Singular Research Director's Letter: July performance 2019
July 2019 Director’s Letter
Major market indices grind slightly higher, anticipating a rate cut Singular Coverage List continues to lead.
In a move called an “insurance cut” the Fed lowered rates to enable continued growth. Simultaneously, the Fed also curtailed its quantitative tightening program a couple months early to provide an addition stimulative measure. The recovery has been heralded as the longest modern recovery, now over ten years, without a recession. But this recovery has only now achieved an average ranking in cumulative GDP growth that has normally been achieved in four or five years in previous modern economic up cycles. This slow motion recovery has also been characterized by muted bull and bear markets cycles within it. We would not “fight the fed” or the out-sized buyback programs that will arise from a larger positive spread between borrowing costs and the earnings yield. These factors tend to favor large caps over small caps.
Our top performers were led by ANIK, management announced strong second quarter results and shorts ran to cover. HBIO was similarly driven by better than expected results engineered by new management, also boosted by short covering. RUBI reported a third consecutive quarter of accelerating growth accompanied by higher guidance bringing more attention to new management’s successful turnaround and nascent leadership in programmatic digital advertising.
The bottom performers were headed up by HSC, which met eps estimates and guided lower as it remakes itself from an industrial into to a higher margin , higher multple, environmental services firm. SALM continues to suffer from the dual headwinds of lower ad revune from a declining radio market and a slow transition to finding growth from digital ad sales . NMIH finaly slowed its momentum of higher than expected beats with a decelerating growth outlook.
In July, we dropped coverage on FLL due to a combination of low institutional interest and lack of transparency with management. Consequently, we have redirected our resources to identify under covered, mispriced, small cap equities with higher liquidity and broader institutional interest.
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 out- performance anomaly.
Singular research Staff