Investor Summary
Fund Strategy
FUND PERFORMANCE AS OF 31st March 2026
| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 21.2% | 6.6% | 6.6% |
| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 21.2% | 6.6% | 6.6% |
Atai Capital generated a 6.6% net return in Q1 2026, significantly outperforming the S&P 500's 4.3% decline and modestly beating microcap benchmarks. The portfolio's top contributor was Haivision, which was trimmed as it approached fair value, while Kitwave Group was acquired and exited. BK Technologies remains the largest position, with management unveiling a Vision 2030 framework targeting $170M in revenue at 60% gross margins and 35% EBITDA margins, representing 15%+ annual revenue growth and nearly 4x EPS expansion from 2025 to 2030, all organically. The manager values BKTI's disciplined capital allocation approach, particularly management's stringent focus on after-tax ROIC and willingness to repurchase shares rather than pursue M&A for its own sake. AstroNova was acquired for $29/share during the quarter, delivering satisfactory IRRs despite earlier challenges from an unprofitable acquisition. Following these exits, cash has grown significantly, and while the manager is uncomfortable with the elevated cash level, he refuses to dilute the portfolio with mediocre ideas, preferring lost opportunity over lost capital. Remaining investments are attractively valued with limited anticipated turnover.
Atai Capital pursues a concentrated microcap value strategy focused on high-quality businesses with strong management teams, disciplined capital allocation, and clear paths to value realization, willing to hold significant cash when compelling opportunities are scarce rather than dilute the portfolio with mediocre ideas.
The manager expects limited near-term portfolio turnover given that remaining investments are cheap at the time of writing. The manager is actively searching for new investment opportunities to deploy the elevated cash position but will not compromise on quality. The manager anticipates several current names to continue working out well following a strong year-to-date performance.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jun 22 2026 | 2026 Q1 | ALOT, BKTI, HAI.TO | activism, aerospace, Capital Allocation, Microcap, Public Safety, small caps, value |
BKTI ALOT |
Atai Capital delivered 6.6% net returns in Q1 2026, outperforming the S&P 500 by over 1000 basis points. BK Technologies, the largest position, unveiled a compelling Vision 2030 framework targeting organic revenue growth of 15%+ annually and nearly 4x EPS expansion through disciplined execution and market share gains in public safety. AstroNova was acquired at $29/share. Elevated cash reflects scarce compelling opportunities, not market timing. |
| Mar 10 2026 | 2025 Q4 | BELFB, BKTI, EGAM, HAI.TO, KITW.L | Concentration, Microcap, Objectivity, Philosophy, Quality, small caps | - | Atai Capital's concentrated micro-cap strategy delivered strong 2025 returns despite Q4 underperformance. The fund maintains elevated cash levels due to limited attractive opportunities but stands ready to deploy capital as recent macroeconomic volatility creates potential investments. The manager continues evolving toward quality names while prioritizing selectivity over forced deployment in an unfertile market environment. |
| Dec 2 2025 | 2025 Q3 | ALOT, BELFA, BKTI, MSI, TP | concentrated, defense, Microcap, small caps, technology, value | - | Atai Capital's concentrated micro-cap strategy delivered 10.7% in Q3, led by BK Technologies' transformation under exceptional CEO John Suzuki. BK manufactures mission-critical radios for first responders, expanding beyond wildfire niche to compete with Motorola at half the price. Management targets 10% market share from current 3.5%, offering substantial growth runway at attractive valuation. |
| Aug 14 2025 | 2025 Q2 | ALNT, ALOT, BELFB, CABO, HAI.TO | activism, Concentration, Governance, small caps, value |
CABO ALOT |
Atai Capital posted 32.8% Q2 returns through concentrated small-cap value investing, significantly outperforming benchmarks. The manager increased cash to 17% amid challenging market conditions, exited failed positions Cable One and trimmed AstroNova after value-destructive acquisitions. Focus remains on patient capital deployment with higher hurdle rates given elevated market valuations. |
