Singular Research Director's Letter: June performance 2019


June 2019 Director’s Letter


Major market indices recover from May sell off.

Singular Coverage List continues to lead.

singular list

A dovish Fed signals rate cuts to stimulate stalling economic growth. The Singular Research Coverage list continued to lead the S&P500 & Russell 2000 YTD, although the major indices slightly outperformed bouncing back from the May correction. Although, the small caps and unweighted indices have not kept pace, we will wait to see if this lag becomes a divergence.

top 5 performer for the month

Our top performers in June were led by Geospace Technologies Corp. (GEOS), Management announced strong second quarter results with revenue up 36% YOY driven by OBX rental demand. Our next chart topper was Salem Media Group (SALM). Total revenues declined 5.2% YOY to $60.5 million in q1 19 as a result of drops in Broadcast, Digital Media and Publishing revenues. At a significant discount to book value at $8, SALM looks to have found some fans. Acme United Corp (ACU) gave positive forward guidance after a difficult TTM outlook, Management reiterated its sales guidance for CY 2019 of ~$140-$143 million, net income of $5.0-$5.3 million and earnings per share of $1.41-$1.50.

worst 5 performers for the month

Our worst performers were led by Floor & Décor Holdings Inc(FND), a short call that suffered both from profit taking and covering as the June rally in the overall equity markets gained traction. Harvard Bioscience, Inc. (HBIO) continued to fall in June, GAAP revenues improved 5% in Q119, but organic revenues fell 4% and adjusted EPS declined YOY from $0.03 from $0.02. HBIO expects a challenging H119 and improving results in H219. Daktronics, Inc. (DAKT) reported fourth quarter fiscal 2019 results below our projections.Management guided for slightly higher sales for Q1:20. However, we expect near-term EPS growth to remain muted amid trade tensions. We cut our rating to Buy/Long Term and lower our target price to $6.50.

In June, we initiated coverage on LB Foster (FSTR) LB Foster Co. engages in the manufacture, fabrication, and distribution of products and services for the transportation and energy infrastructure. We caught a nice move up powered by strong Q1:19 results with EBITDA increasing ~92% YOY driving FSTR up 11% and into our top five for June.

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.


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Singular research Staff

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MMI June 2019

Bearish with a Bounce


As of press time the market has enjoyed a 2%-3% rally, albeit on lower volume, spurred by a dovish stance by the Fed Chairman Powell, whom is standing by to cut rates if needed, which is seen as a supporting move if there is a global economic slowdown caused by trade skirmishes.


Sentiment Indicators: Positive 


Several rounds of selling in May has driven most sentiment indicators to an extreme negative reading with the recent two day rally reversing some of the May sell-off.

Volatility indicators VIX and VXN are at elevated levels.


mmi image 1


The bull to Bear ratio is now positive with bears at 40% bulls at 25%. This is a contrarian indicator, the put to call ratio on the S&P 100 and the CBOE is reflecting an oversold market. Put buying has been elevated.


AAII Index


  • Bullish 24.8% 24.7% 29.8%
  • Bearish 40.1 36.1 39.3
  • Neutral 35.1 39.2 30.9

Technical Indicators: Negative


The 580 point Dow rally has moved some of these indicators into neutral territory. We are waiting until next week to see if we find confirmation of a bullish reversal, a follow-through rally on stronger volume. Before the rally, all major indices were below their 200-day moving average connoting a bearish environment. Tuesday's massive rally took the S&P 500 and NASDAQ, the New York composite and the unweighted S&P 500 above their 200-day moving averages.


mmi image 2


Liquidity Indicators: Negative


Significant withdrawals were spurred by the May sell-off, set off by Trump trade war tweets. Mutual funds and ETFs experienced approximately $20 billion in outflows in May. Adding to this was an increase in issuance in the IPO market, led by Uber (UBER) at $8 billion and Beyond Meat (BYND) at over a $1 billion.

Share buybacks were a feeble $4 billion and M&A was non-existent. The only activity was strategic bolt- on acquisitions of public companies buying private firms.


Valuation Indicators: Positive


Due to the market sell-off, combined with an earnings season that has been better than expected, the general equity market now has more upside potential over the next 12 months. The earnings yield projected over the next 12 months is approximately 6.5% compared to a BBB corporate bond yield of 4%. Thus, equities look attractive vs fixed income.

The projected for 12 month PE ratio is approximately 16 versus a five-year average of 16.5. However, the overall Market appears slightly overvalued based on our modified version of the Tobin's Q ratio with the current total market cap exceeding 1.5 x GDP. This is below the year 2000 bubble of 2x but above out indicator high mark a fair value at 1.25 times. This elevated figure is palatable due to the current high net profit margins.

