cambium Networks (CMBM), EMCORE (EMKR), Netgear (NTGR), Puma Biotechnology (PBYI) and QuinStreet (QNST).

Today we completed the second quarter re-balancing of the Crabtree Technology portfolio.

We sold six positions, including Cloudera (CLDR), Cirrus Logic (CRUS), FormFactor (FORM), Mantech (MANT), Nova Measurement (NVMI) and Sapience (SPNS). Additionally, we trimmed seven positions that while they still qualified for inclusion had grown materially larger than our typical 2% position size. These included Aviat Networks (AVNW), Genmab A/S (GMAB), Generac Holdings (GNRC), Jabil (JBL), Magnachip Semiconductor (MX), Transcat (TRNS) and Ultra Clean Holdings (UCTT).

Replacing our sales were six new positions, including Casa Systems (CASA), CytomX Therapeutics (CTMX), EMCORE Corp. (EMKR), Juniper Networks (JNPR), Ooma Inc. (OOMA) and Vertiv Holdings (VRT). All of these new positions originated with our quantitiative model. And we added to nine existing positions that – while continuing to qualify for inclusion – had fallen materially below our standard 2% position size. These adds included Alpha and Omega Semiconductor (AOSL), Covetrus (CVET), Diodes (DIOD), eXp World Holdings (EXPI), Fluent (FLNT), Itron (ITRI), OSI Systems (OSIS), Perion Network (PERI) and Vonage (VG).

Well I was right…sort of. Before the open today, TCF and hedge fund holding Magnachip Semiconductor (MX) confirmed receipt of an unsolicited proposal from Cornucopia Investment Partners on behalf of itself and a group of investors, including financial sponsors led by Mr. Tim Crown, Yango financial holdings, Sino-Rock Investment Management Company Limited and Lombarda China Fund, to acquire all of the outstanding shares of Magnachip common stock … for $35.00 per share in cash. Yowsa. But the higher price doesn’t solve the sovereignty issue…in fact, it almost seems like Cornucopia is trolling Magnachip and the latter’s board, knowing that the deal can’t close at any price. Mr Market seems to agree because MX shares only rose from $23.05 to $25.91 today, nearly 35% below the new $35 offer on the table. But I’m going to continue to hold MX, because this new offer leaves headroom for a third offer priced at, say, $32 – $33 made by an acceptable American or European entity. We’ll see…

This morning before the open, TCF holding Cloudera (CLDR) entered into a definitive agreement to be acquired by affiliates of Clayton, Dubilier & Rice and KKR in an all-cash transaction valued at approximately $5.3B or $16.00/share.

Cloudera’s Board of Directors has unanimously approved the transaction and recommends that the Cloudera shareholders approve the transaction and adopt the merger agreement. Entities related to Icahn Group, collectively holding approximately 18% of the outstanding shares of Cloudera common stock, have entered into a voting agreement pursuant to which they have agreed, among other things, to vote their shares of Cloudera common stock in favor of the transaction.

The offered price represents a 24% premium to the previous trading day close and a 30% premium to the 30-day VWAP. This deal is totally seasoned with KKR and Icahn and the Board “on board,” so I’ll just part with this in a couple of weeks when I re-balance TCF.

Before market open today, Leaf Group, Ltd. (LEAF), a holding in both TCF and the hedge fund, gets a written proposal from Graham Holdings to acquire all outstanding shares of LEAF for $8.50 in cash. Graham is a publicly-traded “diversified education and media company.” The price is a 21% premium to the previous close on April 1 and a 35% premium to the 90-day VWAP. Since the initial inquiry by Graham toward Leaf occurred back on February 9, there’s been plenty of time to rustle up other offers. So I’m comfortable parting with LEAF right here and I sold both the positions before the close on April 5. (Later, on April 26, I replaced the LEAF position in TCF with Himax Technologies (HIMX)).

Before the market open today, Magnachip Semiconductor (MX), a holding in both TCF and the hedge fund, announced that it had entered into a definitive agreement with Wise Road Capital in a “take-private” transaction valuing Magnachip at $29/share. That price represents a premium of approximately 75% to Magnachip’s 3-month VWAP and approximately a 54% premium to the unaffected closing stock price on March 2, 2021, the last trading day before media reports of third-party interest in acquiring Magnachip. The proposed all-cash transaction is “fully backed by equity commitments and not contingent on any financing conditions.” The problem is that Wise Road represents mostly Chinese interests and Magnachip – notwithstanding being incorporated in Delaware and headquartered in Luxembourg– is essentially a South Korean company. South Korea’s business and political leaders are unlikely to feel good about allowing a mortal enemy to have access to leading edge Korean technology. This is likely why MX shares only rose to an intraday high of $26.70 and closed at $26.01, far far below the proposed takeover price. But the offer seems legit, and maybe another offer will come along from a more palatable suitor, so I’m choosing to hold our MX shares for now. The break-up fee associated with the transaction is worth about $2/share in cash to MX, so even if this deal was DOA tomorrow, the share price wouldn’t likely drop all the way back down to $20.41, where it closed yesterday.

Today we completed the first quarter re-balancing of the Crabtree Technology portfolio.

We sold six positions including Allot Ltd. (ALLT), Enphase Energy (ENPH), L3Harris Technologies (LHX), NeoPhotonics (NPTN), PRA Health Sciences (PRAH) and Perspecta (PRSP).  Additionally, we trimmed five positions that while they still qualified for inclusion had grown materially larger than our typical 2% position size. These trims included Calix (CALX), Cambium Networks (CMBM), Fluent (FLNT), Generac Holdings (GNRC) and Magnachip Semiconductor (MX).

Replacing the six sold positions are Axcelis Technologies (ACLS), Amneal Pharmaceuticals (AMRX), Alpha and Omega Semiconductor (AOSL), Aviat Networks (AVNW), NETGEAR Inc. (NTGR) and QuinStreet (QNST). All of these came from our proprietary quantitative model. And we added to eleven existing positions to bring them back up to our standard 2%-of-the-portfolio size. These included AudioCodes Ltd. (AUDC), CACI Intl. (CACI), Cirrus Logic (CRUS), eXp World Holdings (EXPI), Genmab A/S (GMAB), Jabil (JBL), Leidos Holdings (LDOS), Lockheed Martin (LMT), Mantech (MANT), Puma Biotechnology (PBYI) and Sapiens (SPNS).

Update on Coherent: inertia turns out to be our friend. This morning MKS Instruments (MKSI) – coincidentally also a Crabtree Small Cap Growth holding- showed up metaphorically on Coherent’s doorstep with flowers in one hand and a $240/share offer in the other. Coherent’s stock promptly jumped from around $200/share to $220. The existence of two suitors, Lumentum and MKS Instruments, makes us more comfortable in holding on to our Coherent position at least until we re-balance the Small Cap Growth portfolio in mid-March.

Perspecta (PRSP) – a holding in the Crabtree Technology portfolio – announced it has entered into a definitive agreement under which it will be acquired by PE firm Veritas Capital, in an all-cash transaction. Perspecta stockholders will receive $29.35 per share in cash, which representing a premium of 49.7% to the company’s unaffected closing stock price of $19.60 on November 6, 2020, the last trading day prior to media reports being published regarding a potential strategic process for Perspecta, and a premium of 11.8% to the closing stock price of $26.25 on January 26, 2021. Since it’s an all-cash deal, Veritas is a major, credible PE firm that already owns 14.5% of PRSP and PRSP’s board has already approved the deal, we plan to keep  the Perspecta until each portfolio’s next re-balance in early March. This was the 40^th M&A deal  involving a Crabtree holding as a target.

It’s worth mentioning that we initially purchased Perspecta in September 2019. After it under-performed over the following year, we bought more of it in September 2020 to bring it back up to a standard 2% position. This outcome validates our standard practice of portfolio re-balancing.