| May 20 2025 | 2025 Q1 | ALOT, BELFB, CXI, EN7.ST, HAI.TO, QUIS, TPB | Concentration, Manufacturing, Quality, small caps, tariffs, Trade Policy | - | Atai Capital's concentrated micro/small-cap strategy outperformed in Q1 despite tariff volatility, establishing largest-ever position while evolving toward higher-quality businesses. Portfolio now most concentrated in fund history at 67% in top five holdings. Manager navigating trade policy uncertainty with elevated cash position, seeking overseas opportunities given high U.S. valuations while maintaining long-term confidence in portfolio quality. |
| Feb 18 2025 | 2024 Q4 | ALOT, BF, NVDA, SXI, TPB, TSLA | AI, Concentration, Microcap, small caps, valuation, value | ALOT | Concentrated microcap fund underperformed in 2024 despite portfolio refinement efforts. Manager maintains disciplined valuation approach amid elevated market multiples, with 58% holdings under $250M market cap. AstroNova acquisition disappointment offset by confidence in new CFO's operational expertise. AI disruption and tariff uncertainty create market headwinds, but selective opportunities remain for patient capital deployment. |
| Nov 12 2024 | 2024 Q3 | BELFB, GOOGL, HAI.TO, META, MSFT, TPB | defense, growth, Microcap, small cap, Streaming, Video Technology | HAI.TO | Atai Capital outperformed in Q3 with a 6.5% return, driven by a new position in Haivision Systems, a video streaming infrastructure company benefiting from protocol migration trends and defense spending. The microcap-focused fund maintains concentrated positioning with 54% in top five holdings while actively seeking new opportunities despite temporarily elevated cash levels. |
| Aug 22 2024 | 2024 Q2 | ALOT, EG7.ST | gaming, Microcap, small caps, technology, value |
ALOT EG7.ST |
Atai Capital's concentrated microcap strategy faced headwinds in Q2 with a 0.6% decline, but the manager remains optimistic given strong business fundamentals. Key holding AstroNova doubled EBITDA while stock stayed flat, creating compelling value at 5x EBITDA. Small caps trade at historic discounts to large caps, presenting attractive opportunities for patient capital. |
| May 16 2024 | 2024 Q1 | EG7 SS, TPB | - | - | |
| Jan 16 2024 | 2023 Q4 | ALOT, BELFB | Cash, Concentration, EBITDA, small caps, value | ALOT | Small-cap value manager returned 20% in 2023 while holding substantial cash. Portfolio now at peak concentration with 60% in top five positions. Key holding AstroNova surged on unexpected margin expansion, trading at 5.5x EBITDA with $34 target. Deploying remaining 17% cash by Q1 end through new systematic idea generation process. |
| Nov 29 2023 | 2023 Q3 | ATVI, BELFB, CTG, EG7.ST | Concentration, Quality, risk management, small caps, value, volatility | - | Atai Capital's concentrated value strategy declined 5.8% in Q3 but remains positive year-to-date. Manager emphasizes volatility as opportunity rather than risk, using Bel Fuse's 100%+ price swings as example of market inefficiency. Portfolio focuses on quality businesses trading below intrinsic value, with position sizing based on permanent loss risk assessment rather than return potential. |
| Dec 7 2023 | 2023 Q2 | ALOT, ATVI, BELFB, CDR.WA | Electronics, gaming, industrials, small caps, value |
ALOT BELFB ATVI |
Small-cap value fund targeting undervalued companies with clear catalysts. Largest position AstroNova expected to see EBITDA nearly double over 12-24 months. Bel Fuse margins expanding dramatically under new management. Large cash position ready for deployment. Avoiding Big Tech AI bandwagon, viewing current concentration as unsustainable given high valuations and risk-free rates. |
| Apr 13 2023 | 2023 Q1 | ALOT, ATVI, CABO | aerospace, Broadband, gaming, Monopoly, Rural, small cap, value | - | Small-cap value manager targeting monopolistic businesses at deep discounts. Largest position AstroNova benefits from aerospace recovery through cockpit printer monopoly. Activision merger arb with standalone upside. Contrarian Cable One position despite broadband headwinds. High cash from selectivity, not macro fears. Focus on business fundamentals over market timing. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
