Here’s Why Headwaters Capital Exited its Position in SPS Commerce (SPSC)

Investment management company Headwaters Capital recently released its second quarter 2022 investor letter. A copy of the same can be downloaded here. In the second quarter, the fund declined by -20.5% compared to a -16.9% decline for the Russell Mid Cap index. High energy prices as a result of the Russian invasion affected the performance of the portfolio. You can check the top 5 holdings of the fund to know its best picks in 2022.

Headwaters Capital discussed stocks like SPS Commerce, Inc. (NASDAQ:SPSC) in the second quarter investor letter. Headquartered in Minneapolis, Minnesota, SPS Commerce, Inc. (NASDAQ:SPSC) is a cloud-based supply chain management software provider. On August 22, 2022, SPS Commerce, Inc. (NASDAQ:SPSC) stock closed at $126.93 per share. One-month return of SPS Commerce, Inc. (NASDAQ:SPSC) was 12.28% and its shares lost 1.03% of their value over the last 52 weeks. SPS Commerce, Inc. (NASDAQ:SPSC) has a market capitalization of $4.571 billion.

Here is what Headwaters Capital specifically said about SPS Commerce, Inc. (NASDAQ:SPSC):

“SPS Commerce, Inc. (NASDAQ:SPSC). After beginning to trim the SPS position in Q1 following the Q4 ’21 earnings release, I fully exited the position in early Q2. New customer additions for the company showed early signs of deceleration in Q4 ’21 and I am concerned that broader weakness in retail spending will ultimately lead to slower growth than the company has forecast. Commentary from adjacent peers in the supply chain management industry also suggest that competition in SPS’ core EDI business may be increasing. Additionally, part of the original thesis centered around the company’s shares trading at a discount to other high quality software peers. Given broader weakness in the software universe combined with share price appreciation for SPSC, that valuation discount is no longer present. The combination of slowing growth, increased competition and the potential for multiple compression drove the sell decision.”

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SPS Commerce, Inc. (NASDAQ:SPSC) is not on the list of 30 Most Popular Stocks Among Hedge Funds. As per our database, SPS Commerce, Inc. (NASDAQ:SPSC) was held by 14 hedge fund portfolios at the end of the first quarter, which was 17 in the previous quarter.

We discussed SPS Commerce, Inc. (NASDAQ:SPSC) in another article and shared the list of best mid cap stocks to buy in 2022. You can check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other prominent investors.

Disclosure: None. This article is originally published at Insider Monkey.