Coherent (COHR) – a holding in the Crabtree Small Cap Growth portfolio – has received an offer from Lumentum (LITE) wherein Lumentum will acquire Coherent in a cash and stock transaction. Per the agreement – which has been unanimously approved by the Boards of Directors of both companies – Coherent stockholders will receive $100.00 per share in cash and 1.1851 shares of Lumentum common stock for each Coherent share they own.  The proposed transaction value of $226/share represents a premium of 49% to Coherent’s closing price on January 15, 2021. Lumentum will finance the cash consideration of the transaction through a combination of cash on hand from the combined company’s balance sheet and $2.1 billion in new debt financing. We’re electing for now to hold on to our COHR position.

Today we completed the fourth quarter re-balancing of the Crabtree Technology portfolio.

We sold 7 positions, including Chegg (CHGG), Ciena (CIEN), Ducommun  (DCO), Euronet Worldwide (EEFT), eGain(EGAN), Pinterest (PINS) and Qiwi (QIWI). Additionally, we trimmed 6 positions that while they still qualified for inclusion had grown substantially larger than our typical 2% position size. We trimmed Brooks Automation (BRKS), Diodes (DIOD), Enphase (ENPH), eXp World Holdings (EXPI), FormFactor (FORM) and Ultra Clean Holdings (UCTT).

Replacing our sales were 7 new positions, all drawn from our quantitative model. These included Canbium Networks (CMBM), Fluent (FLNT), Leaf Group (LEAF), Transcat (TRNS), Truecar (TRUE), Travelzoo (TZOO) and Vonage (VG).  Additionally, we increased our holdings in 9 portoflio positions bringing them back up to 2% of the portfolio. These adds included Allot (ALLT), Audiocodes (AUDC), CACI International (CACI), Collegium (COLL), General Dynamics (GD), L3Harris (LHX), Methode (MEI), OSI Systems (OSIS) and PRA Health Sciences (PRAH).

Today we completed the semi-annual re-balancing of the Crabtree Small Cap Growth portfolio.

We sold 20 positions, including American Outdoor Brands (AOUT), American Renal Associates (ARA), Argo Group International (ARGO), Cal-Maine Foods (CALM), Darling Ingredients (DAR), Euronet Worldwide (EEFT), FutureFuel (FF) II-VI Inc. (IIVI), John B. Sanfillipo and Son (JBSS), J&J Snack Foods (JJSF), MobileIron (MOBL), Orthofix (OFIX), Revlon (REV), Spirit AeroSystems (SPR), Tootsie Roll (TR), United Fire Group (UFCS), USA Technologies (USAT), Vectrus (VEC) and WD-40 Company (WDFC).  Additionally we trimmed four positions, including FormFactor (FORM), MKS Instruments (MKSI), Nova Measuring (NVMI) and The Boston Beer Co. (SAM).

In turn, we added 17 new positions to the portfolio (lowering our total positions to 40). The new holdings include Atlas Air Worldwide (AAWW), American Public Education (APEI), Century Communities (CCS), Cowen (COWN), America’s Car-Mart (CRMT), Covetrus (CVET), Forterra (FRTA), Griffon Corp. (GFF), Hibbing Sporting Goods (HIBB), Lazydays Holdings (LAZY), Medifast (MED), MYR Group (MYRG), Nautilus (NLS), Netgear (NTGR), Gibraltar Industries (ROCK), SciPlay (SCPL), Vera Bradley (VRA).

Additionally, we added to four existing positions that had fallen below our typical 2 1/2% position size. These included Cimpress (CMPR), Coherent (COHR), GreenDot (GDOT) and Natural Grocers by Vitamin Cottage (NGVC). Our next scheduled re-balance for the Small Cap Portfolio will be in March, 2021.

Today we completed the third-quarter re-balancing of the Crabtree Technology portfolio.

Five stocks were sold out of the portfolio: Cardtronics (CATM), PC Connection (CNXN), Cutera (CUTR), General Electric (GE) and Tactile Systems Technology (TCMD). Additionally, we trimmed four positions that had grown materially larger than our standard 2%-of-the-portfolio position size. Thes trims included E-Gain (EGAN), Logitech (LOGI), Medpace (MEDP) and Sapiens (SPNS).

Replacing our five sells were new 2% positions in Airgain (AIRG), Calix (CALX), Covetrus (CVET), ChannelAdvisor Corp. (ECOM) and SciPlay (SCPL). All five of the new positions were selected from our quantitative model. We also added to six of our existing positions that -while still exhibiting the Crabtree Attributes that we look for in a company – had fallen below our 2% position size. These six included CDW Corp. (CDW), Ciena (CIEN), Euronet Worldwide (EEFT), Neophotonics (NPTN), Perion Network (PERI) and Perspecta (PRSP).

Today we took the unusual step of trimming our two largest positions outside of our normal quarterly re-balancing cadence.  These were EXP World Holdings (EXPI) and Generac (GNRC), which had grown to being 5.1% and 3.5% of the portfolio, respectively. Each was trimmed back to our standard 2% position.

We took this step as a form of risk control. While both companies are performing as we hope any of our Crabtree positions would, we have no more (or less) confidence in these two stocks than in the other 48 positions in the Crabtree Technology portfolio. Especially since much of the stock appreciation has occurred in the absence of company- or industry-specific news. In short, momentum has worked in our favor, but we pride ourselves in not confusing luck with skill and (possibly) “round-tripping” a stock back down to where it started its upward move.

Make no mistake: we still own both EXPI and GNRC and believe each will provide alpha for the portfolio and for  investors from this point forward. But prudence and experience demands  this move.

Today we completed the second quarter re-balancing of the Crabtree Technology portfolio. Only three stocks were sold out of the portfolio: GrubHub (GRUB) (see below), Lannett (LCI) and Shutterstock (SSTK). Replacing those three were Genmab A/S (GMAB), Magic Software (MGIC) and Puma Biotechnology (PBYI). The latter two choices came from our quantitative model; Genmag is an exception, replacing GrubHub, which itself was an exception.

Additionally, we trimmed the following existing holdings that had grown substantially larger than our standard 2% position size: AudioCodes (AUDC), Chegg (CHGG), Ciena (CIEN), Neophotonics (NPTN), and Nova Measurement (NVMI). And we added to our positions in Digi International (DGII) and General Electric (GE) as they had fallen in size but still qualified for inclusion.

Re-balancing was undeniably altered by the effect of the global pandemic currently underway. For one thing, only 14 companies passed our quantitative screen,  a substantial decline from the 40-60 names that were passing in recent quarters, pre-pandemic. Second, a far higher percentage of existing holdings no longer qualified by the standards of our model, but in a clear-eyed assessment, this was not because they no longer exhibited the Crabtree Attributes regarding market share, execution and cash generation. One might describe this contradiction as a flaw in our model, and that accusation has some validity. However, global pandemics are both extremely rare, and easy to spot, so we feel no need to modify the model to somehow account for the pandemic’s effects.

Today it was credibly reported that Just Eat Takeaway.com (TKAAY), a U.K based food delivery service, has agreed to acquire Crabtree holding GrubHub. The proposed all-stock transaction values GrubHub at roughly $75/share. However, understandable concerns regarding dilution caused Just Eat Takeaway.com stock to decline by about 9% after the announcement, lowering the actual price for GrubHub to the mid-$60s range. It had been widely reported that Uber (UBER) and GrubHub had been negotiating for nearly a year, but in recent days, concerns about whether a combination of the two (with combined U.S. market share of about 55%) would pass antitrust regulators resulted in GrubHub fielding other offers.

Since this news coincided with our scheduled quarterly re-balancing, and because the deal hasn’t even been voted upon by either company’s board of directors, we elected to immediately sell  our GrubHub position for $61.15, a 31% premium from GRUB’s price on May 11, the day that ongoing discussions with Uber were revealed.

Today we completed the first quarter re-balancing. As we noted on March 13 when we completed the bulk of the buys and sells, market volatility made it wise to stop after completing five of the expected seven buys. Today, with the market in a much quieter way, we executed the purchase of Pinterest (PINS) and GrubHub (GRUB). While four of the five earlier purchases were from our quantitative model, both Pinterest and GrubHub are exceptions.