Public SafetyBK Technologies is positioned to grow revenues at 15%+ annually through 2030, driven by end-market growth of 10% per year, the launch of the BKR9500 radio in 2027, and continued market share gains from larger peers less focused on tier 3 state and local public safety agencies. The company expects to compound EPS nearly 4x from 2025 to 2030 organically, reaching $170M in revenue at 60% gross margins and 35% EBITDA margins. |
Public Safety Radios Market Share Organic Growth |
Capital AllocationBK Technologies management has signaled a stringent focus on after-tax ROIC, prioritizing internal investments first, M&A second, and shareholder returns last. Management has resisted rushing into large or forced deals despite having the balance sheet capacity, instead recently beginning share repurchases, signaling confidence in organic growth plans and commitment to attractive ROICs rather than pursuing M&A for its own sake. |
ROIC M&A Buybacks Capital Discipline | |
AerospaceAstroNova's aerospace business started to take off during the period, contributing to the company's improved performance. The new management team increased margins, unwound working capital, and lowered capital expenditures to essentially nothing. The company was ultimately acquired for $29/share, with the outcome attributed to positive business, management, and governance changes following an activist proxy contest. |
Aerospace Margins M&A | |
ActivismThe manager attributes AstroNova's positive outcome to activist Samir Patel of Askeladden Capital, whose proxy contest won endorsement from ISS and Glass Lewis and led to positive business, management, and governance changes that might not have happened otherwise. The activism resulted in the removal of the CEO responsible for an unprofitable acquisition and ultimately led to a successful sale of the company. |
Activism Proxy Contest Governance | |
| 2025 Q4 |
Small CapsThe fund operates a concentrated Micro and Small-Cap strategy that naturally diverges from market indexes. Portfolio consists of ~60% businesses with market caps below $500M, with top five positions accounting for ~60% of the portfolio. |
Microcap Small Cap Concentration |
| 2025 Q3 |
Small CapsAtai Capital operates a concentrated Micro and Small-Cap strategy with 58% of portfolio consisting of businesses with market caps below $500M. The manager acknowledges this strategy will naturally diverge from market indexes and anticipates periods of both outperformance and underperformance. |
Microcap Small Cap Concentrated Divergence Outperformance |
DefenseBK Technologies manufactures Land Mobile Radios primarily for Fire and Police Departments, operating in a mission-critical environment where products cannot fail during first-responder situations. The industry is dominated by Motorola with high barriers to entry driven by brand loyalty and switching costs. |
Land Mobile Radios First Responder Mission Critical Police Fire | |
| 2025 Q2 |
Small CapsThe fund operates a concentrated Micro and Small-Cap strategy with approximately 66% of the portfolio consisting of businesses with market caps smaller than $500M. The manager notes finding the current market environment difficult for idea generation in small caps. |
MicroCap SmallCap Concentration Valuation Opportunity |
ValueThe manager emphasizes maintaining a higher-than-normal hurdle rate for new investments, describing U.S. markets as not cheap today. The fund sold Allient as it approached fair value estimates, demonstrating disciplined value-based selling. |
Valuation Hurdle Rate Fair Value Discipline | |
| 2025 Q1 |
Trade PolicyManager extensively discusses tariff impacts following Liberation Day, noting 10% across-the-board tariffs with Chinese rates fluctuating from 145% to 30%. Emphasizes uncertainty around policy consistency and implementation, with businesses likely to wait out the administration rather than relocate manufacturing to the US. |
Tariffs China Manufacturing Supply Chain USMCA |
QualityManager has evolved strategy to focus on higher-quality businesses, raising the bar and willing to pay more for quality. Notes that best-performing investments have been high-quality companies with solid leadership, leading to more favorable outcomes and upside surprises. |
