Singular Research Director’s Letter: April performance 2020

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Singular Research’s April 2020 Director’s Letter

 

 In April, there was progress in the fight against the Corona virus as social distancing and quarantine measures appeared to have slowed new cases and deaths.  Gilead’s Remdesivir brought new hope to Corona virus patients and the stock market as initial trials reduced hospitalization and mortality rates.  Many Americans received their $1,200 stimulus check and the U.S. central bank bought $30 billion per day in Treasuries.  The Small Business Administration’s (SBA) first round of loans totaling $342 billion dried up halfway through the month.  Later in the month, the House approved another round of loans totaling $310 billion.  With the stock market rallying, state economies re-opening, and strong progress being made on the fight against the Corona virus, many believe the worst may be over.

The April Purchasing Managers Index (PMI®) was still in contraction territory, registering 41.5 percent, a decrease of 7.6 percentage points from the March reading of 49.1 percent.  Similarly, the Conference Board Leading Economic Index® (LEI) for the U.S. declined 6.7 percent in March to 104.2 (2016 = 100), following a 0.2 percent decrease in February and a 0.4 percent increase in January.  The LEI decline of 6.7 percent was the largest decline in the index’s 60-year history.  The unemployment rate rose to 14.7% (4.4% in March), as workers were furloughed and businesses closed.

 

For the month of April, the Singular coverage list outperformed the S&P 500 and the Russell 2000 by 130 and 32 basis points, respectively.  Year-to-date, the Singular coverage list has outperformed the Russell 2000 by 405 basis points and underperformed the S&P 500 by 733 basis points, respectively.  As progress is being made in the fight against the Corona virus, markets rebounded significantly from March lows.  Investors displayed enthusiasm over industries such as telecommunications and technology that could weather the Corona virus storm better than others.

april 2020 top 5 performance

 

SA was our top performer in April as gold prices increase in inflationary times.  Gold is also viewed as a haven in times of uncertainty.  BYND also did well as meat processing plants had supply chain issues, leading consumers to buy more plant-based meat as an alternative.  CMTL, ROKU, and RUBI all experienced increased usage of their products while consumers remained in quarantine.

april 2020 worst 5 performers

EHTH was our worst performer for the month as investors worried over the negative effects the Corona virus may have on health insurers; however, the company reported record earnings in April which has led to a strong rebound of EHTH’s stock price in the month of May.  ZEUS and DAKT were roughly eight percent lower as demand for their products have recently come into question.  With large gatherings and sporting events currently on hold, demand for DAKT’s score boards have decreased.  Furthermore, as oil prices cratered in April, investors became wary of the demand and usage of GEOS’s ocean bottom discovery technology for oil deposits. 

For April, we initiated a short position on Zoom Video Communications, Inc. (ZM).  Zoom Video Communications provides a cloud-based video communication platform for enterprises. The company's platform enables face-to-face video experiences and connects users across various devices and locations in a single meeting.

april 2020 new initiation

 

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Thank You

Robert Maltbie, CFA
Singular Research, President
818-222-6234(office)
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