Singular Research Director’s Letter: October performance 2020

Singular Research’s October 2020 Director’s Letter

In October, the Corona virus continued its rampant tear throughout the United States and the world. The Corona virus even made its way into the White House and infected President Trump and First Lady Melania Trump. Throughout the month, Covid spread at higher rates in the Midwest and the Southeast. North Dakota, South Dakota, and Wisconsin each had 2,623, 2,344, and 1,685 cases per 100,000 over the 30-day period, the three highest cases per capita in the nation. Globally, Covid cases increased throughout Europe as the UK, Italy, Spain, and Germany each imposed new lockdown restrictions.

With Covid cases increasing as colder fall and winter months begin, a lack of a stimulus bill, election uncertainty, and new lockdown restrictions being put in place throughout Europe, the stock market really did not have much enthusiasm in October, posting its worst month since March. Giant technology stocks also had large selloffs as investors worried their valuations may be too high. Certainly, such uncertainty from the aforementioned has created opportunities, one way or the other.

The September Purchasing Managers Index® (PMI) registered 55.4 percent, a decrease of 0.6 percentage points from the August reading of 56.0 percent. Similarly, the Conference Board Leading Economic Index® (LEI) increased 0.7 percent in September to 107.2 (2016 = 100), following a 1.4 percent increase in August and a 2.0 percent increase in July. Both the PMI and LEI weakened from August and investors were wary of the results as it may be showing signs of an economic slowdown. The unemployment rate fell to 7.9% in September (8.4% in August) as businesses have started the rehiring process. The October PMI and LEI were not available at the time of this writing.

For the month of October, the Singular coverage list continued to outperform the S&P 500 and the Russell 2000 by 622 and 189 basis points, respectively. Year-to-date, the Singular coverage list has underperformed the S&P 500 and outperformed the Russell 2000 by 809 and 102 basis points, respectively. Since our 2004 inception, the Singular coverage list has outperformed the S&P 500 and Russell 2000 by an annualized 272 and 298 basis points, respectively.

For October, MGNI has finally started to receive market enthusiasm from RUBI’s merger with Telaria. MGNI also agreed to a new expanded agreement with Discovery, a global leader in real life entertainment. Similarly, ACU had a strong month as the company announced better than expected earnings that were attributable strong sales in first aid and safety products. NMIH also was a top performer for October as they announced a lower September default rate as compared to July and August.

GEOS was our worst performer for the month as investors worried that a global economic slowdown would create a lack of demand for oil drilling technology. BYND was also a weak performer even though the company had good expansion news in China as KFC China announced they would carry the Beyond Burger at over 200 locations for a limited time; the price action was largely tied to the overall market volatility for October. AMRK was another weak performer as the price of gold and silver was steady, leading to lower profitability for the firm.

For the month, we initiated coverage on GMBL, TA, and KIRK. GMBL is an emerging leader in the rapidly expanding multi-billion dollar market for online gambling and esports wagering; TA is the largest publicly traded operator/franchisor of full-service travel centers in the United States; KIRK operates as a specialty domestic retailer of home décor.

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.

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Robert Maltbie, CFA
Singular Research, President
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Singular Research Launches Coverage on Esports Entertainment (GMBL) BLT (Buy Long-Term)

Esports Entertainment (GMBL)

Newly-public Esports Entertainment (GMBL) offers the most versatile and transparent wagering platform in the $3.6 billion esports gambling market.

INVESTMENT THESIS

• The esports fan base is expanding rapidly and expected to reach 590 million by 2022; global gross revenues are estimated at $3.6 billion.

• Esports Entertainment is well-positioned to capture market growth. It has online gambling licenses in nearly 150 jurisdictions, a best-in-class wagering platform, hundreds of marketing affiliate partnerships and a management team with deep industry experience.

• The company added UK and Irish gambling licenses through a July acquisition and acquired its first US license in August through a partnership with a New Jersey casino operator.  

• Esports Entertainment has nearly $12 million of cash to fund acquisitions, platform development and tournament hosting. Management is guiding for FY:21 revenues of $13 million.

• We initiate coverage with a Buy Long-term rating and a $X.XX price target, which assigns a XXX-times multiple to FY:21 projected revenues.  