High Quality Leadership Business Quality Standards Concentration | |
Small CapsPortfolio maintains concentrated Micro/Small-Cap strategy with 51% of holdings having market caps smaller than $250M. Manager acknowledges this strategy will naturally diverge from market indexes with periods of relative outperformance and underperformance expected. |
Micro Cap Small Cap Concentration Market Cap Divergence | |
| 2024 Q4 |
ValuationManager extensively discusses market valuation concerns, noting S&P 500 trades at 22x earnings with top 10 stocks at 29x earnings. Historical analysis shows when paying 20x+ earnings for S&P 500, following 10-year returns have never exceeded 5% annually since 1988. Current market concentration at 38% in top 10 stocks exceeds dot-com era levels. |
Multiples Earnings Historical Concentration Returns |
AIAI space experienced significant disruption in late January with DeepSeek R1 open-source model release, reportedly trained at fraction of cost compared to OpenAI's O1 model. NVDA dropped 17% in one day on this news, with ongoing debate about actual impact on AI revolution among industry experts. |
DeepSeek OpenAI Cost Disruption Revolution | |
Small CapsPortfolio consists of 58% businesses with market caps smaller than $250M. Manager focuses on microcap investing with concentrated approach where top five positions make up 55% of portfolio. Strategy involves buying good-to-great businesses at attractive prices when opportunities present themselves. |
MicroCap Concentration Opportunities Businesses Attractive | |
| 2024 Q3 |
StreamingHaivision provides video networking infrastructure for live streaming, particularly through their SRT protocol which is gaining adoption over legacy protocols like RTMP. The transition from legacy to modern IP-based protocols is expected to intensify over the next 3-5 years, creating growth opportunities. |
SRT Protocol Video Streaming IP Networks Live Video Protocol Migration |
DefenseHaivision serves government and defense customers including NASA, U.S. Department of Defense, and U.S. Navy. The company was recently awarded a large CAD 82M defense contract with the U.S. Navy over five years, representing significant growth potential in this segment. |
Defense Contracts Government Military Navy Contract Mission Critical | |
| 2024 Q2 |
GamingEnad Global 7 operates multiple gaming studios including ToadMan (work-for-hire), Daybreak Games (live service portfolio), and recently acquired Singularity 6 with their cozy game Palia. The gaming industry experienced widespread layoffs and project cancellations this year, impacting ToadMan's performance. |
Live Service Game Studios Free-to-play Gaming Platforms |
Small CapsThe Russell 2000 experienced its worst half in history relative to the S&P 500 and is on track for its third consecutive year of underperformance. Small caps appear undervalued with multiples near the lower end of their historical range, while large caps may be overvalued. |
Russell 2000 Underperformance Valuations Market Dislocation | |
| 2023 Q4 |
ValueManager focuses on companies trading below intrinsic value with substantial upside potential. AstroNova trades at 5.50x normalized EBITDA with clear path to $34/share target. Emphasizes finding businesses worth more than current market price without relying on overly optimistic assumptions. |
Intrinsic Value Undervalued Upside EBITDA Multiple Valuation |
Small CapsPortfolio consists entirely of small-cap companies including AstroNova and Bel Fuse. Manager notes concentration in top five positions at 60% of portfolio with several LSD-MSD positions. Focus on smaller companies with potential for material growth in cash flows over 2-3 years. |
Small Cap Concentration Position Sizing Cash Flows Growth | |
| 2023 Q3 |
ValueManager emphasizes purchasing shares at a discount to intrinsic values as the core investment strategy. Discusses the value arbitrage opportunity when share prices disconnect from business fundamentals, using Bel Fuse as an example where the stock experienced 100%+ volatility while fair value remained stable. |
Intrinsic Value Discount Value Arbitrage Fair Value Undervalued |
VolatilityExtensive discussion on volatility as a mechanism for opportunity rather than risk. Manager argues volatility allows purchasing shares at discounts and should be viewed as a friend of long-term investors, not a measure of risk as taught in business schools. |
