Our material long positions (>3% of the portfolio) at the end of June were as follows (in order of size): Stratasys (SSYS), Trex Co. (TREX), NOW Inc. (DNOW), Zebra Technologies Corp. (ZBRA), Colfax Corp. (CFX), IPG Photonics (IPGP), Materion Corp. (MTRN), Astronics Corp. (ATRO), Generac Holdings Inc., (GNRC), Balchem Corp. (BCPC), Proto Labs (PRLB), Kirby Corp. (KEX), and Primoris Services Corp. (PRIM).

The only name no longer on the list is Core Laboratories (CLB), which we have trimmed below the materiality threshold as the stock has climbed with crude prices.

Primoris Services Corp. (PRIM) returned to the list in June as we rebuilt the position on a share price decline. As to what has caused the decline, we presume people are worried that excessive rain in Texas (PRIM’s largest market) will lead to a 2Q:16 earnings miss; given that we live in Austin (and we’ve confirmed with PRIM’s Dallas-based management), most of the rain has been in Houston, where PRIM has less of a presence… not to mention, one rain-filled quarter is hardly a long-term business concern.

The only truly new position on the list is Zebra Technologies Corp. (ZBRA). Like so many names in our portfolio, this is a company with which have many years of experience spanning both the buy- and sell-sides, and we know management well. Zebra, particularly after its acquisition of Motorola Solutions, is one of the largest provider of asset tracking solutions (bar code printers, scanners, RFID tags, etc.) in the world. As mentioned earlier in this letter, ZBRA shares plummeted in recent months after a couple of earnings misses. The earnings misses were due to a combination of slower-than-expected end-market conditions and temporarily aggressive pricing (to lock in very long-term contracts with higher margins on the back end). As we also mentioned earlier, we think there is minimal downside left for the stock and the earnings outlook. Longer-term, we think ZBRA will continue to benefit from the secular trend toward supply chain transparency and speed, and we expect the company’s high-quality management team to continuously find new ways to squeeze higher margins out of the business.


The above post has been excerpted from a letter of Liberty Park Capital Management.

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