VISIT: for more information & full report https://www.singularresearch.com/index.php/en/  

KIRK Action Call | BUY | 10/6/2020

Action Call – Buy
Kirkland’s Inc. (KIRK)

12 Month Price Target, $12.95

Kirkland's, Inc. operates as a specialty retailer of home décor in the United States. The company's stores provide various merchandise, including holiday décor, furniture, ornamental wall décor, decorative accessories, art, textiles, mirrors, fragrance and accessories, lamps, artificial floral products, housewares, outdoor living items, gifts, and frames. The firm’s stores also offer an assortment of holiday merchandise in seasonal periods. The company operates its stores under the Kirkland's, Kirkland's Home, Kirkland's Home Outlet, Kirkland's Outlet, and The Kirkland Collection names. As of March 19, 2020, the firm had 432 stores in 36 states, as well as an e-commerce enabled Website, kirklands.com. Kirkland's, Inc. was founded in 1966 and is headquartered in Brentwood, Tennessee.

As the Holiday season begins, we believe KIRK will continue to benefit from quarantined Americans who are looking to improve their home décor to match the current season. We believe KIRK is an attractive investment because:

1. The company is largely undervalued relative to its peers on a Price to Sales and Price to Book basis.

-Singular Staff

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Titans of Sports Gaming forming Grand Alliances

(Sports bettors check the odds at William Hill sports book at Tuscany Casino in Las Vegas.)

Titans of Sports Gaming forming Grand Alliances

Sports fans across the country are showing more willingness to take a financial interest in the outcome of games, and in 18 states that allow sports betting, they may not even have to leave their couch to do it.

In two years since the U.S. Supreme Court ruled against the Professional and Amateur Sports Protection Act, the gaming industry has seen a widespread trend of casino operators partnering with tech companies that offer online and mobile betting platforms.

Penn National Gaming (PENN) acquired a 36 percent share in Barstool Sports, a leading digital sports media company, joining Boyd Gaming (BYD), MGM Resorts (MGM), Caesars Entertainment (CZR) and others going after the estimated $40 billion sports betting business.

Penn paid about $163 million in cash and convertible preferred stock to become Barstool’s exclusive gaming partner for up to 40 years. The company also gained the right to use Barstool’s brand for all of Penn’s online and retail sports betting and internet casino games.

“The partnerships you see developing between operators, teams, leagues and the media are a natural evolution of how sports betting is rolling out throughout the United States,” said Brendan Bussmann, partner and director of government affairs for Las Vegas-based Global Market Advisors.

Going forward, wagering will become part of sports culture, he added. Even before the repeal of PASPA, sports fans and commentators talked about point spreads and money lines in their normal conversations.

Jay Snowden, president and CEO of Penn National, said the partnership with Barstool Sports reflects the company’s strategy to evolve from a regional gaming operator with 41 properties in 19 states to a “best-in-class omnichannel provider of retail and online gaming and sports betting entertainment.”

“With 66 million monthly unique visitors, we believe the significant reach of Barstool Sports and loyalty of its audience will lead to meaningful reductions in customer acquisition and promotional costs for our sports betting and online products, significantly enhancing profitability and driving value for our shareholders,” he said.

Founded by David Portnoy in 2003, Barstool Sports reaches a primary audience of millennials and Generation Xers with original content through blogs, podcasts, radio, video and social media. In 2019, the company grew revenue by 65 percent to nearly $100 million from advertising, ecommerce, licensing, events and subscriptions.

Onboard with ESPN

William Hill (WIMHY) extended its media and digital presence when U.S. partner Caesars Entertainment signed a deal with ESPN in September. *

William Hill’s sports betting apps, geographically targeted to states with legalized sports betting, will appear as links on the ESPN.com website and ESPN Fantasy app. Caesars’ William Hill sports book will become a sponsor of ESPN Fantasy products.

“ESPN is one of the pre-eminent brands in sports,” said Ulrik Bengtsson, group CEO of William Hill. “Tens of millions of fans will now have a direct link to our sports betting apps and odds.”

In a move to cement the partnership, Caesars has reportedly offered $3.7 billion to take over William Hill, outbidding Apollo global Management as a rival suitor. U.K.-based William Hill confirmed Bloomberg’s report that both Caesars and Apollo had made offers.

Since becoming Caesars’ sports betting partner, William Hill has opened 12 books at Caesars properties in Nevada, Iowa and New Jersey. The mobile sports betting app, Caesars Sports Book by William Hill, will soon launch in Indiana, Pennsylvania, New Jersey and Nevada, pending regulatory approval.

