Singular Research Director’s Letter : January 2015

S&P 500 Finishes Near an All-time High

After what seemed to be a year ripe with plenty of volatility the large cap segment of the market finished just off its all-time high (using the S&P 500 as our proxy). Small caps, represented by the Russell 2000, trailed larger caps by over 600 basis points. However, looking ahead to 2015 we feel this dynamic may be poised to change for a variety of factors. One we cite in particular is that small caps, on a relative basis, have less exposure to softening foreign demand and currency headwinds. If the US economy continues to expand then we see small caps having the runway to advance and outpace large caps this ear.

We return to highlighting our MMI indicator which, as shown in the chart below, displays strong correlation with the Russell 2000. As a reminder, an index score for our MMI indicator of 60 or higher is considered bullish; 50 to 60 is neutral; and under 50 is bearish. In the chart below we plot our weekly MMI readings since early May 2014 versus the level of the Russell 2000 index. After falling through September, our indicator bottomed early in October before rallying, finishing the year in the bullish zone, adding further conviction to our stance on small caps for 2015.


For December, the S&P 500 was down 0.44%, the Russell 2000 was up 2.68% and the aggregate Singular List was up 2.94%. For the trailing twelve months, which also marks the full year 2014, the S&P was up 12.5%, the Russell 2000 was up 5.0%, and the Singular Research List was down 1.7%.

With December typically a light month in terms of corporate news, our top five performers saw a variety of catalysts for their respective moves higher. As our table shows, the top performing company on the Singular List was Trecora (TREC). We, along with many investors, had been awaiting the filing of pro forma figures related to the company’s acquisition of SSI Chusei. With those figures finally published investors pushed shares higher as they gained more comfort in their forward projections.


As with our top performers, our worst performers in December were also from a variety of industries and with a range of reasons for the declines. The rout in Oil continued with Natural Gas prices also sagging significantly during the month, with softening global demand pegged as a catalyst. Reading through this, investors also sold off other commodity names, negatively impacting LODE on our list.


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 Office