Singular Research Director's Letter: November 2018
November 2018 Director’s Letter
The Correction Deepens
The market continued its sell off despite a couple strong rebound attempts. The China trade war fears and fed tightening continued to loom ominously over the market as investors de-risked and reduced exposure to equities.
Major market indices such as the S&P 500 in the DJIA struggled to stay in positive territory as the yield curve continue to flatten, triggering a recession fear sell-off as the three-year bond inverted above the five-year bond. Save a slightly tepid employment reports most economic series continued to display strength. But, as we know, the market is a forward-looking indicator, portending trouble ahead for 2019.
Top performers for November
Bottom performers for November
We initiated coverage with a buy on Olympic Steel, (ZEUS), an operator of U.S based metals service centers with a growing focus on higher value- added, engineered products. We are very constructive on long term prospects for this beneficiary of Trump’s steel tariffs.
We wish our clients and friends and their families a joyous holiday season and thank all our subscribers for their continued support.Singular Research Staff
Singular Research Director's Letter: October 2018
October 2018 Director’s Letter
Lowlights: a triumvirate. of negatives overcomes bull market
Nowhere to hide from the claw of the bear, or the wrath of the Fed. The new Fed chief Powell indicated that the Fed plans on more hikes this year and next, a hawkish tone that spooked investors in October. The sell -off was deep and swift knocking most major indices approximately 10%, and individually issues 20-30%. The FAANG was hit hard for a 20% drop
Investors are concerned about trade wars and declining earnings momentum as S&P500eps growth is expected to taper from 15% to 5% over the next two quarters. Meanwhile, GDP continues to steam ahead at 3.5% GDP growth in Q3.
OUR INTERNAL MARKET INDICATORS ARE MILDLY BULLISH
Singular best & worst in Oct.
Underscoring the bearish environment in October the best/worst list dominated by negative returns.
Thank you for support.of our quest to discover forgotten,forlorned and mispriced, undercovered small and micro cap equities. We look forward to finding much more attractively valued coverage candidates in the months ahead. Happy holidays !
Singular Research Staff…
Singular Research Director's Letter: September 2018
September S& P 500 defying gravity
In September, U.S. equity markets bucked the historical trends and another rate hike by the Fed while edging slightly higher. However, the Russell 2000 index and the Singular Research coverage list were both slightly lower in September.
Perhaps distracted by the battle regarding the Kavanaugh appointment, it seems many market participants didn't read the fine print in the FED minutes showing a shift to a more hawkish stance toward raising rates very soon.The Fed hinted at up to five more hikes between now and the end of 2019, actions that may appear to be too aggressive. And a tone that likely as of this writing in mid-October has initiated a sharp correction in US Equity markets.
Our top performers for September were an Eclectic group of stocks.
The list was led by Seabridge Gold (SA), up 14.6% benefiting from a recovery and a possible bottoming of gold related equities in September. Our second top performer was Olympic Financial (OLY .TO) up 14.3%. Olympic was bolstered by a better-than-expected earnings report spurring our analyst to his raise his price Target.
Are third best top performer was Emerging Biosolutions ( EBS), up 6.2%. Emergent benefited from the announcement of a significant acquisition marking their entrance in the opioid treatment business acquiring a top private company with a remedy for overdoses called Narcan.
Singular three bottom performers were led by Huttig Building Products, (HBP), off 18.5% Huttig was hurt by the recent hike in interest rates which slows down demand for housing. Our second worst performer was Harvard Bioscinces, (HBIO), down 11.8%. Harvard appeared to be impacted by uncertainties caused by the departure of its CFO and light profit-taking. Are Third worst performer was Salem Media Group (SALM) down 11-75. Salem has been struggling most of the year adjusting is portfolio of stations ridding itself of lower-performing stations while focusing on top performers.
We hosted our Midwestern values conference in Dallas on September 20th featuring ten exciting growth and value ideas. In attendance were top local and regional fund managers, the conference was viewed as an outstanding success.
We thank our clients for their support and input as we move forward in the fourth quarter and toward what we believe will be a strong finish to 2018.
Market Indicators & Strategy Report Feb. 1, 2015
Singular Research Director’s Letter : August 2018
An Unheralded Record
Singular list tops S&P 500 but lags Russell 2000 in August.
Trailing 12 Mo’s
Meanwhile, the S&P 500 set a record for duration of a bull market exceeding 10 years. In August, measured from its lows at 666 this represents an eye-popping 330 % return.
However, if you were among the unfortunate whom invested in the tech bubble in the year 2000 when the S&P 500 floated at the 1500 level your returns are a much less impressive + 90%. Or a price appreciation of about 4% per year.
Despite near-record optimism and employment on top of a record bull market, professional money managers believe this is the peak. More than 58% of them believe that 2019 will be a down year.
Many seem to be underestimating the earnings power that has been unleashed by tax cuts and deregulation.