In early September, William Hill finalized its acquisition of CG Technology, which operated sportsbooks at The Venetian, Palazzo, Cosmopolitan and Silverton casinos in Las Vegas, after the deal was approved by Nevada Gaming Control Board.

NFL betting boom

If there were any worries about the pandemic shutdown’s effect on sports gambling, they vanished when the NFL kicked off its 2020 season and bettors flocked to sportsbooks for action.

Boyd Gaming timed the launch of its new B Connected Sports betting app with the start of the NFL, upgrading its betting experience with IGT’s PlaySports technology that offers pre-game and in-game wagering on football, baseball, basketball, hockey and other sports, both in the United States and overseas.

The upgraded app lists dozens of proposition bets for each sporting event, along with in-game wagering for big games. The app’s user-friendly platform updates sports betting odds in real time and calculates payouts on each betting option.

“Mobile and in-play sports betting are more popular than ever, so the new and improved B Connect Sports app comes at the perfect time,” said Bob Scucci, Boyd’s vice president of race and sports.

Colorado outreach

Century Casinos (CNTY) partnered with Las Vegas-based Circa Sports as one of its internet sports betting operators in Colorado. The Circa Sports mobile sports betting app operates in association with one of Colorado’s master licenses for sports wagering held by Century’s subsidiaries.

Century’s 15-year agreement with Circa Sports includes a market access fee, share of net gaming revenue and minimum revenue guarantee each year.

Century also finalized an agreement with bet365 in May to bring on a second internet sports betting operator partner in Colorado. Financial terms simulate those with Circa Sports.

Hear the lion roar

In July, MGM Resorts International formed a joint venture with GVC Holdings to launch BetMGM, a sports betting and online gaming platform that has become the official sports betting partner of the Las Vegas Raiders, along with the NBA, NHL, PGA and NASCAR.

BetMGM has exclusive access to all land-based and online sports betting in the United States, online casino gaming and poker tournaments, and other interactive digital games.

The formation of the joint venture significantly increases speed to market for both parties, lowers execution risk and creates “meaningful early mover advantages,” MGM said in a company statement.

“Where there’s opportunity for sports teams and leagues in this space is first and foremost sponsorship,” said Bussmann of Global Market Advisors, with additional dollars coming from ticket sales, merchandise and other fan engagement.

Operating margins vary by state, the gaming consultant noted. With a gaming tax rate of 6.7 percent, Nevada has completely different margins than Pennsylvania, where the tax rate is 36 percent.

“The biggest variable is marketing costs,” Bussmann said. “You see that with Fan Duel and Draft Kings.”

Meanwhile, powerful alliances, spanning key verticals of technology, hotels & casinos, and media are forming to carve out swarths of market share in this attractive, high growth, high margin market opportunity in sports gaming. It will be epic battle of the titans for dominance in sports gaming.

Emerging behemoths:

• ESPN/ Draft Kings (DKNG)
• Caesars Entertainment (CZR) / William Hill (WIMHY)
• Fan Duel/ The Stars Group/ Fox Sports   / Paddy Power Betfair (PDYPY)
• Penn Gaming (PENN)/ Bar Stool Sports
• MGM (MGM)/ NFL / NBA/ MLB/ Yahoo Sports

-Singular Staff

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Singular Research Director’s Letter: September performance 2020

Singular Research’s September 2020 Director’s Letter

In September, the United States passed seven million Corona virus cases. As some states experienced a slowdown in new cases, other states experienced an alarming growth of new cases. From September 15 through the 28th, 28 states each reported a rise in average daily new cases. Globally, India surpassed Brazil as the second largest country of Corona virus cases. A successful vaccine is likely to come in early 2021; however, Dr. Moncef Slaoui, the chief adviser for the White House vaccine program, said that a COVID-19 vaccine before November would be “extremely unlikely but not impossible.”

The story in the stock market was mega cap technology momentum to the downside. For the month, technology companies lost 11.5% as investors feared valuations were far too high. Markets were more volatile than normal with several large down days; the S&P 500 posted four straight losing days, a feat that has not occurred since February. Markets began to price in the idea that an economic recovery from the Corona virus will not be as easy or as strong as once anticipated. The presidential debate, passing of Ruth Bader Ginsburg, stalled stimulus bill talks, and escalating tensions between the U.S. and China all affected market prices and their volatility.

