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.
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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.
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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.
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