TOP 5 PERFORMERS FOR THE MONTH
|Beat & raise, provides year end guidance|
|Beat & raise, raises year end guidance|
|Rebound from post eps report sell-off|
|Makes announcement of large acquisition|
|Better than expected revenues|
In August, our top performer was Control 4 (CTRL) + 27.4% an emerging leader in smart home technology topped earnings forecasts and guided for solid numbers into 2019. NV5 (NVEE), popped + 17.5%. NV5, an environmental and energy Focused E&C firm topped expectations and guided higher. NVEE, one of our top picks over the last two years nearly tripling. New initiation, Quinstreet, a leader in digital marketing (QNST) ticked up 14.4%.
WORST 5 PERFORMERS FOR THE MONTH
|Gives back prior month’s gain on weak earnings report|
|Misses estimates ,higher than expected costs|
|Aum outflows offset small acquisition|
|Lower backlogs projected|
Salem Media (SALM) lead to the downside falling – 22.2%, reversing much of the gains from the previous two months as earnings disappointed again. Banco Latino Americano (BLX) was off 13% as lower spreads from higher interest rates hurt net income. HNNA fell 7.4% as continued Capital outflows pressured earnings.
Please join us September 20th in Dallas for our Midwestern values conference where will be focusing on several of the names mentioned above and other under covered, under followed and misunderstood situations that we believe can perform exceptionally well over the next 12 months. Visit www.singularresearch.com
At singular research we wish to thank our clients and followers for their continued commitment and support of our unbiased Independence research.
Singular Research Staff
Trecora Resources (TREC:BUY Long-term) TREC’s second quarter FY:18 EPS came below expectations due to reduced customer demand
5-SEP-18 – Trecora Resources (TREC:BUY) TREC’s second quarter FY:18 EPS came below expectations due to reduced customer demand and higher operating costs, while gross margin sank again on higher feedstock costs. We are maintaining our price target of $15.00 per share and our rating at Buy-Long Term.
Singular Research Director’s Letter : July 2018
EARNINGS Trump Tariff Talk
The singular coverage list nudged ahead beating the benchmark in July.
The Singular coverage list was up 2.13 % vs. 1.50% for the Russell 2000 and 3.39% for the S&P 500 as big caps led driven by strong earnings reports.
|SINGULAR MONTHLY PERFORMANCE STATISTICS|
|Last Month||YTD||Trailing 12 Mo’s|
Trump continues to talk tough on trade, calling out China, Europe, Mexico, and Canada recently. The market doesn’t seem too disturbed, taking it all in stride and to the dismay of a mainstream media which is decrying the dire circumstances these tariffs will create for the global economy.
Most investors see this as Trump technique, with an initial extreme position taken, then moving towards the center, in pursuit of a positive outcome for U.S economic objectives.
Earnings continue to impress
With the second quarter nearly in the books, eps surprises have been dominate as
79% of S&P 500 companies have beaten the estimates. This will mark one of the highest beat ratios since the year 2000. Top EPS beaters for Singular include: Anika Therapeutics (ANIK), +105%, Control 4 (CTRL) +29% and Emergent Bio solutions (EBS) + 21% above Street consensus estimates.
Cracks in the dynasty
Facebook (FB), Netflix NFLX, and Twitter (TWTR) all disappointed on MAU growth and offered disappointing guidance. Is the possible plateauing of this metric a harbinger of flattening growth ahead? These social media glamour heroes have been knocked down nearly 20% as of late. The strategy of buy the FAANG and go away, may be losing luster and coming to an end which would bode favorably for the rest of the market as investors seek out other stock plays to provide Alpha.
Top winners and losers.
National mortgage insurance Holdings (NMIH) was top performer, driven by strong earnings and a debt capital raise that increased earnings capacity. EVIO Inc.
(EVIO), was the weakest performer as capital was reallocated to larger caps with stronger near term fundamentals.
|TOP 5 PERFORMERS FOR THE MONTH|
|NMIH||BUY||$ 17.50||28.2%||strong eps and guidance|
|ANIK||BUY||$ 60.00||25.1%||relief rally from oversold condition on better than expected eps|
|TRNS||BUY||$ 20.00||20.9%||strong eps beat . Higher margins from cost reductions|
WORST 5 PERFORMERS FOR THE MONTH
|EVIO||BUY||$2.00||-22.0%||continued decline from disappointing near term execution|
|HNNA||BUY||$ 23.75||-9.8%||profit talking on in line quarter|
|LYTS||BUY||$9.80||-8.4%||C-level departs creating selling pressures|
We launched coverage on Internet marketing specialist Quinstreet Inc. (QNST), a firm that is well positioned to capitalize on the ongoing shift from traditional to digital ad spending, and also on Geospace Technologies Corp. (GEOS), a leading manufacturer of seismic equipment for the oil and gas exploration industry which we believe is in the beginning stages of a significant turnaround.
At Singular Research we wish to thank our clients and followers for their continued commitment and support of our unbiased, independence research model as we strive to consistently deliver Alpha generated from the lack of coverage outperformance anomaly.