The August Purchasing Managers Index® (PMI) rebounded to expansion territory, registering 56.0 percent, an increase of 1.8 percentage points from the July reading of 54.2 percent. Similarly, the Conference Board Leading Economic Index® (LEI) increased 1.2 percent in August to 106.5 (2016 = 100), following a 2.0 percent increase in July and a 3.1 percent increase in June. Both the PMI and LEI gained strength from July and investors saw optimism in the results. The unemployment rate fell to 7.9% in September (8.4% in August) as businesses have started the rehiring process. The September PMI and LEI were not available at the time of this writing.

For the month of September, the Singular coverage list outperformed the S&P 500 and the Russell 2000 by 560 and 515 basis points, respectively. Year-to-date, the Singular coverage list has underperformed the S&P 500 and the Russell 2000 by 1,409 and 67 basis points, respectively. Since our 2004 inception, the Singular coverage list has outperformed the S&P 500 and Russell 2000 by an annualized 231 and 287 basis points, respectively.

For September, AMRK reported stellar earnings for the quarter. The pandemic has created volatility and upside momentum for the price of gold and silver which has helped AMRK immensely. Similarly, BYND had a strong month as the company announced expansion plans with Walmart and plans to open a production facility in Jiaxing EDZ, China. QNST made the top performers list for the second consecutive month as the company posted better-than-expected earnings results in August and is narrowing their focus on more profitable business segments; QNST divested its mortgage and education client verticals. Investors cheered VIVO’s performance as the company developed a new Corona virus test taken from saliva samples.

SAMG was our worst performer for the month even though the company had no negative news; the price action was largely tied to the overall market volatility for September. CMTL was another weak performer as the company faced litigation over their intent to cancel their merger with Gilat. On September 28, FSTR announced the sale of their IOS Test and Inspection Services business which will improve their profitability in the future; as a result, the stock price has rebounded to pre-September levels.

For September, we did not have any new initiations.

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.

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Robert Maltbie, CFA
Singular Research, President
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The Great Rotation “Compelling Values” Webinar

At Singular Research, we focus on small and micro-cap stocks that are undercovered on Wall Street. These stocks have a niche business model and have yet to be widely discovered. Many of the global threats in the stock market today do not affect these stocks. Currently, there has been a huge wave of positive momentum in mega cap technology growth stocks; however, as that momentum slows, we are seeing a shift back into small-cap value investments. As of August 31, large-cap growth and the Nasdaq have had year-to-date returns of 21.6 and 26.7% while large-cap value and the Russell 2000 have returned (11.4) and (6.0)% over that same time period. Similarly, as of the end of August, the S&P 500 has a forward P/E ratio of 22.6 while Russell 2000’s small-cap value stocks (IWN) and micro-cap stocks (IWC) have forward P/E ratios of 11.7 and 11.4, respectively. Given this wide disparity in returns and valuations between large-cap growth and small-cap value stocks, we believe now is the time to focus your attention on small-cap value stocks as we are starting to see a new strong rotation back into small-cap stocks.

Our small-cap investor webinar will focus on top ranked emerging growth, undervalued, and undercovered companies that exemplify our research and provide exciting alpha opportunities at a time when small and micro-cap stocks are most justified for favorable returns. Please see below for a list of invited and presenting companies and a brief description with valuation metrics, an investment thesis, and recent quarterly highlights on three of the companies that are presenting.

Emergent BioSolutions, Inc. (EBS)

$144.00 Price Target, Buy, Current Price: $104.21 (9/8/20)

Emergent BioSolutions (EBS) is a global specialty life sciences company that develops and commercializes vaccines, drugs, and devices that address biodefense threats. The Company is a preferred provider of biodefense products and services to the U.S. government under multi-year contracts. The firm’s most valuable product, BioThrax, is the only FDA-approved anthrax vaccine. The Company’s products are sold mainly in the U.S. as well as internationally.