Price Fluctuations Short-term Pain Market Timing Beta Academic Theory | |
QualityEmphasizes business quality as a critical component of margin of safety alongside price. Manager discusses the importance of cash flow quality and how minority shareholders benefit from those cash flows, warning against investing in poor businesses even at low prices. |
Business Quality Cash Flows Margin of Safety Fundamentals Minority Shareholders | |
| 2023 Q2 |
ValueManager emphasizes buying companies at substantial discounts to intrinsic value, focusing on businesses trading cheaply for identifiable reasons that can be corrected. Portfolio concentrated in undervalued small-cap names with clear catalysts for value realization. |
Value Discount Intrinsic Cheap Undervalued |
Small CapsFund focuses on small-cap opportunities where illiquidity and lack of institutional coverage create pricing inefficiencies. Manager notes that in small-cap land, Mr. Market doesn't give out free lunches often, requiring deep analysis to identify genuine opportunities. |
Small Cap Illiquid Coverage Institutional Inefficiency | |
AIManager views current AI hype as a bandwagon fueled by FOMO, with investors piling into AI-related names despite decade-high valuations. Compares situation to historical manias and suggests the bandwagon will eventually come to an end. |
AI Hype Bandwagon Valuations FOMO | |
| 2023 Q1 |
AerospaceCommercial airplane production is recovering from COVID lows, with Boeing expected to deliver 800 planes in 2025 and Airbus guiding to 1,000 by mid-decade. AstroNova benefits from this recovery through its monopoly position in cockpit printers, which are standard on all Airbus A320s and purchased directly by airlines for Boeing 737s. |
Commercial Aviation Aircraft Production Cockpit Printers Boeing Airbus |
GamingVideo game industry benefits from secular tailwinds and valuable intellectual properties. Activision Blizzard owns some of the most valuable gaming IPs including Call of Duty, which continues to break sales records despite minimal innovation between releases. |
Video Games Intellectual Property Call of Duty Gaming Franchises | |
BroadbandRural broadband providers face headwinds from fiber overbuilds and Fixed Wireless Access competition, but these threats may be overstated. Cable One maintains essential monopoly status in 65% of its markets while providing internet service that is practically a necessity. |
Rural Broadband Cable Fiber Competition Fixed Wireless |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jun 22, 2026 | Fund Letters | Atai Capital Management | BKTI | BK Technologies Corp. | Other | Communications Equipment | Bull | - | capital allocation, Communications Equipment, Hardware, Management Quality, margin expansion, market share gains, organic growth, Public safety, ROIC Focus, Share Buybacks, Two-Way Radios, Vision 2030 | Login |
| Jun 22, 2026 | Fund Letters | Atai Capital Management | ALOT | AstroNova Inc. | Other | Technology Hardware, Storage & Peripherals | Bull | - | acquisition target, activist involvement, Aerospace, debt reduction, Management Change, margin expansion, Operational Improvement, Proxy Contest, Specialty Printers, strategic alternatives, turnaround, working capital | Login |
| Aug 14, 2025 | Fund Letters | Atai Capital Management | CABO | Cable One Inc. | Communication Services | Cable & Satellite | Bear | NYSE | ARPU, broadband, cable, Fiber Competition, HFC Network, leverage, Rural Markets, Subscriber Losses, turnaround | Login |
| Aug 14, 2025 | Fund Letters | Atai Capital Management | ALOT | AstroNova Inc. | Information Technology | Technology Hardware, Storage & Peripherals | Neutral | NASDAQ | activist campaign, Data Acquisition, earnings inflection, governance issues, Management Change, MTEX Acquisition, Poor Capital Allocation, Specialty Printers, turnaround | Login |
| Feb 18, 2025 | Fund Letters | Atai Capital Management | ALOT | AstroNova Inc. | Technology Hardware & Equipment | Electronic Equipment, Instruments & Components | Bull | NASDAQ | Aerospace, aircraft production, capital allocation, Data Acquisition, EBITDA multiple, Equity, Industrial, Management Change, Specialty Printers, technology integration, turnaround, Value | Login |