Specifically, both have “fame” factor scores that exceed our typical limit. But both are performing exceptionally well on the Crabtree Attributes of gaining market share, generating cash and executing on their business models. Specifically, our research indicates both are taking substantial market share during the current Coronavirus pandemic.

GrubHub, in particular, is doing something quite interesting. The current stay-at-home/shelter-in-place mandates across most of America (and much of the world) means GrubHub could easily meet or even exceed the 2020 profitability guidance it provided in January. But GRUB management has elected to manage its business to a lower cash flow margin with the stated goal of “supporting [its] ecosystem.” Which we interpret as keeping prices competitive and marketing heavily to existing and new restaurant partners.

We like to see this kind of strategic thinking in our holdings, where gaining market share now – while still remaining profitable – will result in greater overall lifetime cash profitability in its relationships with restaurant partners.

Today, we performed the first quarter 2020 re-balancing of the Crabtree Fund.

We sold seven of our positions. These included Boeing (BA), Comtech Telecom (CMTL), Cyber-Ark Software (CYBR), CSG Systems (CSGS), Qudian (QD), Spirit Aerosystems (SPR) and Vectrus (VEC).  Additionally, we trimmed an existing holding, Audiocodes (AUDC), that had grown materially larger than our typical 2% position.

Replacing our sells were Allot Ltd. (ALLT), Cloudera (CLDR), Collegium Pharmaceutical (COLL), Cirrus Logic (CRUS) and Perion Network (PERI). Note that because of the market volatility on March 13, we were unable to complete our planned purchase of two additional holdings, Pinterest (PINS) and GrubHub (GRUB). We have elected – for now – to forego these purchases. We are 99% invested with less than 1% cash, so our exposure to our factors and to the market is about as high as it would be if we’d been successful in acquiring GRUB and PINS.

Just how volatile was the trading environment? On March 12 the Crabtree technology portfolio fell 10.55%. On March 13 the portfolio rose 5.87%. On the next trading day, Monday March 16, the portfolio fell 11.85%. There’s not much to be gained by executing trades in such a fast-moving environment. What good are limit orders when you’re adjusting prices by 1-2% mid-trade? Answer: not much.

Today, we performed the 4th quarter re-balancing of the Crabtree Fund.

We sold out of nine positions. These included Aerojet Rocketdyne (AJRD), Diebold Nixdorf (DBD), Forescout (FSCT), KEMET (KEM), MobileIron (MOBL), Insperity (NSP), NV5 (NVEE), Sonos (SONS) and TriNet (TNET). Additioanlly, we trimmed eight additional positions that had grown larger than our typical 2%-of-the-portfolio position size. These included CDW (CDW), Cutera (CUTR), Digi International (DGII), Diodes (DIOD), Generac (GNRC), Jabil (JBL), Sapiens (SPNS) and Vectrus (VEC).

Replacing the nine sells were new 2% positions in the following companies: Cardtronics (CATM), Cyber-Ark Software (CYBR), FormFactor (FORM), General Electric (GE), MagnaChip Semiconductor (MX), Nova Measuring Instruments (NVMI), Perficient (PRFT), Shutterstock (SSTK) and Ultra Clean Holdings (UCTT).We also “topped up” four existing holdings that had underperformed recently and fallen below our 2% threshold. These were Ciena (CIEN), General Dynamics (GD), Lannett (LCI) and OSI Systems (OSIS)

Although we don’t usually track such things, we initiated our position in Insperity on March 5, 2015 and trimmed it on four different occasions as it had grown larger than our standard 2%-of-the-portfolio position. Offsetting this kind of long-term holding was Diebold Nixdorf, which we held for only a single quarter. A more comprehensive analysis of turnover has indicated that for the Crabtree Fund, turnover is approximately 80% annually, and realized capital gains are split with roughly 2/3rds as long-term and 1/3rd as short-term.

AVX Corp. (AVX) announced before the market open this morning that Japanese multi-national Kyocera is going to buy the remaining 28% of AVX it doesn’t already own. The $19.50/share cash offer represents a 30% premium over the $15.04 closing price from yesterday. We hold AVX in the Crabtree Hedged Technology portfolio, which we have been incubating since April 2015.

KEMET Corp. (KEM) announced after the market close today that Yageo, a competitor, will acquire all of the outstanding shares of Crabtree holding KEMET for $27.20/share, an 18% premium over the closing price earlier today. Since we’ll be re-balancing the Crabtree Fund in about three weeks, we’re comfortable holding it until then.

Today, we performed the 3rd quarter re-balancing of the Crabtree Fund.

We sold out of eleven positions. These included Astronics (ATRO), Ceragon Networks (CRNT), Green Dot (GDOT), Glu Mobile (GLUU), Health Insurance Innovations (HIIQ), Merit Medical (MMSI), Presidio (PSDO), SS&C Technologies Holdings (SSNC), Vishay Precision Group (VPG) and Varex Imaging (VREX). Additionally, we trimmed six other holdings that had grown beyond our preferred 2% position size. These included AudioCodes (AUDC), CACI International (CACI), CSG Systems Intl. (CSGS), L3Harris (LHX), MobileIron (MOBL) and Qiwi (QIWI).

Replacing the eleven sales were Aerojet Rocketdyne (AJRD), PC Connection (CNXN, Cutera (CUTR), Diebold Nixdorf (DBD), Ducommun (DCO), Enphase (ENPH), Itron (ITRI), Medpace (MEDP), Neophotonics (NPTN), Perspecta (PRSP), and Tactile Systems (TCMD). All eleven new names were sourced from our quant model and several are making return appearances to the portfolio, including AJRD, CUTR, ITRI, MEDP and NPTN.

Crabtree holding Presidio today announced it had “entered into a definitive agreement to be acquired by funds advised by BC Partners, a leading investment firm, in an all-cash transaction[.]” It’s an all-cash offer for $16.00/share, a premium of 21.3% over the close of trading on August 13, 2019 and 18.3% over the 60-day VWAP. Presidio’s board of directors has voted unanimously to approve the agreement with BC Partners. I’ve elected to wait until the third quarter re-balancing – about three weeks hence – to sell our position. PSDO closed today at $16.10 and if that premium remains, I may sell sooner. This offer represents the 34th time that a Crabtree holding has been the subject of an M&A transaction since the portfolio’s inception in April 2009.

Today, we performed the 2nd quarter re-balancing of the Crabtree Fund.

We sold out of seven positions. These included Airgain (AIRG), Globus Medical (GMED), MKS Instruments (MKSI), ON Semiconductor (ON), Sprint (S), Virtusa (VRTU) and Vishay Intertechnology (VSH). Additionally, we trimmed five other holdings including Ciena (CIEN), Euronet Worldwide (EEFT), Generac (GNRC), OSI Systems (OSIS) and TriNet (TNET).

We replaced the seven sales with the following new 2% positions: Astronics (ATRO), eXp World Holdings (EXPI), Leidos (LDOS), Mantech (MANT), Qudian (QD), Qiwi (QIWI) and Sapiens (SPNS). All seven of these new positions were sourced from our quantitative model. We also added to three existing positions, Ceragon Networks (CRNT), eGain (EGAN) and Forescout (FSCT), bringing them back up to 2% of the portfolio.

Today, we performed the 1st quarter re-balancing of the Crabtree Fund.

We sold out of eight positions. These included Acordia Therapeutics (ACOR), AeroJet Rocketdyne (AJRD), Attunity (ATTU), Blucora (BCOR), Harmonic (HLIT), Medpace Holdings (MEDP), QuinStreet (QNST) and Smart Global Holdings (SGH). Additionally, we trimmed four other holdings, including Chegg (CHGG), Fabrinet (FN), ForeScout (FSCT) and Insperity (NSP). Attunity was sold as it was the subject of an all-cash acquisition offer (see below).