Q2:20 Highlights

• Product sales improved 63% YOY to $298.5 million primarily due to increased sales of anthrax and smallpox vaccines. CDMO revenues grow 288% to $72.6 million as a result of new COVID-19 vaccine development and manufacturing contracts. Contract and grant revenues decline 42% to $23.6 million, reflecting development activities completed on the company’s new anthrax vaccine AV7909.
• EBS has emerged as a major player in the COVID 19 vaccine space. The company was awarded a $628 million task order by HHS for production of COVID-19 vaccine candidates through 2021 as part of Operation Warp Speed. EBS signed a 5-year manufacturing contract with JNJ beginning in 2021 and valued at $480 million for the first two years and a 3-year contract with AZN valued at $174 million through 2021. These follow initial agreements with JNJ and AZN valued at $135 million and $87 million, respectively, for CDMO services and to reserve manufacturing capacity.
• Other big contract awards include $34.6 million from the Defense Department to advance the company’s COVID-HIG therapeutic candidate, a contract option valued at $258 million for deliveries of anthrax vaccine to the Strategic National Stockpile (SNS) over 12 months, $176 million for deliveries of smallpox vaccine over 12 months to SNS and $54 million for deliveries of VGIV, which treats complications from smallpox vaccination, to SNS over 12 months.

NV5 Global, Inc. (NVEE)

$58.00 Price Target, Buy, Current Price: $50.57 (9/8/20)

NV5 Global, Inc. is a provider of professional and technical engineering and consulting solutions in the infrastructure, energy, construction, real estate, and environmental markets. The Company’s clients include U.S. federal, state, local governments, and the private sector.

Q1:20 Highlights

• Q1:20 revenues increased 41% YOY to $165.4 million, fueled by organic growth and contributions from acquisitions. The Company exited the quarter with backlog up 30% YOY to $574 million.
• Adjusted EBITDA improved 58% YOY to $24.1 million, while EBITDA margin increased 170 bps to 18.6% in Q1:20 versus Q1:19.
• Adjusted EPS was up 10.2% YOY to $0.84 per diluted share.
• NVEE achieved contract wins across all business segments and ended the quarter with backlog up 30% YOY to $574 million.
• Although NVEE’s businesses are considered essential, the Company warns there could be COVID-19 related funding delays and project cancellations. Accordingly, NVEE withdrew its previously issued 2020 guidance.

Good Natured Products (GDNP.V)

$0.27 Price Target, Buy, Current Price: $0.14 (9/8/20)

Good Natured Products Inc., formerly Solegear, is an award-winning, publicly traded bioplastics company founded in 2006 and based in Vancouver, British Columbia, Canada. Good Natured is an innovator in the field of next generation bioplastics made from annually renewable plant-based sources.

2019 Highlights

• GDNP grew sales 98% to $10.1 million via a mix of new products, improved cross-selling and customer acquisitions.
• GDNP signed a one-year agreement to supply earth-friendly packaging to SmartPac and launched a new line of biodegradable containers and utensils for food service and restaurant carryout service.
• Gross margins rose to 34.4% in FY:19 from 33.9% in FY:18 due to improved overhead absorption and a better product and customer mix.
• SG&A as a percent of sales declined to 46% from 66% one year earlier. EBITDA loss narrowed to $1.44 million from $1.87 million, a 23% YOY improvement.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.

To learn more about our “Compelling Values” webinar on October 1, please follow the link below. Although this is a private client webinar, we do have capacity for select institutional investors with the committed interest in small caps.

https://register.gotowebinar.com/register/3075103535189803790

For a complimentary research report on any of these companies mentioned, please e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. or call 818-222-6234. Thank you.

The $13 Billion Market Opportunity in ESPORTS and emerging Leaders | Singular Research

(The 30,000-square-foot HyperX Esports Arena opened inside the Luxor hotel and casino in 2018.)

Video gamers have come a long way from their elementary days of Pong, Pac-Man and Donkey Kong.

Technologically absorbed millennials have taken today’s games to another level, engaging in esports tournaments with substantial monetary rewards and driving a global video gaming market projected to surpass $138 billion by 2021.

Grant Johnson, chief executive officer of Esports Entertainment Group (NASDAQ: GMBL), based in Malta, orchestrated strategic acquisitions to position his company for a share of the estimated $13 billion in global wagering on electronic gaming, or eGaming.

Using a licensed and secure wagering system, Esports Entertainment offers fans the ability to bet real money on professional esports events, but the company has yet to enter the U.S. market due to the regulatory process.

That could change following a partnership formed in August with Twin River Worldwide Holdings. Esports Entertainment hopes to launch online sports betting in New Jersey in first quarter 2021, pending Twin River’s necessary regulatory approval to acquire Bally’s Atlantic City hotel and casino.

