Markets Find Direction to the Upside
Both large and small caps posted solid returns in February as earnings season hit its stride. As is so often the case, outside factors such as geopolitical concerns and so forth recede while investors focus on whether or not companies in their portfolios are reporting results consistent with (or better than) their expectations. This was particularly telling in February as the FED appears set to begin raising interest rates soon yet the market took the news in stride. It remains to be seen what will happen once the news of earnings season fades and investors return their focus to issues such as the stability of the European Union and rising interest rates.
In this Directors Letter we are adopting a new format to encapsulate the performance of the Singular Coverage List relative to the performance of the SP&500 and the Russell 2000. We feel this table presents our results in a more concise form than before, where we reviewed the results in purely text form.
http://www.singularresearch.com/sr/wp-content/uploads/2015/03/dir-ltr-201500302a-300x76.png 300w" sizes="(max-width: 405px) 100vw, 405px" style="max-width: 100%; display: block; margin: 0px auto 10px;">
Recapping the table above, for February, the S&P 500 was up 5.39%, the Russell 2000 was up 5.67% and the aggregate Singular List was up 2.94%. For the trailing twelve months, the S&P was up 12.83%, the Russell 2000 was up 4.4%, and the Singular Research List was down 3.69%.
As we noted at the outset, February market movements were driven primarily by earnings results in our opinion. As our table shows, the top performing company on the Singular List was INTL FC Stone (INTL). The company announced earnings results for the second quarter of their fiscal 2015 which easily outpaced our estimates. The business looks to be firing on all cylinders while a recent acquisition will help round out the company’s offerings. As noted during the earnings call, management assumes no synergies in developing its acquisition criteria. Thus, any potential cross-selling gains will be icing on the cake. Looking at the rest of our Top 5 performers, BLX was also up following its earnings report while NNBR benefited from a positive analyst day outlook.
http://www.singularresearch.com/sr/wp-content/uploads/2015/03/dir-ltr-201500302b-300x54.png 300w" sizes="(max-width: 576px) 100vw, 576px" style="max-width: 100%; display: block; margin: 0px auto 10px;">
As with our top performers, our worst performers in February saw their monthly returns driven primarily by their respective earnings reports. Both EAC and FHCO declined as their earnings reports failed to impress. SELL-rated VMC posted better than expected results, driving shares higher.
http://www.singularresearch.com/sr/wp-content/uploads/2015/03/dir-ltr-201500302c-300x52.png 300w" sizes="(max-width: 576px) 100vw, 576px" style="max-width: 100%; border: none; display: block; margin: 0px auto 10px;">
At Singular Research we continue to seek out investment ideas that have minimal to no Wall Street coverage. There are a number of uncovered and under-covered names we continue to track with an eye on helping our clients gain an edge. We thank our clients for your support of independent equity research.
Jeremy Hellman, CFA
Director of Research/Chief Operating Officer