Replacing our sells were new 2%-of-the-portfolio positions in Airgain (AIRG), AudioCodes (AUDC), Boeing (BA), Digi International (DGII), Lannett (LCI), Spirit Aerosystems (SPR), SS&C Technologies Holdings (SSNC) and Varex Imaging (VREX). Additionally, we purchased more of KEMET (KEM) as it still qualifies for inclusion via our quantitative model yet had declined in recent months owing to non-fundamental factors. All of the new purchases, except SS&C Technologies came from our quantitative model.  SS&C didn’t qualify “by the numbers,” but it has both a high free-cash-flow model and a multi-year market opportunity making it worthy of inclusion for now.

Boeing’s inclusion may seem to be in response to its recent operational troubles and price decline, but that was just a coincidence – we would have purchased it anyway. Only time will tell if having bought it ‘on sale’ contributes to any portfolio alpha. It’s important to reiterate that we never buy stocks based on price-action. Our simple explanation for this is that “a lower price never turns a bad business into a good one” and we’re primarily interested in superior business models, not “cheap” stocks.

Today, Crabtree holding Attunity (ATTU) signed an agreement to be acquired by Qlik, another software company. The deal is for $23.50 in cash, an 18% premium from the previous close of $19.93. Both boards have already voted to approve the deal. As we’re close to re-balance time, we’re just going to wait until then to sell. This is the 32nd time a Crabtree holding has been the subject of  a credible offer to be acquired since the portfolio’s inception 10 years ago.

Today, we performed the 4th quarter re-balancing of the Crabtree Fund.

We sold out of 14 positions. These included Cohu Corp. (COHU), Care.com (CRCM), Cirrus Logic (CRUS), FARO Technologies (FARO), Hollysys Automation Technologies (HOLI), Ichor Holdings (ICHR), Kaman Corp., (KAMN), Kimball Electronics (KE), LivaNova (LIVN), Insight Enterprises (NSIT), ePlus (PLUS), TTM Technologies (TTMI), Western Digital (WDC) and Winstream Holdings (WIN).

We also trimmed Euronet Worldwide (EEFT) and PRA Health Sciences (PRAH). These two companies had grown substantially beyond our usual 2% threshold.

Replacing our fourteen sells are fourteen new 2% positions in CDW Corp. (CDW), Ciena Corp. (CIEN), Comtech Telecommunications (CMTL), Ceragon Networks Ltd. (CRNT), Glu Mobile (GLUU),  Globus Medical (GMED), Harmonic (HLIT), L3 Technologies (LLL), Medpace Holdings (MEDP), MobileIron (MOBL), Presidio Inc. (PSDO), Sprint (S), Sonos (SONO) and Stratasys (SSYS).

A brief word about one of our sells, Care.com. Technically, Care.com enjoyed a “beat-and-raise” September quarter. That is normally enough for a company to retain its position as a Crabtree holding. But Care.com only raised EPS guidance, not revenue guidance. And the $0.03 delta of the F18 EPS guidance raise was only half of the size of the Q3 beat, rather than passing all six cents of the “beat” through to its full year EPS guidance.

Combined with the (albeit) small decrease in gross margins, this told us that profitable growth is getting harder for Care.com. On one hand, valuation (currently an enterprise-value:revenue ratio of 2.68) isn’t so stretched that a poor earnings announcement in the near future would herald some awful reckoning and accompanying price decline. But when Care.com reports its December quarter and issues 2019 guidance – implied or expressed – we think it’s likely to be disappointing, beyond the usual initial guidance conservatism.

Nothing wrong here right now, unless you count the very modest deceleration in revenue growth. And all three Crabtree Attributes are present. But this is why we do this triage: to make sure holdings are doing what we want and are not about to stop doing those things. We love this business model, and Care.com is a juicy M&A target. But the risk-reward analysis strongly suggests we don’t want to hold Care.com shares through its Q4 earnings announcement.

Today, the Crabtree Hedged Technology portfolio went “live” today on Interactive Brokers Asset Management.

This “new” portfolio was actually started in April 2015. You can learn more about the product and its associated risks by clicking through on the hyperlink above.

Today, we performed the 3rd quarter re-balancing of the Crabtree Fund.

We sold out of 7 positions. These included  Criteo (CRTO), Facebook (FB), Orasure (OSUR), Stoneridge (SRI), The Trade Desk (TTD), Ultra Clean Holdings (UCTT), and ZAGG (ZAGG). We also trimmed CACI Intl. (CACI), Chegg (CHGG), Health Insurance Innovations (HIIQ), Kemet (KEM), LivaNova (LIVN), and NV5 (NVEE). These latter companies had grown substantially beyond our usual 2% threshold.

Replacing our seven sells are seven new positions in Acordia Therapeutics (ACOR), Aerojet Rocketdyne (AJRD), Attunity Ltd. (ATTU), Cirrus Logic (CRUS), Fabrinet (FN), ForeScout (FSCT) and Insight Enterprises (NSIT). All seven were sourced from our quantitative model. And we added to our position in ON Semiconductor (ON), bolstering it back up to 2% in size.

A word about Facebook. We owned Facebook for four years, initially purchasing it about one year after its IPO. It was an exception in that it didn’t come to our attention via our quant model. Our reason for selling came down to two factors. First, it trades at a price:sales ratio of roughly 10; this compares with a market P:S ratio median of roughly 2.5. Second, while Facebook’s business model remains very powerful, recent negative trends in earnings estimates and Facebook’s position as a target for political action are worrisome in the short run. Our experience, which is substantial in this area, is that technology companies’ stock prices do not fare well in the simultaneous presence of these factors. We will of course continue to monitor Facebook and perhaps, like Aerojet Rocketdyne and Euronet Worldwide before it, it may appear in the portfolio again one day.

Today, we performed the 2nd quarter re-balancing of the Crabtree Fund.

We sold out of 7 positions. These included  AeroJet Rocketdyne (AJRD), AXT Inc. (AXTI), Deutsche Telekom (DETGY), Extreme Networks (EXTR), Fresenius Medical (FMS), Leidos (LDOS) and Nova Medical (NVMI). Additionally, we trimmed five positions that had grown substantially larger than our typical 2% weighting. These included Blucora (BCOR), eGain (EGAN), Insperity (NSP), Stoneridge (SRI) and The Trade Desk (TTD).

Replacing our seven sells are new 2% positions in CSG Systems (CSGS), Euronet Worldwide (EEFT), Generac (GNRC), Kaman (KAMN), Smart Global Holdings (SGH), TTM Technologies (TTMI) and Windstream (WIN). All of these new positions are from our quantitative model; none are exceptions. And we added to three positions that had diminished over the past quarter but which still qualified for inclusion in the portfolio. These are Jabil (JBL), Ultra Clean Holdings (UCTT) and ZAGG (ZAGG).

Today, we performed the 1st quarter re-balancing of the Crabtree Fund.

We sold out of 10 positions. These included Adtran (ADTN), A10 Networks (ATEN), CSRA (CSRA), Control4 (CTRL), FormFactor (FORM), Lantheus (LNTH), Novanta (NOVT), Pixelworks (PXLW), Ribbon Communications, (RBBN), and Tower Semiconductor (TSEM). Additionally, we trimmed seven other holdings that had grown well above our typical 2% position size. These trims included Chegg (CHGG), Healthcare Innovations (HIIQ), MSK Instruments (MKSI), Insperity (NSP), ON Semiconductor (ON), TriNet (TNET) and The Trade Desk (TTD).

Replacing our 10 sells were an equal number of new positions. These  included Aerojet Rocketdyne (AJRD), eGain (EGAN), FARO Technologies (FARO), Hollisys Automation Technologies (HOLI), Methode Electronics (MEI), Merit Medical Systems (MMSI), OSI Systems (OSIS), QuinStreet (QNST), Vishay Precision Group (VPG) and Western Digital (WDC). Additionally, we added to two positions that had decreased we below our typical 2% position size but which still qualified for inclusion in the portfolio. These were Criteo S.A. (CRTO) and Kimball Electronics (KE).