The partnership delivers on Esports’ goal of expanding U.S. operations when the company completed its IPO on Nasdaq earlier this year, Johnson said. The company also acquired a skill-based European esports tournament platform that it hopes to bring to the United States, though each state has its own regulations.

With demand for eGaming entertainment increasing during the COVID-19 pandemic, Esports Entertainment completed the acquisition of AHG Entertainment Associates in July. The company paid $1.25 million in cash to AHG, a Florida limited liability company, and issued warrants to AHG to purchase up to 1 million shares of common stock of Esports at $8 a share.

War game generals

Not to be confused with fantasy sports, eGaming is evolving into a lucrative industry with intense competition among dynamic, young players who shed the couch-potato stereotype holed up at home with a game console.

There’s a highly skilled subset of players who excel at war games such as Call of Duty, League of Legends, Valorant, Dota 2 and Counter Strike: Global Offensive. Some compete as teams; individually, Dota 2 professional Johan Sundstein (gamer name NOtail) has won nearly $7 million in tournament play at age 26.

Recognizing that young adults favor video games over slot machines and table games, MGM Resorts opened the 30,000-square-foot HyperX Esports Arena at Luxor Hotel and Casino in Las Vegas in 2018. MGM partnered with Allied Esports, which specializes in esports event production and facility management.

The multi-level venue features a state-of-the-art gaming and broadcast center, competition stage and 50-foot LED video wall. It targets gaming enthusiasts with weekly tournaments, esports exhibition show matches, VIP events and a vintage video game cocktail lounge.

Esports Entertainment Group signed a sponsorship with Allied Esports in July for the inaugural VIE.gg Counter Strike: Global Offensive Legend Series tournament that began Aug. 31 at HyperX Esports Studio in Hamburg, Germany.

“We’re excited to partner with an industry leader, Allied Esports, as the title sponsor of their newest esports tournament,” Esports Entertainment CEO Johnson said in a company statement.

Increased footprint

With AHG, Esports also acquired LHE Enterprises, holding company of online sportsbook and casino operator Argyll Entertainment AG, based in the United Kingdom, and its operating subsidiaries. Those holdings include SportNation.bet, a major contributor to Argyll’s $12 million revenue in 2019.

“They were an example of our aggressive M&A strategy and provided us with $12 million in 2019 revenue and U.K. and Ireland licenses,” said Jeff Cohen, vice president of strategy and investor relations at Esports. “Argyll is part of our three-pillar strategy.”

The first pillar is Esports Entertainment’s gaming tournament platform; the second is Esports’ VIE.gg gambling platform; and the third is traditional internet gaming and sports betting through Argyll, Cohen explained.

Esports competes against established online sports betting platforms such as Draft Kings and Fan Duel, along with apps specific to esports such as Rivalry, Luck Box, Lootbet and Unikrn, for the estimated $13 billion global handle, or total amount wagered, according to Narus Advisors.

“We don’t have specific targets in terms of market share, but we intend to build a best-in-class platform that should attract a significant number of the 500 million-plus esports fans globally,” Cohen said.

Draft Kings soars

During the lockdown on professional sports that impacted sports gaming, Draft Kings (DKNG) benefitted significantly from the iGaming trend, posting revenues for the quarter ended in June that beat expectations by 22%.

As management stated in its Q2 earnings call: “In addition, our iGaming product offering was especially resilient in the second quarter, as it was not impacted by the sports calendar and perhaps even benefited from people staying at home.

“As you might expect given the COVID pandemic, our B2C monthly unique payers in the quarter declined 35% year-over-year to 295,000. More than 100% of the decline was from our daily fantasy sports MUPs, which is both our largest source of monthly unique payers and the product offering that has been most impacted by the disruption in the sports calendar.

“MUPs improved in late May and June as some sports resumed their schedules. On the other hand, ARPMUP increased 51% in Q2 to $63 from $42 in the same period in 2019, which was predominantly driven by a mix shift into our iGaming product offering.”

 Other industry competitors include:

William Hill PLC (WIMHY.PK) is well positioned as a global powerhouse in betting and gaming online and retail. William Hill’s growth has suffered from betting caps in the U.K. and is motivated to seek new avenues of growth.  The company operates through three business divisions: online, retail and William Hill US.  William Hill currently derives over 50% of gross revenues from “non- real world” sports gaming such as football, basketball, soccer, etc.

And privately held:

Unikrn Inc., headquartered in Redmond, Wash., is an esports betting company and software publisher founded in 2014. Betting options include sports, video games and raffles.

