Why One Fund Cut a $4.1 Million Stake Amid Interface’s Blowout $364.5 Million Quarter
Key Points
Dallas-based Meros Investment Management reduced its Interface holding by 259,973 shares in the third quarter.
The value of the position change was approximately $4.1 million from quarter to quarter.
After the transaction, the fund held 166,576 shares of Interface valued at $4.8 million as of September 30.
On November 14, Dallas-based Meros Investment Management disclosed it sold 259,973 shares of Interface (NASDAQ:TILE) in the third quarter, reducing its position by approximately $4.1 million.
What Happened
According to a U.S. Securities and Exchange Commission (SEC) filing dated November 14, Meros Investment Management sold 259,973 shares of Interface (NASDAQ:TILE) during the third quarter. The fund’s remaining stake stands at 166,576 shares, worth $4.8 million at quarter-end.
What Else to Know
The sale reduced Interface to 2.1% of reportable AUM; in the prior quarter, the position was 4.24% of fund AUM.
Top five holdings as of the filing:
- NYSE: DCO: $16 million (6.8% of AUM)
- NYSE: PLYM: $14.6 million (6.2% of AUM)
- NASDAQ: MGNI: $13.4 million (5.7% of AUM)
- NYSE: SEI: $11.7 million (5% of AUM)
- NASDAQ: PLAB: $11.6 million (4.9% of AUM)
As of Friday, Interface shares were priced at $27.32, up about 5% over the past year and well underperforming the S&P 500, which is up 13% in the same period.
Company Overview
| Metric | Value |
|---|---|
| Market Capitalization | $1.6 billion |
| Revenue (TTM) | $1.4 billion |
| Net Income (TTM) | $113 million |
| Price (as of market close Friday) | $27.32 |
Company Snapshot
- Interface offers modular carpet tiles, resilient flooring, rubber flooring, luxury vinyl tile, antimicrobial chemical compounds, adhesives, and installation services under brands such as Interface, FLOR, norament, noraplan, and Intersept.
- The company generates revenue through direct sales to end-users, indirect sales via contractors and distributors, and online channels, complemented by project management and maintenance services.
- It serves commercial clients in offices, healthcare, education, hospitality, retail, and government sectors, as well as residential customers globally.
Interface, Inc. is a modular flooring company with a diversified product portfolio and both direct and indirect sales channels serving commercial and residential markets. Interface, Inc. sells a range of modular flooring products and related services to customers in many industries worldwide.
Foolish Take
The significance of Meros trimming its Interface position comes down to timing: The company just delivered one of its strongest quarters in years, posting expanded margins and raising full-year guidance. A fund taking profits after a rally to all-time highs rather than exiting due to deteriorating fundamentals sends a very different signal — and investors should read this move as portfolio rebalancing, not a thesis break. Interface’s third-quarter results reinforce that point: Net sales rose 5.9% to $364.5 million, and GAAP EPS surged 62.5% year-over-year to $0.78, with adjusted EPS up 27% to $0.61. Management also raised full-year guidance, now expecting nearly $1.38 to $1.39 billion in sales and higher adjusted gross margins.
Despite volatile trading and a stock still lagging the broader market over the past year, Interface’s operating momentum and strong cash generation — $76.7 million in the third quarter alone — position it well for long-term value creation.
Glossary
13F reportable assets under management: The portion of a fund's assets disclosed quarterly to the SEC, showing U.S. equity holdings.
AUM (Assets Under Management): The total market value of investments managed by a fund or investment firm.
Position: The amount of a particular security or asset held by an investor or fund.
Stake: The ownership interest or shareholding a fund or investor has in a company.
Top holdings: The largest investments in a fund's portfolio, usually ranked by market value.
Modular carpet tiles: Carpet flooring manufactured in tile form, allowing flexible installation and design.
Direct sales: Products sold directly from manufacturer to end-user, without intermediaries.
Indirect sales: Products sold through third parties like distributors or contractors rather than directly to the customer.
Project management services: Assistance provided to oversee and coordinate the planning and execution of flooring installations.
TTM: The 12-month period ending with the most recent quarterly report.
Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ducommun. The Motley Fool recommends Magnite. The Motley Fool has a disclosure policy.