Eight of our 10 new positions came from our quantitative screen, with the exceptions of eGain (EGAN) and Merit Medical Systems (MMSI). eGain is transitioning from a license to a subscription model which artificially and temporarily depresses reported revenue growth while not affecting underlying cash flow. A look at the bigger picture revealed that eGain demonstrated all three of the Crabtree Attributes and so we elected to make an exception for it, as we did for Merit Medical. Merit scored slightly too strongly on our “fame” factor, but was so solid in its other factor scores that we made room for it as well. Merit and eGain join Facebook and Chegg as exceptions in the portfolio.

Today, Crabtree holding CSRA (CSRA) announced that it had agreed to be purchased by General Dynamics (GD) for $40.75 in cash.  The proposed purchase price represents a roughly 32% premium over CSRA’s closing price of $30.82 on Friday, February 9.  The boards of both firms have already unanimously agreed to support the transaction. Given the all-cash terms of the deal, the support of both boards and General Dynamics multi-billion dollar balance sheet, we plan to hold on to our CSRA shares for now and simply sell them as part of our normal early-March re-balancing. As it happens, we are also shareholders in General Dynamics.

This represents the 31st time that a Crabtree holding has been the subject of an actual or proposed M&A transaction since the Fund’s inception in April 2009. The most recent takeout was back in September 2017 when Crabtree holding Orbital ATK (OA) was the subject of an offer from Northrup Grumman (NOC).

Today, we performed our fourth quarter re-balancing of the Crabtree Fund.

We sold 10 positions including Alpha and Omega Semiconductor (AOSL), Box (BOX), CBIZ (CBZ), Ceragon Networks (CRNT), ChannelAdvisor (ECOM), Itron (ITRI), MTS Systems (MTSC), NCR (NCR), Orange (ORAN) and RadNet (RDNT). We also trimmed back to 2% three positions that had appreciated since their purchase. These included Green Dot (GDOT), NV5 (NVEE), Stoneridge (SRI), and ZAGG (ZAGG).

We replaced our sold positions with ten new ones, each representing two percent of the portfolio. These new positions included A10 Networks (ATEN), AXT (AXTI), Extreme Networks (EXTR), Ichor Holdings (ICHR), LivaNova (LIVN), Orasure (OSUR), Pixelworks (PXLW), Ribbon Communications (RBBN), The Trade Desk (TTD) and Virtusa (VRTU). We also added to our existing position in KEMET (KEM), which had fallen well below its original two percent size.

It’s worth noting that our sell discipline sometimes requires that we sell positions in companies that we still admire and which are likely to continue to thrive. In this most recent rebalancing, CBIZ, MTS Systems and RadNet fit that profile. But at Crabtree we’re always looking for companies whose stocks will out-perform and not merely keep up with the stock prices of other companies or our benchmarks.

Today, Crabtree holding Orbital ATK (OA) announced it had reached an agreement to be acquired by Northrop Grumman (NOC) for $134.50 in cash and debt. The purchase price represented a roughly 22% premium over OA’s closing price of $110.04 on Friday, September 15.  The boards of both companies have already voted to approve the merger. As shares of OA were trading at only a 1-2% discount to the proposed purchase price, and closure of the industry-consolidating deal is by no means assured, we elected to sell our entire OA position and replace it with a new 2% position in Fresenius Medical Care (FMS), which we sourced from our quantitative model.

Northrop Grumman’s offer for Orbital ATK represents the 30th time a Crabtree holding has been the subject of a takeover offer since the Crabtree portfolio’s inception in April 2009. The most recent takeover offer was on May 5, 2017 when closely-held Avantor announced its plan to acquire Crabtree holding VWR Inc. (VWR).

Coincidentally, former Crabtree holding Silver Spring Networks (SSNI) was also the subject of a takeout offer today, made by existing Crabtree holding Itron (ITRI). Although it’s unfortunate to have “missed out” on SSNI’s 24% price appreciation , the proposed deal is highly synergistic and Itron’s share price rose 5% today.

Today we performed our third quarter re-balancing.

Sold out of the fund were Celestica (CLS), Cutera (CUTR), GoDaddy (GDDY), Hill-Rom Holdings (HRC), Innerworkings (INWK), Magnachip Semiconductor (MX), Premier Corp. (PINC), Sabre Corp. (SABR), Sierra Wireless (SWIR), Tetra Tech (TTEK), TTM Technologies (TTMI) and Web.com (WEB).  Twelve new 2% positions were purchased to replace them. They are Adtran (ADTN), Chegg (CHGG), CSRA (CSRA), Diodes (DIOD), FormFactor (FORM), Health Insurance Innovations (HIIQ), Jabil (JBL), Kemet (KEM), Lockheed Martin (LMT), Lantheus Holdings (LNTH), Ultra Clean Holdings (USTT) and Zagg (ZAGG).

All of the new positions except Chegg were sourced from our quantitative model. We made an exception for Chegg because of its recent history of execution and cash flow generation, combined with the likelihood that it is gaining market share in its electronic study aids and e-Textbook business lines.

Additionally, three positions, Control4 (CTRL), Tower Semiconductor (TSEM) and RadNet (RDNT) were trimmed as they had appreciated substantially above our 2% position limit. Conversely, we added to our position in Stoneridge Inc. (SRI), which had fallen substantially below the 2% limit.

Today we performed our second quarter re-balancing.

Sold out of the fund were AVX Corp. (AVX), Halyard Health (HYH), II-VI Corp. (IIVI), Netgear (NTGR), Orbotech (ORBK), Spirit AeroSystems (SPR), Silver Spring Networks (SSNI), and Xcerra (Xcerra).  Nine new two percent positions were purchased to replace them. They are Blucora (BCOR), Box Inc. (BOX), CACI International (CACI), Hill-Rom Holdings (HRC), NCR Corp. (NCR), NV5 Global (NVEE), Sabre Corp. (SABR), Sierra Wireless (SWIR),  and Web.com Corp. (WEB). The additional, ninth, new purchased position replaced VWR Corp. (VWR), which we sold out of last month as it was the subject of a proposed M&A transaction.

Of the brand new positions, all came to our attention via our quantitative screen, with the exception of Box. As a relatively recent IPO, Box’s unique qualities weren’t going to be captured by our screen. However, it does appear to have the three Crabtree attributes: it’s generating operating cash flow, it’s executing on its operational and public company plans and it appears to be taking market share in the cloud data storage space.

Additionally, we trimmed eight positions that had grown more than 20% beyond our typical two percent position size. These trims included Brooks Automation (BRKS), Care.com (CRCM), Green Dot (GDOT), Logitech International(LOGI), MKS Instruments (MKSI), Novanta (NOVT), Nova Measurement (NVMI) and Vectrus (VEC). Lastly we increase our position in Alpha and Omega Semiconductor (AOSL), which still qualifies for inclusion in the portfolio based on our quantitative screen, but which had declined to less thana 1.6% position in the fund. Thus we once again manage 50 positions in the fund with generally less than 1% in cash.

Today, Crabtree holding VWR announced it had reached an agreement to be acquired by industry competitor Avantor for $33.25/share in cash.  This price represents a premium of roughly 17% over the closing price on May 2, after which rumors began to indicate a deal was in the works. The price represents a 24% premium over the 30-day volume-weighted average price of VWR common stock. The boards of both companies have already voted unanimously to approve the transaction.

News of the deal was first reported by the Wall Street Journal after a participant in the deal (likely a junior investment banker) leaked details of the proposed transaction to a WSJ reporter. VWR’s stock briefly rose to as high as $36/share on May 3. We briefly considered selling at that time because we reasoned that the leaked information represented an existing offer on the table. However, the valuation implied by the leaked information actually represented a hoped-for higher price, which was not forthcoming.

Nonetheless, we are happy to accept the nearly 25% premium over the price only 30 days earlier and we elected to sell our position today, May 5. This offer represents the 29th time a Crabtree holding has been the subject of a takeover offer since the Crabtree portfolio’s inception in April 2009. The most recent takeover offer was on April 10, 2017 involving Crabtree holding Xcerra (XCRA).