| Nov 12, 2024 | Fund Letters | Atai Capital Management | HAI.TO | Haivision Systems Inc. | Information Technology | Technology Hardware, Storage & Peripherals | Bull | TSX | Canada, Decoders, Encoders, enterprise, Government Defense, growth, Hardware, live sports, SRT Protocol, technology, turnaround, Video Streaming | Login |
| Aug 22, 2024 | Fund Letters | Atai Capital Management | ALOT | AstroNova Inc. | Technology | Electronic Equipment, Instruments & Components | Bull | NASDAQ | acquisition, Aerospace, EBITDA growth, margin expansion, Portugal, Printing Equipment, Test Measurement, Value | Login |
| Aug 22, 2024 | Fund Letters | Atai Capital Management | EG7.ST | Enad Global 7 | Communication Services | Interactive Media & Services | Bull | Stockholm Stock Exchange | acquisition, EBITDA margins, Free-to-Play, game development, Gaming, Live Service, Multi-Platform, Sweden | Login |
| Jul 12, 2023 | Fund Letters | Atai Capital Management | ALOT | AstroNova Inc. | Technology | Technology Hardware, Storage & Peripherals | Bull | NASDAQ | Aerospace, EBITDA growth, illiquid, Monopoly, Printers, small-cap, turnaround, Value | Login |
| Jul 12, 2023 | Fund Letters | Atai Capital Management | BELFB | Bel Fuse Inc. | Technology | Electronic Equipment, Instruments & Components | Bull | NASDAQ | Aerospace, Electric Vehicles, Electronic Components, manufacturing, margin expansion, Networking, turnaround, Value | Login |
| Jul 12, 2023 | Fund Letters | Atai Capital Management | ATVI | Activision Blizzard Inc. | Communication Services | Interactive Media & Services | Bull | NASDAQ | entertainment, Gaming, Merger Arbitrage, Microsoft Acquisition, Mobile Gaming, Regulatory risk | Login |
| Jan 16, 2024 | Fund Letters | Atai Capital Management | ALOT | AstroNova Inc. | Technology | Technology Hardware, Storage & Peripherals | Bull | NASDAQ | Aerospace, Consumables, EBITDA multiple, Label Printers, manufacturing, margin expansion, Product Identification, restructuring, Value | Login |
| TICKER | COMMENTARY |
|---|---|
| BKTI | Since our initial write-up on BKTI, things have been progressing well and in line with our expectations. They hosted their first investor day under John Suzuki's leadership in early April, during which they provided further details on their 'Vision 2030' framework and financial targets. The company now expects to hit $170M in revenue at 60% gross margins and 35% EBITDA margins (~$60M), while generating $55M in free cash flow. For reference, as of the most recent quarter, the company had ~52% gross margins and ~19% EBITDA margins, while guiding to at least $90M in revenue for the full year. Put differently, the company expects to compound revenues at 15%+ and nearly 4x EPS from 2025 ($3.44/sh → $13.00/sh), and they expect to do all this organically. The company anticipates this growth to come from end-market growth of 10% a year through 2030, the launch of the BKR9500 radio in 2027, and continued market share gains from larger peers who are less focused on BKTI's target market of tier 3 state & local public safety agencies – 4.5% share vs 3.6% today. Under normal circumstances, we'd be very skeptical of such high targets, but these come from a management team with a proven history of under-promising and over-delivering. I don't believe that John and team would put out such targets if they didn't believe they were achievable and possibly even a low hurdle for the company. From a capital allocation standpoint, they are planning to direct future cash flows toward internal investments first (radios, software, and technology), M&A afterward, and returns to shareholders last. BKTI has been and will continue to generate substantial cash in excess of what their internal investments require. What they do with this excess cash is extremely important, and M&A discussions can be especially worrisome (AstroNova is a perfect example). However, the company has signaled a very stringent focus on after-tax ROIC, which is refreshing in today's growth-at-any-cost world. Furthermore, with John leading the company, I'm even less worried about this, and the way he spoke about M&A during the investor day helped ease my concerns. The company has certainly had the balance