Singular Research Director’s Letter : July 2018

EARNINGS Trump Tariff Talk

The singular coverage list nudged ahead beating the benchmark in July.
The Singular coverage list was up 2.13 % vs. 1.50% for the Russell 2000 and 3.39% for the S&P 500 as big caps led driven by strong earnings reports.

SINGULAR MONTHLY PERFORMANCE STATISTICS
  Last Month YTD Trailing 12 Mo’s  
SINGULAR LIST 2.13% -0.05% 7.38%  
S&P 500 3.39% 4.77% 13.39%  
RUSSELL 2000 1.50% 7.85% 16.20%  

Trump continues to talk tough on trade, calling out China, Europe, Mexico, and Canada recently. The market doesn’t seem too disturbed, taking it all in stride and to the dismay of a mainstream media which is decrying the dire circumstances these tariffs will create for the global economy.
Most investors see this as Trump technique, with an initial extreme position taken, then moving towards the center, in pursuit of a positive outcome for U.S economic objectives.

Earnings continue to impress

With the second quarter nearly in the books, eps surprises have been dominate as
79% of S&P 500 companies have beaten the estimates. This will mark one of the highest beat ratios since the year 2000. Top EPS beaters for Singular include:  Anika Therapeutics (ANIK), +105%, Control 4 (CTRL) +29% and Emergent Bio solutions (EBS) + 21% above  Street consensus estimates.

                                                     

 Cracks in the dynasty

Facebook (FB), Netflix NFLX, and Twitter (TWTR) all disappointed on MAU growth and offered disappointing guidance.  Is the possible plateauing of this metric a harbinger of flattening growth ahead? These social media glamour heroes have been knocked down nearly 20% as of late. The strategy of buy the FAANG and go away, may be losing luster and coming to an end which would bode favorably for the rest of the market as investors seek out other stock plays to provide Alpha.

 

Top winners and losers.

National mortgage insurance Holdings (NMIH) was top performer, driven by strong earnings and a debt capital raise that increased earnings capacity. EVIO Inc.
(EVIO), was the weakest performer as capital was reallocated to larger caps with stronger near term fundamentals.

 

TOP 5 PERFORMERS FOR THE MONTH
Symbol Rating Target Month Return Comment
NMIH BUY  $  17.50 28.2% strong eps and guidance
ANIK BUY  $  60.00 25.1% relief rally from oversold condition on better than expected eps
TRNS BUY  $  20.00 20.9% strong eps beat . Higher margins from cost reductions
NVEE BUY  $  52.00 8.7%  
EBS BUY  $  60.00 7.7%  
         
         
 

WORST 5 PERFORMERS FOR THE MONTH

Symbol Rating Target Month Return Comment
EVIO BUY  $2.00                 -22.0% continued decline from disappointing near term execution
HNNA BUY  $  23.75 -9.8% profit talking on in line quarter
LYTS BUY  $9.80                 -8.4% C-level departs creating selling pressures
QNST BUY  $  16.75 -7.7%  
GASS BUY  $6.00                 -5.3%  

New initiations

We launched coverage on Internet marketing specialist Quinstreet Inc. (QNST), a firm that is well positioned to capitalize on the ongoing shift from traditional to digital ad spending, and also on Geospace Technologies Corp. (GEOS), a leading manufacturer of seismic equipment for the oil and gas exploration industry which we believe is in the beginning stages of a significant turnaround.

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 outperformance anomaly.

Sincerely,

Singular Research

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