Today, Crabtree holding Xcerra Corporation and Sino IC Capital Co. Ltd. today announced that Xcerra and an affiliate of Sino IC Capital , Unic Capital Management Co., Ltd., entered into a definitive agreement under which Unic Capital Management Co., Ltd., will acquire all outstanding shares of Xcerra for $10.25 per share in cash. The transaction price represents approximately a 28 percent premium to Xcerra’s average closing price over the 90 trading day period ending April 7, 2017. Xcerra’s board of directors has already voted unanimously to approve the transaction.

However, the price premium is only about 10% over the closing price this past Friday and since a) Xcerra is performing quite well as an operational and public company and b) there is a high degree of risk-to-closure for U.S.-based companies being acquired by China-based suitors, we are going to hold on to our Xcerra position for now. This proposed offer represents the 28th time a Crabtree holding has been the subject of a takeover since our firm’s April 2009 inception. The most recent similar offer was Belden’s offer for Crabtree holding Digi International on November 14, 2016.

Today, we executed the first quarter re-balancing of the Crabtree Fund. We sold our entire positions in the following 11 holdings: Advanced Energy Industries (AEIS), Applied Materials (AMAT), Cardtronics (CATM), Coherent (COHR), Euronet Worldwide (EEFT), Juniper Networks (JNPR), KT Corp. (KT), Orthofix (OFIX), Pets.com (PETS), Shutterfly (SFLY) and XO Group (XOXO). Additionally, we trimmed back to 2% of the portfolio three of our holdings that had grown too large: Brooks Automation (BRKS), Control4 (CTRL) and Nova Measurement (NVMI).

Replacing our liquidated positions were 11 new 2% positions in AVX Corp. (AVX), Celestica (CLS), Cohu (COHU), Ceragon Networks (CRNT), ChannelAdvisor (ECOM), MagnaChip Semiconductor (MX), PRA Health Sciences (PRAH), ePLUS (PLUS), TTM Technologies (TTMI), Vectrus (VEC) and Xcerra (XCRA). All of the new positions came from our typical quantitative process. Of the current 50 positions in the portfolio, only Facebook (FB) is an exception. Of course, we occasionally allow for exceptions where a company is newly public, or a recent spin-off, or where the business model is exceptional and company’s ‘fame/value’ factor falls outside our usual bounds. Facebook is exceptional for this latter reason.

Today, we performed the fourth quarter re-balancing of the Crabtree Fund. Sold out of the portfolio were the following 10 positions: Aerojet Rocketdyne (AJRD), Arris (ARRS), BOFI Holdings (BOFI), Cimpress (CMPR), Exactech (EXAC), Expeditors Intl. (EXPD), FormFactor (FORM), Huntington Ingalls (HII), USA Technologies (USAT) and Vectren (VEC).  We also trimmed  back to 2% positions our holdings in Advanced Energy Industries (AEIS), Coherent (COHR), II-VI (IIVI), Leidos (LDOS), and Tetra Technologies (TTEK).

Replacing our sold positions as well as the Digi International sold just three weeks ago were the following 11 stocks: Brooks Automation (BRKS), Criteo SA (CRTO), Cutera (CUTR), GoDaddy Inc. (GDDY), Itron (ITRI), Juniper Networks (JNPR), Kimball Electronics (KE), MTS Systems Corp. (MTSC), Novanta (NOVT), Orange (ORAN) and TriNet Group (TNET).   Additionally, we topped up to 2%-of-the-portfolio the following existing holdings: Deutsche Telekom AG (DTEGY), Orthofix (OFIX), Premier (PINC) and RadNet (RDNT).

A word of discussion about USA Technologies. It was disappointing to part with a company that exemplifies many Crabtree attributes. Moreover, 30% top-line growth achieved in the most recent quarter (without the benefit of acquisitions) is pretty rare. But that growth figure is exactly why we sold USAT. With such a growth number, there ought to be operating leverage. Yet there appears to be none. And if they can’t move the profit needle when everything is going their way, including benefitting from not one but two megatrends (Internet-of-Things and mobile cashless payments), then how will things go when the tailwinds turn to headwinds. To re-iterate: hope is not a strategy at Crabtree. This business model should work. But it doesn’t. So it’s gone.

Friday November 11^th after the close, Belden announces a $13.82/share cash offer for Crabtree holding Digi International (DGII), a 25% premium from the close on Thursday, November 10^th. Since a) we were planning to sell DGII anyway in the upcoming re-balance and b) DGII’s board had already rejected the deal, and c) DGII was already trading higher than that, we sold it for $13.85 Monday morning, in the pre-market.

This marks the 27th time that a Crabtree holding has been the subject of a credible takeover offer since the portfolio’s inception on March 31, 2009. The most recent time was on August 5 of this year when Rackspace (RAX) was the subject of credible rumors regarding a buyout, driving its stock up 36%. We sold our shares of RAX on that day. A deal for Apollo to buy Raxspace for $32/share was officially announced three weeks later.

Yesterday and today we completed the third quarter re-balance of the Crabtree Fund. The re-balance occurred slightly later than usual because our quantitative model was briefly unavailable to us in late August. It is now back “on line.”

We sold our positions in Cavium (CAVM), Cray (CRAY), ESCO Technologies (ESE), First Solar (FSLR), Knowles (KN), Mellanox (MLNX), Nanometrics (NANO) and Verizon (VZ).  Replacing them (and Rackspace, which we sold on August 5) are Arris (ARRS), KT Group (KT), Logitech (LOGI), Netgear (NTGR), Orbotech (ORBK), Stoneridge (SRI), InnerWorkings, Inc. (INWK), Leidos (LDOS) and Vishay Intertechnology (VSH).

Additionally, we trimmed back to our typical 2% position the following companies that had appreciated substantially: Applied Materials (AMAT), Alpha and Omega Semiconductor (AOSL), MKS Instruments (MKSI) and Tetra Technologies (TTEK).

A brief comment about Mellanox, which we’ve owned for some time and which has done quite well. Business was humming along but its Q2 financial performance and guidance weren’t as stellar as in some recent quarters. Mellanox has been successfully managing the competitive challenge from Intel in both reality and perception. And solid gross margin guidance doesn’t hint at major competitive pressure from Intel and its Omni-Path product – just some tactical pricing kung fu. But the underlying tone (e.g. MLNX’s InfiniBand revenue in Q2 was down sequentially from Q1 – blamed on Q1 pull-in) from Mellanox’s management was not quite as righteous.

And then there was this comment from Mellanox’s CEO during its July 20th earnings conference call: ” We are seeing some price pressure in some locations. We don’t expect to lose significant market share, but Intel is seeing some success where people that say ‘good enough’ is good enough for them.”
This dynamic, combined with the recent difficulties at Cray send a clear message: Mellanox is no longer gaining market share and is likely losing share. So it’s gone. Along with Cray, of course.

Apollo Global Management announces a firm $32/share ‘going private’ offer for Rackspace.

Crabtree holding Rackspace (RAX) is currently the subject of very credible takeout rumors, and its share price has jumped over the last two days to about $31.50, a 36% premium from the close two days ago.  But the valuation talk only justifies about a $28-$29 share price. We know a good deal when we see one and manage to sell pre-open at 31.03. This is the 26th time that a Crabtree Fund holding has been the subject of a credible takeout offer since the portfolio’s inception on March 31, 2009. The most recent such offer was on June 15 of this year when QLogic accepted an offer from Cavium.

After the market close today, Crabtree holding QLogic (QLGC) announced it had reached a “definitive” agreement with Cavium, Inc. (CAVM) to be acquired by the latter company. Cavium plans to acquire all of the outstanding QLogic common stock for approximately $15.50 per share. This amount will be comprised of $11.00 per share in cash and 0.098 of a share of Cavium stock for each share of QLogic stock held by the latter firm’s shareholders.

