Singular Research Director’s Letter : September 2015

Singular List Outperforms

August was a doozie as all the indices suffered declines. In assessing the performance of our coverage at Singular, we focus on the Russell 2000 and the S&P 500, both of which recovered from intra-month lows of greater than 10% to close down roughly 6%. Market participants have no doubt seen ample commentary on the sharp decline that seemed to be led by the combination of negative news from China along with an impending increase in interest rates in the US. Despite this sell-off, the Singular List performed relatively well, registering a loss of 3.35%.

Interestingly, the drop came after the unofficial close of earnings season, which we peg at August 15 since that is date earnings must be reported by for companies that closed their quarter on June 30. During earnings season stock prices are more likely to be driven by individual company earnings. However, once that possible catalyst has passed there is little to prop shares up against negative macroeconomic news.

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Recapping the table above, for August, the S&P 500 was down 5.89%, the Russell 2000 was down 6.07% and the aggregate Singular List was down 3.35%. For the trailing twelve months, the S&P was up 2.07%, the Russell 2000 was up 4.63%, and the Singular Research List was down 7.23%.

Digging into the companies on our coverage list, as our table below shows, the top performing company on the Singular List was SeaBridge Gold (SA). The company reported additional positive news regarding its mineral deposits. Additionally, our analyst noted that the company is receiving increased interest in JV opportunities from industry majors. Among our other top performers, positive Q2 earnings reports were a common theme.

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Our worst performers in August saw their monthly returns driven by various factors although disappointing Q2 earnings appeared to be a dominant factor (just as the same played a big part with our gainers). In particular, our worst performer was LSB Industries (LXU). The company disclosed that a large capex project is running behind schedule and over budget, promptly leading to a drop in the shares. Other names, such as VDSI and FLXS, have been great performers in recent months but saw their momentum broken by disappointing earnings/guidance.

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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.

Sincerely,

Jeremy Hellman, CFA
Director of Research/Chief Operating Officer