Trigran Investments, led by Douglas T. Granat, has filed its latest Form 13F with the U.S. Securities and Exchange Commission for the reporting period of the end of the first quarter. Illinois-based Trigran Investments was founded in 1992 by Granat and the hedge fund currently manages $200 million in assets under management. The employee-owned hedge fund favors fundamental analysis supported by in-house research when making investments in the U.S. equity markets. Trigran Investments disclosed an equity portfolio comprised of 44 positions valued at around $327.4 million, with the portfolio consisting primarily of technology stocks. The top long-term holdings of the fund are represented by KMG Chemicals Inc. (NYSE:KMG), NVE Corp (NASDAQ:NVEC), DTS Inc. (NASDAQ:DTSI), and Mercury Systems Inc (NASDAQ:MRCY).
We track moves of more than 700 hedge funds because our research has shown that imitating a portfolio of the 15 most popular small-cap picks among these professional investors can generate an average of nearly one percentage point in excess of the S&P 500 Total Return Index’s monthly return. Moreover, these picks generated an alpha of around 80 basis points per month. By comparison, the 50 most popular stocks among hedge funds overall (which are mostly large- and mega-cap companies) had a monthly alpha of six basis points and under-performed the market by around seven basis points per month. Our small-cap strategy has returned around 138% in the last 2.5 years since we started tracking it in real time, beating the S&P 500 ETF (SPY) by over 80 percentage points (read more details here).
On the top position is KMG Chemicals Inc. (NYSE:KMG), in which Trigran Investments trimmed its stake to 1.38 million shares from 1.43 million shares held previously. The stake is valued at just under $37.0 million. Trigran Investments has been holding a stake in KMG Chemicals Inc. (NYSE:KMG) since the first quarter of 2011 with ownership of 15,337 shares at that time. KMG Chemicals Inc. (NYSE:KMG) is a $348.8 million market cap provider of specialty chemicals in select markets. The company reported adjusted diluted earnings per share of $0.30 for the second quarter of fiscal 2015, versus $0.12 per share in the prior year’s second quarter. Its consolidated net sales were $79.8 million, representing a 5% decrease from last year’s second quarter. However, KMG Chemicals Inc. (NYSE:KMG) stock has been performing well, soaring 90.54% during the past year and by more than 40% since January alone. Aside from Trigran Investments, Peter Schliemann’s Rutabaga Capital Management is also a large shareholder of the company, owning 337,747 shares as of the end of 2014.
The second largest holding is represented by NVE Corp (NASDAQ:NVEC), in which Trigran Investments started a position about eight years ago, owning 166,100 shares at the end of the third quarter of 2007. The latest 13F filing showed that Trigran Investments increased its stake in NVE Corp (NASDAQ:NVEC) by roughly 15% from the previous quarter to 525,828 shares worth $36.24 million. For the fourth quarter of fiscal 2015, NVE Corp (NASDAQ:NVEC) reported an increase in net income of 43% to $3.66 million, or $0.75 per diluted share, versus $2.56 million, or $0.53 per diluted share for the prior-year quarter. The company posted a 27% increase in total revenue for the quarter to $7.57 million versus $5.98 million year-over-year. For fiscal 2015, the company’s net income increased by 29% to $14.4 million, or $2.95 per diluted share, compared to $11.1 million, or $2.29 per diluted share, for fiscal 2014. Another investor in Trigran Investments is Bandera Partners, led by Gregory Bylinsky and Jefferson Gramm, which held 63,073 shares at the end of 2014.
In DTS Inc. (NASDAQ:DTSI), Trigran Investments disclosed ownership of 1.02 million shares with a reported value of $34.67 million. The stake represents a slight increase from the 976,063 shares the fund held previously. Trigran Investments has been holding a position in DTS Inc. (NASDAQ:DTSI) since March 2012, when it disclosed ownership of 165,459 shares of the company. DTS Inc. (NASDAQ:DTSI) is engaged in providing audio solutions for high-definition entertainment experiences, and has a market cap of $592.8 million. The share price of DTS Inc. (NASDAQ:DTSI) has increased by 83.5% since last May. However, the audio company posted first quarter 2015 net income of $1.1 million, a significant decrease from the $14.3 million in earned in the first quarter of 2014. Revenue for the quarter was $33.9 million, down from $36.8 million year-over-year. Among the investors we track, Chuck Royce’s Royce & Associates holds a large position of 1.39 million shares worth $47.37 million in DTS as of the end of the first quarter.
Lastly is Mercury Systems Inc (NASDAQ:MRCY), in which Trigran Investments reduced its stake by 19% to 1.77 million shares, the stake being valued at $27.49 million. The fund started a position in Mercury Systems Inc (NASDAQ:MRCY) in the third quarter of 2010, as it owned 21,000 shares at the end of September of that year. Mercury Systems Inc (NASDAQ:MRCY) is a provider of secure, sensor processing subsystems for defense and intelligence applications, and has a market cap of $486.3 million. Mercury Systems Inc (NASDAQ:MRCY) stock gained 17.08% during the past calendar year. Mercury Systems (NASDAQ:MRCY) reported its financial results on April 28, posting earnings per share (EPS) of $0.11 for the quarter, missing analysts’ consensus estimate of $0.13. In the same quarter of last year, earnings per share stood at a loss of -$0.02. Royce & Associates also sees value in Mercury Systems Inc (NASDAQ:MRCY), holding 2.49 million shares of the company as of the end of the first quarter.
Disclosure: None