The proposed transaction has already been unanimously approved by the boards of directors of both companies. We expect to tender our shares of QLogic when required to do so when Cavium officially commences the offer. The mostly-cash offer and Cavium’s financial strength, gives us the confidence that the transaction will be consummated.

The $15.50  per share price represents a 14% premium over QLogic’s closing price of $13.54. This represents the 25th time a Crabtree Fund holding has been the subject of a takeout offer since the portfolio’s inception on March 31, 2009. The most recent takeover was just two weeks ago when private equity firm Accel/KKR proposed to purchase Crabtree holding SciQuest (SQI).

Today we performed our second quarter re-balancing.

Sold out of the fund were Autobytel (ABTL), Axcelis (ACLS), Broadridge Financial (BR), Brocade (BRCD), Ericsson (ERIC), Nokia (NOK), Neustar (NSR), SciQuest (SQI), Viavi (VIAV) and Xerox (XRX). Ten new two percent positions were purchased to replace them. They are Cardtronics (CATM), Care.com (CRCM), Exactech (EXAC), Green Dot (GDOT), Huntington Ingalls (HII), Halyard Health (HYH), Knowles (KN), PetMed Express (PETS), Rackspace (RAX) and VWR Corp. (VWR).

Additionally, we trimmed three positions that had grown more than 20% beyond our typical two percent position size. These included Advanced Energy Industries (AEIS), Facebook (FB) and Insperity (NSP). We continue to manage 50 positions in the fund with generally less than 1% in cash.

Today before the market opened,  Crabtree holding SciQuest Inc. (SQI) announced it had received an all-cash offer of $17.75/share from private equity firm Accel/KKR. The offer price represented a 34% premium over SciQuest’s closing price this past Friday, May 27. SciQuest’s board of directors has already unanimously approved the transaction and will recommend that other shareholders vote to approve the deal as well. Accel/KKR was already a SciQuest investor, holding 4.9% of the latter firm’s equity prior to this offer.

As is customary, we plan to sell our entire SciQuest position shortly, probably during our regular quarterly re-balancing which happens to take place tomorrow. Even though the terms of the offer give SciQuest a 25-day “go-shop” provision to seek out a superior offer, we typically choose to sell our position when the offer is non-hostile and from a financial rather than strategic suitor.

This represents the 24th time a Crabtree Fund holding has been the subject of a takeout offer since the portfolio’s inception on March 31, 2009. The most recent takeover was three and a half months ago in early February when Crabtree holding FormFactor  made an offer for another Crabtree holding, Cascade Microtech (CSCD).

Today we executed the first quarter portfolio re-balancing.

We sold 10 positions outright and replaced them with 12 new ones. The two additional buys were necessary to account for our February sales of Cascade Microtech (CSCD) and RetailMeNot (SALE) and return the portfolio to our customary 50 positions.

Sold out of the portfolio were Advanced Semiconductor (ASX), Bio-Rad Laboratories (BIO), Halyard Health (HYH), MAXIMUS (MMS), Mercury Systems (MRCY), NetApp (NTAP), Shoretel (SHOR), Sohu.com (SOHU), Windstream Holdings (WIN) and Zebra Technologies (ZBRA).

We initiated new positions in Applied Materials (AMAT), Alpha & Omega Semiconductor Ltd. (AOSL), Coherent (COHR), Control4 Corp. (CTRL), Deutsche Telecom (DTEGY), Ericsson (ERIC), ESCO Technologies (ESE), Nanometrics (NANO), Premier Inc. (PINC), QLogic (QLGC), Viavi (VIAV), and Xerox (XRX).

Additionally, we trimmed two of our existing holdings, II-VI (IIVI) and USA Technologies (USAT) that had appreciated above our customary 2% starting position size. And we added to our Axcelis (ACLS) holding, which had depreciated during the previous three months.

Sold Cascade Microtech (CSCD) for $19.95/share

Sold RetailMeNot (SALE) for $6.46/share

Today we executed the fourth quarter portfolio re-balancing.

We sold 12 positions outright and replaced them with 14 new ones. The two additional buys were necessary to account for our sales of Pericom Semiconductor and  Constant Contact, each of which was the subject of a takeout offer since our last re-balancing.

The 12 names we sold were ABM Industries (ABM), ARC Document Solutions (ARC), Brocade (BRCD), Calix (CALX), Changyou (CYOU), Amdocs (DOX), Engility (EGL), ESCO Technologies (ESE), Groupon (GRPN), Quinstreet (QNST), Tri-Net (TNET) and TeleTech Holdings (TTEC).

The 14 purchases were BOFI Holdings (BOFI), CBIZ Inc. (CBZ), First Solar (FSLR), Halyard Health (HYH),  ON Semiconductor (ON), Silver Spring Networks (SSNI), RetailMeNot (SALE), Shoretel (SHOR), Sohu.com (SOHU), SciQuest (SQI), Tower Semiconductor (TSEM), USA Technologies (USAT), Vectrus (VEC), and Windstream Holdings (WIN).

Additionally,  we trimmed our existing positions in AutoByTel (ABTL), Cimpress (CMPR) and Digi International (DGII) back to our traditional ‘starting’ 2%-of-the-portfolio positions.

Today before the market opened,  Crabtree holding Constant Contact (CTCT) announced that it had received an all-cash offer of $32/share from Endurance International Group (EIGI). Endurance is a web/cloud software developer that is, like Constant Contact, also headquartered in Eastern Massachusetts. The $32/share offer represented a 23% premium over Constant Contact’s closing price this past Friday, October 30.

As is customary, we elected to sell our entire Constant Contact position this morning, recieving $31.88/share.

This represents the 22nd time a Crabtree Fund holding has been the subject of a takeout offer since the portfolio’s inception on March 31, 2009. The last time this happened was two months ago on September 3, when Diodes Inc.  made an offer for Crabtree holding Pericom Semiconductor (PSEM).

Today before the market opened,  Crabtree holding Pericom Semiconductor (PSEM) announced it had received an all-cash offer of $17.00/share from Diodes Inc. (DIOD). We’re quite familiar with Diodes, having owned shares in that firm several years ago.

The $17/share price represents a 40% premium over PSEM’s closing price yesterday.

This represents the 21st time a Crabtree Fund holding has been the subject of a takeout offer since the portfolio’s inception on March 31, 2009. The most recent time was just three weeks ago on August 18, 2015 when Seagate made an offer for Crabtree holding Dot Hill.

This afternoon, we sold our entire position in Pericom for $16.73/share.  As noted before, we are not risk arbitrageurs, but long-only equity money managers. In rare instances, when a suitor is exceptionally well-capitalized and the acquisition is part of a long-standing strategy by the suitor to expand its business, we will hold the position until our next re-balance.

But as much as we admire Diodes and its management team, that level of certainty doesn’t exist here. So we are happy to take our profit and move on. Since we have just run our quantitative model in support of our Q3 re-balance, we expect to find and buy a replacement for Pericom shortly.

Today we completed the third quarter re-balancing of the Crabtree Fund.

Sold out of the portfolio were the following positions: Brightcove, Fairchild Semiconductor, ChipMOS Technologies, Methode Electronics, Neophotonics, Omnicell, ON Semiconductor, Rogers, Sagent, Sizmek, Triumph Group and Encore Wire.

These positions were replaced with new 2% positions in Axcelis Technologies, AeroJet Rocketdyne, Bio-Rad Laboratories, Calix, Constant Contact, Engility Holdings, Mellanox, Nokia, NetApp, Orbital ATK, Orthofix, QuinStreet, Shutterfly and TeleTech Holdings.

All of these new positions were sourced from our quantitative screen. At present, the only two Crabtree holdings for which we made out-of-model exceptions are Facebook and Zebra Technologies.

In addition to the 14 buys and 12 sells, we also trimmed four of our holdings back to 2% positions. These included Amdocs, Euronet Worldwide, Expeditors International and Facebook.

Last evening after the market close,  Crabtree holding Dot Hill Corp. (HILL) announced it had received an all-cash offer of $9.75/share from Seagate Technology (STX).

