Looking Forward to a Rebound
Despite the postponement of an interest rate hike by the FED, markets fell further in September with pharmaceuticals and biotechs bearing the brunt of the selling following negative commentary regarding industry pricing policy. Overall, small caps also declined more than large caps which may have been due to investors moving away from risk, especially emerging pharma/biotech. Economic statistics seemed to be a mixed bag, with a solid GDP figure offset by weakened consumer sentiment, for example.
Much as was the case last month, market movements were driven by macroeconomic factors rather than corporate earnings. In instances where companies did report favorable earnings, such as BUY-rated Aceto Corp, shares performed well despite the negative macro trading environment.
Recapping the table above, for September, the S&P 500 was down 2.44%, the Russell 2000 was down 4.64% and the aggregate Singular List was down 4.71%. For the trailing twelve months, the S&P was down 2.24%, the Russell 2000 was up 1.88%, and the Singular Research List was down 11.20%.
Digging into the companies on our coverage list, as our table below shows, the top performing company on the Singular List was Aceto Corporation (ACET), as we noted earlier. The company reported earnings which outpaced expectations along with positive commentary on future results. We recently hosted management on two non-deal road shows and hope readers had an opportunity to hear the story first-hand.
Our worst performers in September saw their monthly returns driven by various factors although a recurring theme seemed to be previous winners giving up some gains as investors sold winners to offset losers elsewhere. CBM is a good example of such a case as the company has been a winner since our initiation earlier this year. However, with biotechs leading the overall market slide in September, CBM was dragged down given this peer group weakness. We continue to believe the story is as solid as ever and feel the shares offer an attractive entry point at current levels.
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