This Small-Cap Manager Just Sold Its Entire $110 Million Stake in a Data Security Company
Key Points
Sold 1,908,011 shares; estimated trade value ~$109.65 million based on quarterly average pricing.
Quarter-end position value decreased by $109.65 million, reflecting full exit and price movement.
Transaction represented 1.2% of Hood River's reported 13F assets under management.
Post-trade, Hood River held zero shares in Varonis Systems, with a stake value of $0.
The position previously accounted for 1.3% of the fund's AUM as of the prior quarter.
Hood River Capital Management exited its entire stake in Varonis Systems (NASDAQ:VRNS), selling 1,908,011 shares in the fourth quarter for an estimated $109.65 million based on quarterly average pricing, according to a February 17, 2026, SEC filing.
What happened
According to a recent SEC filing dated February 17, 2026, Hood River Capital Management LLC liquidated its entire position in Varonis Systems during the fourth quarter of 2025. The firm sold all 1,908,011 shares for an estimated transaction value of $109.65 million, based on the average share price during the quarter. The quarter-end value of the stake decreased by $109.65 million, reflecting both the share sale and stock price movement.
What else to know
- Hood River sold out of Varonis Systems, which now represents 0% of its 13F assets under management.
- Top holdings after the filing:
- NASDAQ:APLD: $540.36 million (5.9% of AUM)
- NYSE:MTZ: $322.50 million (3.5% of AUM)
- NASDAQ:DAVE: $247.08 million (2.7% of AUM)
- NYSE:FIX: $229.46 million (2.5% of AUM)
- NASDAQ:KTOS: $208.41 million (2.3% of AUM)
- As of February 16, 2026, shares of Varonis Systems were priced at $25.36, down 41.99% over the past year.
- That performance trailed the S&P 500 by 53.79 percentage points over the same period.
- The position was previously 1.3% of the fund's AUM as of the prior quarter.
Company Overview
| Metric | Value |
|---|---|
| Market Capitalization | $2.99 billion |
| Employees | 2,406 |
| Revenue (TTM) | $623.53 million |
| Net Income (TTM) | ($129.32 million) |
Company Snapshot
- Provides data security and analytics software, including DatAdvantage, DatAlert, Data Classification Engine, DataPrivilege, Data Transport Engine, and DatAnswers.
- Serves IT, security, and business personnel at enterprises across North America, EMEA, and international markets.
- Offers a scalable platform for managing and protecting sensitive enterprise data both on-premises and in the cloud.
Varonis Systems is a leading provider of infrastructure software focused on securing and managing enterprise data both on-premises and in the cloud. The company leverages advanced analytics and automation to help organizations protect sensitive information and intellectual property. Its scalable platform and broad product suite position it as a key player in enterprise data security and compliance.
What this transaction means for investors
Hood River Capital Management, a small-cap growth specialist, exited its entire $110 million stake in Varonis Systems after the stock dropped 42% over the past year. For a manager focused on finding companies that beat Wall Street expectations, this looks like a clear cut-your-losses move.
Varonis sells data security software that protects sensitive information, particularly important as companies deploy AI tools that can accidentally expose confidential files. The problem? Varonis is transitioning from selling software licenses to a subscription model, which tanks short-term profits even while building recurring revenue. The company reported $129 million in trailing losses despite growing sales.
For investors, Varonis represents a classic turnaround bet. The business case is solid: AI security is a growing need. But you're betting on management executing a multiyear transformation while bleeding cash. This works for patient, risk-tolerant investors who can stomach continued losses and volatility.
Growth investors like Hood River want companies already profitable and beating estimates. The exit signals a simple truth: When a stock craters 42% and losses pile up, growth managers move on regardless of the long-term story.
Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Comfort Systems USA, Kratos Defense & Security Solutions, and Varonis Systems. The Motley Fool recommends MasTec. The Motley Fool has a disclosure policy.