The price represents a 90% premium over HILL’s closing price earlier Monday.

This represents the 20th time a Crabtree Fund holding has been the subject of a takeout offer since the portfolio’s inception on March 31, 2009. The most recent time was on March 30, 2015 when United Health made an offer for Crabtree holding Catamaran.

This morning, we sold our entire position in Dot Hill for $9.68/share. While Seagate is a high-quality, well-capitalized suitor, the huge premium of the offer makes the risk-reward decision easy – we’re not going to take a chance on any number of ways the deal could fall apart for the risk of just a few more percentage points of return.

Today we completed the second quarter re-balancing of the Crabtree Fund.

Sold out of the portfolio were the following positions: Coherent, Canadian Solar, Catamaran, IAC/Interactive, ICON Plc, Perceptron, QLogic, SAI Corp., ShoreTel, Super Micro Computer, Sierra Wireless, Teledyne Technologies and TE Connectivity.

These positions were replaced with new 2% positions in ABM Corp., Autobytel, Brightcove, Digi International, Expeditors Intl of WA., Fairchild Semiconductor, Groupon, Dot Hill Systems, Neophotonics, Triumph Group, Tetra Technologies, Encore Wire and General Dynamics.

All of these new positions were sourced from our quantitative screen. At present, the only two Crabtree holdings for which we made exceptions are Facebook and Zebra Technologies.

In addition to the 13 buys and 13 sells, we also trimmed three of our holdings back to 2% positions. These included Advanced Energy Industries, Brocade and Changyou. And we added to two continuing positions, returning them to 2% of the portfolio: ARC Document Solutions and Sizmek.

This morning before the market open,  Crabtree holding Catamaran Corp. (CTRX) announced it was being acquired by UnitedHealth Group (UNH).

Shareholders of pharmacy benefit manager Catamaran will recieve $61.50 in cash. The price represents a 27% premium over CTRX’s closing price last Friday, March 27. Both companies’ boards have already approved the proposed transaction.

This represents the 19th time a Crabtree Fund holding has been the subject of a takeout offer since the portfolio’s inception on March 31, 2009. The most recent time was on November 3, 2014 when LabCorp made a cash-and-stock offer for Crabtree holding Covance.

It is noteworthy that Catamaran was the last remaining holding from our original March 2009 portfolio. The company was then known as SXC Health. Including the increase from today’s takeout offer, our original position in SXC Health rose more than 12-fold.

As we have noted before, it is typically our habit to immediately sell the shares in companies subject to takeover offers. However, we make an exception when certain conditions are met, such as a cash offer from a well-capitalized buyer where both companies’ boards have already approved the transaction. All three of those criteria are met here, so we anticipate holding Catamaran until our next re-balance in late May or early June.

Today we completed the first quarter re-balancing of the Crabtree Fund.

Sold out of the portfolio were the following positions: Broadcom, Echo Global Logistics, EPAM Systems, Green Dot, Inteliquent, LG Display Co., RigNet, Rofin-Sinar Technologies, inContact, Stantec, Ultra Clean Holdings, and  USANA Health Sciences.

These positions were replaced with new 2% positions in Coherent, Changyou.com Ltd., Amdocs, II-VI Inc., Insperity, NeuStar, Nova Measuring Instruments, Perceptron, Quality Systems, Science Applications Intl., Sierra Wireless, and TriNet Group. The first eleven of these new names were sourced from our quantitative screen. TriNet was an exception that we made, because our model wouldn’t have caught its unusual combination of market share and cash generation. Among existing holdings, the only other exceptions are Facebook and Zebra Technologies.

In addition to these sells, we also trimmed three of our holdings back to 2% positions. These included Broadridge Financial, ICON Plc., and Mercury Systems.

We would like to note that selling our position in inContact (ticker: SAAS) was difficult, inasmuch as the company had executed flawlessly for over a year, continued to generate cash and exceed its own and the Street’s expectations. Ironically, however, this very execution did not seem to translate into operational leverage. For example, even though the company reported 41% revenue growth in its Q4, and bookings growth (a rough proxy for future revenue growth was 44%, the company still projected a Non-GAAP loss for 2015.

Something is wrong with your business model when that kind of growth combined with rising gross margins doesn’t result in profits. And it also means that the current shareholder base isn’t owning the stock for profits that will never arrive – they’re only owning it for the price momentum. That’s not Crabtree’s MO, so we’re gone.

Today we completed the fourth quarter re-balancing of the Crabtree Fund.

Sold out of the fund were Atlantic Tele-Network, Aspen Technology, Diodes, Electronics for Imaging, EnerNOC, Marvell, MaxLinear, Newport Corp., Insight Enterprises, PAREXEL, R.R. Donnelly, Shutterfly and Trina Solar.

New 2% positions included Advanced Energy Industries, Canadian Solar, Cascade Microtech, FormFactor, IAC/InterActive Corp., LG Display, Methode Electronics, Mercury Systems, Pericom Semiconductor, QLogic, Rogers Corp., Rofin-Sinar Technologies, Spirit AeroSystems and USANA.

Additionally, six names that had grown significantly above a 2% position were trimmed back to that level. These included ARC Document Solutions, Broadcom, Cimpress (formerly known as Vistaprint), Inteliquent, MAXIMUS and Super Micro Computer.

Prior to the market open today, Crabtree holding Covance (CVD) was the subject of an offer from LabCorp (LH).

Shareholders of the drug development and testing company were offered the equivalent of $105/share in cash and LabCorp stock, a premium over the last closing price. Both companies’ boards have already approved the proposed transaction.

But shares of LabCorp opened lower than that today, closer to $100/share. This was perhaps because of the integration risk of such a large acquisition. So Covance shares were “only” up 25% based on the deal terms. Nonetheless, we sold the shares out of the Crabtree portfolio.

As I’ve written before, we are not risk arbitrageurs at Crabtree; we are long-only investors. And, in my opinion, with a fully mature company like Covance, the chance of a higher offer coming along is low. And with a (partially) stock-based offer, we’re at the mercy of the acquiror’s share price. It was time to sell.

The bid for Covance represents the 18th time that a Crabtree holding has been the subject of a takeover offer. The most recent occurrence was on March 28, 2014 when after the close of trading, Nordion (NDZ) got a $11.75 cash offer from Sterigenics, about a 13% premium over that day’s $10.41 close. The offer was subsequently raised to $12.25/share.

Two days ago, Bloomberg reported that Silver Lake Partners had “abandoned” an attempt to acquire Shutterfly, as well as competitor Snapfish, a division of Hewlett-Packard. In that story, another unidentified source said that, “Silver Lake was valuing Shutterfly at about 12 times its future earnings before interest, taxes, depreciation and amortization. That implied a purchase price of about $2.57 billion, based on estimates for 2015 EBITDA of $214 million, according to data compiled by Bloomberg.”

The anonymous source’s explicit leak of the valuation is nothing more than a ‘dog whistle’ to the world, meant to alert anyone who cares what Shutterfly turned down: a market cap of $2.57 billion equated to over $66/share. Apparently, Qatalyst Partners wasn’t impressed that Shutterfly had turned down an offer that was 55% higher than the stock had been trading on July 1.

I can say that I certainly wasn’t impressed either. And neither was Mr. Market: SFLY stock fell about $6/share today to close at $41.42.  During the time I’ve known Shutterfly’s management, I’ve been impressed with their low-key demeanor and impressive operational execution. If, in fact, they did turn down a huge takeover premium, it would be a black mark against them. But the claim could also be an impulsive swipe by a banker that led the horse to water but couldn’t get it to drink. We’re unlikely to ever know.

It’s unfortunate that a deal didn’t happen. But I have no regrets. Shutterfly, after all, is still generating cash and dominating its space in the Internet-enabled printing sector. There is still time for SFLY to generate alpha for The Crabtree Fund.

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.

Shutterfly follow-up:

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.

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.

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.

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.

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.

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.

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.

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!

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.