One Texas Fund Has a $9 Million Bet on Tennant Even as Shares Lag the S&P 500 by 24 Percentage Points

On Monday, Texas-based Kopion Asset Management disclosed the purchase of 35,531 shares of Tennant (NYSE:TNC), an estimated $2.72 million trade based on quarterly average pricing.

What Happened

According to a SEC filing released Monday, Kopion Asset Management purchased 35,531 additional shares of Tennant during the fourth quarter. The estimated transaction value was approximately $2.72 million, calculated using the average closing price for the period. At quarter-end, the fund's total stake in Tennant stood at 123,037 shares with a reported value of approximately $9.07 million.

What Else to Know

The post-trade stake represents 6.48% of Kopion's 13F assets under management.

Top five holdings after the filing:

• NASDAQ: NICE: $12.03 million (8.6% of AUM)
• NYSE: FTI: $11.09 million (7.9% of AUM)
• NASDAQ: TRUP: $10.98 million (7.8% of AUM)
• NASDAQ: VRNS: $10.89 million (7.8% of AUM)
• NASDAQ: MGNI: $9.97 million (7.1% of AUM)

As of Monday, Tennant shares were priced at $73.96, down 7.4% over the past year and underperforming the S&P 500 by 24.5 percentage points.

Company Overview

Metric	Value
Revenue (TTM)	$1.24 billion
Net income (TTM)	$54.80 million
Dividend yield	1.7%
Price (as of Friday)	$73.96

Company Snapshot

• Tennant offers a broad portfolio of floor cleaning equipment, sustainable cleaning technologies, aftermarket parts, and maintenance services under multiple brands.
• The company generates revenue through direct sales, service contracts, rentals, leasing, and asset management solutions for cleaning equipment and related consumables.
• It serves contract cleaners, retailers, industrial facilities, public venues, and institutions worldwide via direct channels and authorized distributors.

Tennant designs and manufactures floor cleaning equipment and technologies, with a diversified product suite and a strong aftermarket service business. The company leverages a multi-channel distribution strategy to reach a broad customer base across commercial, industrial, and institutional markets. Tennant offers sustainable cleaning technologies as part of its product portfolio.

What this transaction means for investors

Tennant is operating through a volume downturn, but it still managed to expand profitability, a combination that tends to matter over full cycles rather than quarters, and that might be what Kopion noticed here.

In the most recent quarterly release, Tennant reported $303 million in net sales, down 4% year over year, driven largely by lapping a prior backlog reduction in North America. But margins moved in the opposite direction. Adjusted EBITDA rose to $49.8 million, and the adjusted EBITDA margin expanded by 120 basis points to 16.4%, helped by pricing discipline and tighter control over selling and administrative expenses. Free cash flow was also notable. Tennant generated $22.3 million in free cash flow in the quarter and converted more than 180% of net income into cash when excluding ERP investments, according to its earnings release.

That profile fits alongside the fund’s other holdings, which skew toward established, cash-generative businesses rather than speculative growth. Tennant returned $28 million to shareholders through dividends and buybacks in the quarter, raised its dividend again, and maintained a net leverage ratio below one times adjusted EBITDA. Ultimately, this looks less like a bet on a rebound trade and more like confidence in a durable industrial operator quietly compounding through the cycle.

Glossary

Assets under management (AUM): The total market value of investments managed by a fund or investment firm.

13F reportable assets: Securities that institutional investment managers must disclose quarterly to the Securities and Exchange Commission (SEC) if above a certain threshold.

Quarter-end: The last day of a fiscal quarter, used as a reference point for financial reporting.

Aftermarket parts: Replacement components sold for equipment after the original sale, often for maintenance or repair.

Service contracts: Agreements for ongoing maintenance or support services, typically for a set period and fee.

Leasing: Renting equipment or assets for a specified time instead of purchasing them outright.

Asset management solutions: Services that help clients track, maintain, and optimize the use of their physical assets.

Multi-channel distribution: Selling products through multiple sales channels, such as direct sales, distributors, and online platforms.

Sustainable cleaning technologies: Environmentally friendly cleaning methods or equipment designed to reduce resource use and environmental impact.

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 Nice, Trupanion, and Varonis Systems. The Motley Fool recommends Magnite and Tennant. The Motley Fool has a disclosure policy.