Singular Research Director’s Letter: February performance 2020
Singular Research’s February 2020 Director’s Letter
In February, the Corona virus spread throughout the world and dramatically affected stock markets both domestically and worldwide as fear of the unknown rattled investors. Iran, Italy, and China became global focal points of the Corona virus; the U.S. reported its first Corona virus related death on February 28 in Seattle, Washington. Domestically, the February Purchasing Managers Index (PMI®) registered 50.1 percent, a decrease of 0.8 percentage points from the February reading of 50.9 percent. Although the PMI® is technically in expansion territory, the data is lagging and there is strong reason to believe the statistic is currently below 50.0. Similarly, the Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.1 percent in February to 112.1 (2016 = 100), following a 0.7 percent increase in January and a 0.3 percent decline in December. The Conference Board has flatly stated that the Leading Economic Index® will not show improvement in March. The unemployment rate remained unchanged at 3.5% (3.6% in January), one of the lowest rates since December 1969.
For the month of February, the Singular coverage list outperformed the S&P 500 and Russell 2000 by 198 and 210 basis points, respectively. Year-to-date, the Singular coverage list has underperformed the S&P 500 and outperformed the Russell 2000 by 38 and 257 basis points, respectively. As the Corona virus continues to spread globally, investors are looking favorably to companies that may not be negatively affected as others, such as technology, precious metals, and healthcare.
RUBI was our top performer in February after the company released better than expected quarter results and favorable news of their pending merger with Telaria which would make the combined companies the largest independent sell-side advertising platform. As fears of the Corona virus exacerbate, investors have and will continue to look to safe haven plays such as AMRK, EHTH, and HBIO, all of which should benefit in times of pandemonium.
Contrary to the positive results of AMRK, SA had a poor month as SA represents a future possibility of gold mined, not an actual store of value. NMIH, a private mortgage insurance company, also had dismal results as investors worried over the company’s future success if many Americans may lose their jobs. HSC reported fourth quarter results that were not impressive as the company is undergoing a tumultuous change to Clean Earth and away from its Industrial segment. BYND, although reporting a strong quarter, had lighter than expected guidance and is also facing many headwinds from the Corona virus’ detraction of consumer demand of the plant-based burger in both restaurants and grocery stores. LUNA also reported a strong quarter with strong 2020 guidance; however, management did not consider any negative affects of the Corona virus on their 2020 guidance.
For February, there were no new initiations as we have been sheltering in place. We wish to thank our clients for their support and belief in our process. To learn more about Singular Research and register for a 14-day trial offer, please follow the link below.
Robert Maltbie, CFA
Singular Research, President