Bet365 Group Ltd., headquartered in United Kingdom, is a provider of gambling services. The company’s key areas of interest are sports betting, soccer highlights, casinos, poker games and bingo. The company was founded in 2001.

Betway Ltd., headquartered in Gzira, Malta, is engaged in the spectator sports sector. The company was founded in 2006. Betway Group Ltd. is its ultimate parent.

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Singular Research Director’s Letter: August performance 2020

Singular Research Director’s Letter: August performance 2020

In August, there have been signs of hope in slowing cases and decreasing deaths in the Corona virus pandemic fight.  Specifically, in the U.S., New York city saw infection rates below one percent for three consecutive weeks, and California, the state with the most Corona virus cases, saw its seven day moving average for new cases per day reduce from 7,800 on August 1 to 5,200 by August 31.  However, as schools re-open, there has been considerable debate as to the most safe and effective way possible.  Interestingly, on August 15, Russia came out with a vaccine; however, the safety and effectiveness of this vaccine is not well understood.  

The story in the stock market was mega cap technology momentum.  The top five companies by market cap in the S&P 500 are Apple, Microsoft, Amazon, Facebook, and Google.  These five companies alone make up roughly one quarter of the index.  So, when these companies have favorable momentum to the upside, the index will also have an upward skew.  Investors continued to buy regardless of any factual news; a good example of this behavior was on August 31 when Apple’s shares traded post-split.  The shares were up 3% at the start of the day simply because the share price was cheaper.  This momentum buying suggests an overextended market with the S&P 500 forward P/E ratio at 21.9, above the historical average of 19.4.

The August Purchasing Managers Index® (PMI) rebounded to expansion territory, registering 56.0 percent, an increase of 1.8 percentage points from the July reading of 54.2 percent.  Similarly, the Conference Board Leading Economic Index® (LEI) increased 1.4 percent in July to 104.4 (2016 = 100), following a 3.0 percent increase in June and a 3.1 percent increase in May.  Both the PMI and LEI gained strength from July and investors saw optimism in the results.  The unemployment rate fell to 10.2% in July (11.1% in June) as businesses have started the rehiring process.  The August unemployment rate was not available at the time of this writing.

For the month of August, the Singular coverage list underperformed the S&P 500 and the Russell 2000 by 733 and 582 basis points, respectively.  Year-to-date, the Singular coverage list has underperformed the S&P 500 and the Russell 2000 by 1,984 and 543 basis points, respectively.  Throughout Singular’s sixteen-year performance track record, there have been many periods of over and underperformance relative to the S&P 500 and Russell 2000.  We want to emphasize that the month of August was an impressive month for the Dow and the S&P 500, both posting their best August returns in 36 years as investors were most likely encouraged by slowing Corona virus cases and vaccine progression.  We do not want this month to blur Singular’s since inception performance which has outperformed the S&P 500 and Russell 2000 by an annualized 195 and 254 basis points, respectively. 

For August, MGNI had a strong month as the company had its first quarter of combined financials from RUBI’s merger with TLRA.  MGNI reassured investors that the new company’s growth plans were not over-exaggerated as management saw MGNI’s CTV business grow 50% YoY.  Similarly, SAMG had a strong month as earnings and assets under management continued to grow even during tough conditions.  LUNA also reported a strong quarter and reaffirmed year-end guidance.  Finally, QNST posted better-than-expected earnings results and is narrowing their focus on more profitable business segments; QNST divested its mortgage and education client verticals.

VIVO was our worst performer for the month even though the company reported record earnings results; on VIVO’s earnings call, management pointed to lower demand in the fourth quarter as supply chain issues led companies to secure more inventory in the third quarter.  SALM was another weak performer as the company had weak quarterly earnings with revenue and EBITDA decreasing 18 and 72% YoY, respectively.  ZM, a short position, posted a record quarter with revenue up 355% YoY. 

For August, we did not have any new initiations.

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.  

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On Thursday, September 17, we are hosting our “Compelling Values” webinar, showcasing top ranked emerging growth, undervalued, and undercovered companies that exemplify our research and provide exciting alpha opportunities at a time when small and micro-cap stocks are most justified for favorable returns.  To learn more about our webinar, please follow the link below.

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Thank You

Robert Maltbie, CFA
Singular Research, President
818-222-6234(office)
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