Why a 63% Vertex Selloff Didn’t Scare Off a New $13 Million Investor
Key Points
New York City-based Hyperion Capital Advisors initiated a stake in Vertex during the third quarter, buying up 540,000 shares.
The shares were worth about $13.39 million at quarter-end.
Vertex is now the fund’s third-largest holding, accounting for 7.16% of total AUM.
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On November 13, New York City-based Hyperion Capital Advisors disclosed a new position in Vertex (NASDAQ:VERX), acquiring 540,000 shares valued at approximately $13.39 million.
What Happened
According to a filing with the Securities and Exchange Commission dated November 13, Hyperion Capital Advisors established a new position in Vertex (NASDAQ:VERX). The fund acquired 540,000 shares, with the stake valued at $13.39 million as of September 30. The move brought the number of reportable positions in the portfolio to 62.
What Else to Know
This new position represents 7.16% of Hyperion Capital Advisors’ reported U.S. equity assets as of September 30.
Top holdings after the filing:
- NASDAQ: GOOGL: $35.93 million (19.2% of AUM)
- NYSE: ELV: $16.69 million (8.9% of AUM)
- NASDAQ: VERX: $13.39 million (7.2% of AUM)
- NYSE: ICE: $12.85 million (6.9% of AUM)
- NYSE: UNH: $12.44 million (6.7% of AUM)
As of Wednesday, shares of Vertex were priced at $20.03, down a staggering 63% over the past year and well underperforming the S&P 500, which is up about 15% in the same period.
Company Overview
| Metric | Value |
|---|---|
| Price (as of Tuesday) | $20.03 |
| Market capitalization | $3.2 billion |
| Revenue (TTM) | $732.19 million |
| Net income (TTM) | ($53.58 million) |
Company Snapshot
- Vertex provides tax technology solutions, including tax determination, compliance and reporting, tax data management, document management, pre-built integration, and industry-specific software.
- The company generates revenue through software licenses, software as a service (SaaS) subscriptions, implementation and training services, and tax-related outsourcing services.
- It serves corporations across retail, communications, leasing, and manufacturing sectors in the United States and internationally.
Vertex is a leading provider of tax technology solutions, with a focus on automating complex tax compliance and reporting processes for large enterprises. The company leverages a mix of on-premise and cloud-based offerings to address diverse client needs and regulatory environments. Its strong presence across multiple industries and long-standing expertise position it as a trusted partner for corporate tax management.
Foolish Take
Vertex’s stock has been crushed since its late January peak, yet the underlying business is still growing at a double-digit clip and throwing off real cash. In the most recent quarter, revenue rose 12.7% year over year to $192.1 million, with cloud revenue up nearly 30%. Annual recurring revenue climbed to $648.2 million, and adjusted EBITDA expanded to $43.5 million, a 22.6% margin. That disconnect might be why Hyperion has stepped in here.net
The selloff appears perhaps driven more by decelerating net revenue retention and investor fatigue with midcap software generally than by a collapse in demand. Meanwhile, management had its own response: Vertex authorized its first-ever $150 million share repurchase program and ended the quarter with more than $313 million in cash, giving it flexibility many beaten-down software names lack. This position now sits alongside Alphabet, Elevance, ICE, and UnitedHealth in the portfolio, signaling a preference for durable cash-generating businesses rather than speculative growth.
Ultimately, for long-term investors, today’s Vertex valuation does seemingly signal that there’s room for patience to be rewarded.
Glossary
Assets under management (AUM): The total market value of investments managed on behalf of clients by a fund or firm.
13F reportable assets: U.S. equity securities that institutional investment managers must disclose quarterly to the SEC via Form 13F.
Net position change: The difference in the number or value of shares held in a security after a transaction.
Stake: The ownership interest or amount of shares held in a company by an investor or fund.
Position: The amount of a particular security or asset held by an investor or fund.
Portfolio: The collection of investments owned by an individual or institutional investor.
Filing: An official document submitted to a regulatory authority, such as the SEC, disclosing financial or investment information.
Market capitalization: The total value of a company's outstanding shares, calculated as share price times number of shares.
Implementation services: Assistance provided to help clients set up and integrate new software or technology solutions.
Software as a Service (SaaS): A software delivery model where applications are accessed online via subscription rather than installed locally.
Outsourcing services: Contracting external providers to perform business functions or processes that could be done in-house.
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 Alphabet. The Motley Fool recommends Intercontinental Exchange and UnitedHealth Group. The Motley Fool has a disclosure policy.
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