Why Tran Capital's SPS Commerce Exit Could Signal Opposite Opportunities for Contrarian Investors

When institutional investors reverse course on a position, it often tells a story. Recently, Tran Capital Management made headlines by exiting its entire SPS Commerce stake—a move that raises a fundamental question: Does an institution’s retreat signal weakness in the stock, or does it represent the opposite perspective worth exploring?

The Fund’s Strategic Retreat from SPS Commerce

According to SEC filings dated January 20, 2026, Tran Capital Management (TCM) sold its complete SPS Commerce position during Q4, liquidating 147,591 shares worth approximately $15.37 million at the quarter’s average price. For TCM, this represented a 1.84% shift in its assets under management, wiping out what had been a 1.8% portfolio allocation just one quarter prior.

The divestment reduced TCM’s holdings from their prior level to zero shares and zero position value. Meanwhile, as of January 21, 2026, SPS Commerce shares traded at $91.13—down 53% over the trailing 12-month period and underperforming the S&P 500 by 67 percentage points.

The Opposite Case: Why Fundamentals Tell a Contrasting Story

Here’s where the narrative takes an interesting turn. While TCM abandoned ship, the underlying business metrics suggest an opposite conclusion. Consider the following:

The Strength Behind the Weakness:

• 99 consecutive quarters of sales growth — a track record most software companies could never claim
• 18% annualized total returns since 2010 — substantially outpacing broader market averages over the long term
• 16% sales growth and 23% earnings-per-share growth in the latest quarter — demonstrating near-term momentum
• 2026 guidance for 8% organic sales growth — reasonable expectations in a challenging macro environment

Valuation Dislocation: SPS Commerce now trades at 24 times free cash flow, versus its five-year average of 52 times FCF. By this metric alone, the stock appears cheaper than historical norms—the opposite of what one would expect for a company with such consistent execution.

Supply Chain Resilience vs. Market Sentiment Divergence

The broader software industry faces uncertainty around artificial intelligence disruption. Yet SPS Commerce operates in a niche where AI represents an opportunity, not a threat. The platform’s value stems from interconnectedness—linking retailers, third-party logistics providers, and suppliers through cloud-based automation and omnichannel order fulfillment.

As e-commerce continues its expansion and supply chain complexity increases, these digital connections become more essential, not less. The megatrend toward omnichannel sales works in SPS Commerce’s favor, creating the opposite dynamic from many software vendors struggling with relevance.

Positioning Against the Consensus: A Contrarian Take

TCM’s exit might reflect a “falling knife” mentality—the belief that a stock momentum is too broken to catch. But contrarian investors often find opportunities exactly where consensus abandonment occurs. TCM chose to exit; others might choose to accumulate.

Top Holdings for Context: TCM’s remaining portfolio shows concentrated positions:

• Nvidia: $60.95 million (7.3% of AUM)
• Talen Energy: $59.99 million (7.2% of AUM)
• Amazon: $59.51 million (7.1% of AUM)
• Microsoft: $58.12 million (7.0% of AUM)
• Danaher: $41.71 million (5.0% of AUM)

Notably, these holdings represent the opposite of deep value investing—they’re mainstream mega-cap positions. Meanwhile, SPS Commerce’s current valuation and growth profile offer contrarian characteristics that may appeal to investors taking the opposite side of institutional retreat.

What This Opposite Direction Means

When a fund exits a position after just one quarter, investors face a choice: follow the trend or fade it. TCM’s decision doesn’t make the company weaker; if anything, it highlights where consensus and fundamentals have diverged. For investors seeking the opposite of crowded trades, SPS Commerce’s combination of proven execution, reasonable valuation, and structural industry tailwinds deserves serious consideration—precisely because the fund community has moved in the opposite direction.