A Prudent Retreat: Cogent Communications and Portfolio Alignment

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It is with a degree of quiet observation that one notes the recent disposition of shares in Cogent Communications Holdings by Taylor Frigon Capital Management. No less than 73,271 shares, representing a value of approximately $2.81 million, have been released from the portfolio, a circumstance which, whilst not necessarily indicative of immediate distress, does invite a certain scrutiny.

The Disposition Explained

An SEC filing of the 23rd of January last revealed the complete withdrawal of Taylor Frigon’s investment in Cogent Communications. A decisive act, certainly, and one which suggests a considered judgment regarding the future prospects of the company, or, perhaps more accurately, its suitability within the fund’s existing framework.

Current Holdings

As of the aforementioned date, the fund’s principal investments lay thus: NASDAQ:ALAB, valued at $4.34 million (representing 2.2% of Assets Under Management); NASDAQ:CRDO, similarly valued; NASDAQ:MDB at $3.81 million (1.9%); NASDAQ:MPWR at $3.71 million (also 1.9%); and NASDAQ:TSEM at $3.49 million (1.8%). One perceives a preference for enterprises demonstrating a more readily apparent trajectory towards sustained profitability.

Cogent Communications, it must be observed, has experienced a period of considerable decline. The share price, having fallen by a most disheartening 65.4% over the past year, stands in marked contrast to the approximately 14% gain enjoyed by the S&P 500 during the same period. A circumstance which, whilst not entirely uncommon, does nonetheless warrant careful consideration.

A Company Profile

Cogent Communications, for those less acquainted with its operations, provides high-speed internet access, private network services, and data center colocation across multiple continents. Its revenue is derived principally from connectivity and network solutions. A solid foundation, one might think, yet it appears that the market, in its collective wisdom, has deemed it insufficient to secure a favourable position within a competitive landscape.

The company operates on a network-centric model, generating income through recurring service contracts and colocation fees. It serves a diverse clientele, including small and medium-sized businesses, communications service providers, and enterprises requiring reliable, high-capacity data connectivity. A broad base, to be sure, but one which, it seems, has not translated into the desired level of financial performance.

Metric Value
Revenue (TTM) $987.53 million
Net income (TTM) ($194.71 million)
Dividend yield 12.6%
Price (as of January 23, 2026) $24.29

The Significance of this Transaction

Portfolio adjustments, one may surmise, are seldom prompted by a single unfavourable quarter. Rather, they reflect a growing divergence between the demands of a business and the inclinations of a portfolio. Such a tension is readily apparent in this instance. Taylor Frigon’s holdings lean towards semiconductors, software, and infrastructure – enterprises where capital intensity is rewarded by scale and accelerating margins. A capital-heavy network operator, with a somewhat uneven pattern of cash generation, finds itself, perhaps, somewhat out of keeping with this established pattern.

Recent results from Cogent have shown pockets of progress, notably a sharp increase in wavelength revenue and a meaningful expansion of EBITDA margins to just over 20% in the third quarter. However, a sequential decline in core service revenue, coupled with thin operating cash flow and a continuing slide in the share price, has understandably given pause for thought. A 65% decline over the past year speaks not merely to market sentiment, but to a discernible lack of confidence in the company’s ability to translate incremental growth into durable free cash flow.

Compared to the fund’s remaining holdings, which demonstrate a clearer operating leverage and benefit from secular demand tailwinds, Cogent stands out – and not, one suspects, in a manner that is conducive to long-term value creation. Strong networks, it is often said, do not automatically equate to strong stocks. And when capital needs remain substantial and cash conversion lags, even improving metrics may fail to safeguard shareholder value – rendering this exit less an act of capitulation, and more a demonstration of prudent financial discipline.

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2026-02-02 01:52