sheet required for substantial M&A for a while now and is sitting on roughly $30M of net cash today, but still has resisted rushing into any large or forced deals. Instead, they've recently begun repurchasing their own shares in the open market. In our view, this not only signals confidence in their organic growth plans but also demonstrates a willingness to return capital to shareholders and a commitment to attractive ROICs rather than pursuing M&A just for its own sake. We believe 18x-20x+ UFCF is more than fair for a high-quality hardware provider to public safety customers. This business is growing in the double digits organically, will eventually have 60%+ gross margins, ROICs are in the mid-20s, and it also seems likely they'll still be growing in the double digits after 2030. We don't often value our investments at this high of a multiple in our 'base case,' but we believe BKTI is worthy of it, and applying 20x to their 2030 targets gets me to a share price of $250 before cash generation, vs the mid-$80s today. It is also worth noting again that, in BKTI's Vision 2030 plans, they expect to have 4.5% market share, which is still well below their long-term stated target of 10%, leaving plenty of room for potential outperformance and a very long growth runway. Furthermore, even if BKTI were to fall well short of their 2030 vision, the investment is currently offering an attractive margin of safety, trading at ~18x UFCF this year's guide, and, given John's track record thus far, we anticipate that a beat-and-raise is likely. |
| ALOT | I am happy to report that AstroNova was acquired last week for $29/share. We have owned AstroNova in various sizes since the firm's inception three and a half years ago, and, as many of you know, what started off as a straightforward investment with a clear path to value realization became highly distorted and frustrating after the company acquired MTEX in mid-2024. That acquisition ultimately proved highly unprofitable and led to a proxy fight at the company. Luckily, the proxy battle was won, and the CEO responsible for the acquisition was removed around this time last year. But because of that acquisition, the company was left saddled with debt, and we subsequently trimmed our position over time. However, as the new management team continued to prove themselves, started to pay down debt, unwound working capital, lowered capital expenditures to essentially nothing, increased margins, and the aerospace business started to take off, pun intended, we added to our position earlier this year before the company announced strategic alternatives. When the announcement was made, our original expectation was a takeout price in the $18-$24 range, which eventually led us to slightly trimming our position before the takeout, as the share price was very close to the low end of our anticipated range. While we recognized that the company's value could have been in the high 20s, we were also of the view that finding a buyer for both segments at that price would be difficult. However, AstroNova did just that, and we benefited significantly. Furthermore, I largely attribute this positive outcome to a friend of mine and activist, Samir Patel, of Askeladden Capital. His proxy contest, which won the endorsement of both ISS and Glass Lewis, led to positive business, management, and governance changes that might not have happened otherwise. Secondly, I believe the company's CFO Tom Deboyle (appointed in 2024 after MTEX was already acquired) also deserves praise/credit here – while we only spoke to Tom a few times over our ownership and met him in person once (SouthWest Ideas conference in 2024) I still stand by my initial positive assessment of Tom and believe he was very instrumental in AstroNova's eventual turn around and sale. All things considered, we are very happy with the outcome here, and while we believe this should have happened or would have happened much sooner than it did had the company never acquired MTEX, our IRRs were still more than satisfactory. |
| HAI.TO | The portfolio's top contributor for the quarter was Haivision, which we subsequently trimmed as it approached our estimate of fair value – we still own Haivision, but in much smaller size. |
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