Discounting for Equity risk, we derive a market multiplier of 18x times’ earnings, our estimate for fy.2019 is $168 for the S&P 500, an increase of 3% EPS y/y. Thus, we see we see fair value on the S&P 500 at 3024.


Monetary Indicators: Negative


Our excess liquidity indicator shows virtual parody, with zero stimulation to economic growth at present. The well followed yield curve is negative. The shape of the curve may be instructive with a dip about twelve months out and then a reversion to a normal upward sloped yield curve. The message may be that the trade wars will cause GDP to flatten out or skew slightly negative, to be cured later on in the year evidenced by increasing normalize rates.


mmi image 3




The LEI (Leading Economic Indicators index) is still positive but barely at + .11% month to month. We could be seeing a changing of the guard as the five-year dominance of big cap tech more specifically the “FAANG” as being the one stop trade, maybe in jeopardy. The U.S.Jjustice Department has initiated an antitrust investigation into the aforementioned “FAANG”. At present, it seems to be a unifying topic, politically. These companies have powerful lobbyists and it remains to be seen whether they will face heavy fines, litigation and be broken up. Perception could be more of an impact than reality over the next year or two. We will be watching to see if the broader markets and small caps can start to re-emerge and lead the market as the “FAANG” trade unwinds.


Commentary & Strategy by:
Robert Maltbie, CFA
President - Singular Research


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Shelter from the storm: With Trade War is back on, will small caps outperform ?

The trade war with China and the potential for a slowing global economy has provided a unique investment opportunity for domestic small-cap companies that are more insulated from this. Here we focus on five unique investment opportunities that have strong potential in 2019. These companies are both growth and value oriented and are under followed by Wall Street.


Luna Innovations, Inc. (LUNA)

Price Target: $5.50

Percent Upside: 25%


Luna Innovations, Inc. develops and markets fiber optic sensing and test and measurement products worldwide. The company has two operating segments. The products and licensing unit sells the company’s commercial fiber optic test and sensing equipment and the technology development segment performs contract R&D for U.S. government agencies.


First quarter highlights include:


  • Q1:19 revenues were $14.8 million, up 69% versus Q1:18, largely attributable to revenue growth in both the Product and Licensing (+98% YOY) and Technology Development segments (+43% YOY).
  • LUNA reported a 79% YOY increase in gross profit to $6.8 million for Q1:19. Gross margin expanded 200 bps YOY to 46% in Q1:19.
  • Adjusted EBITDA improved to $1.0 million for Q1:19, compared to a loss of $(0.1) million for Q1:18.
  • Net income for Q1:19 was $1.0 million or $0.03 per diluted share versus $0.1 million in Q1:18.
  • For the full year of 2019, LUNA expects revenue to be between $60-$65 million, and adjusted EBITDA to be between $6.0-$6.5 million.


 Primary Risk


  • The company operates in a space which is prone to rapid technological changes. New technology or the emergence of new industry standards could render existing products obsolete.


Anika Therapeutics (ANIK)

Price Target: $45.00

Percent Upside: 22%


Anika develops and manufactures therapeutic products for tissue protection utilizing hyaluronic acid (HA), a naturally occurring polymer in humans. Products address osteoarthritis, advanced wound care, and surgical issues. Anika HA products are unique from several perspectives.


First quarter highlights include:


  • Q1:19 revenues were $14.8 million, up 69% versus Q1:18, largely attributable to revenue growth in both the Product and Licensing (+98% YOY) and Technology Development segments (+43% YOY).
  • LUNA reported a 79% YOY increase in gross profit to $6.8 million for Q1:19. Gross margin expanded 200 bps YOY to 46% in Q1:19.
  • Adjusted EBITDA improved to $1.0 million for Q1:19, compared to a loss of $(0.1) million for Q1:18.
  • Net income for Q1:19 was $1.0 million or $0.03 per diluted share versus $0.1 million in Q1:18.
  • For the full year of 2019, LUNA expects revenue to be between $60-$65 million, and adjusted EBITDA to be between $6.0-$6.5 million.

Primary Risk


  • Anika has and can potentially face unfavourable test results which can hinder new drug performance.


Transcat, Inc. (TRNS)

Price Target: $27.75

Percent Upside: 16%


Transcat, Inc. is a leading provider of accredited calibration and laboratory instrument services and a value-added distributor of professional grade test, measurement and control instrumentation to highly regulated industries.


Third quarter highlights include:


  • Q3:19 revenue increased ~1% to $40.8 million impacted by weakness in the Distribution segment. Revenue from the Distribution segment was down 6.2% YOY while the Service segment grew 9.2% YOY. Both the Service and Distribution segments saw margin contraction amid softness in Canadian operations, an unfavorable mix, and productivity challenges. The overall gross margin contracted 60 bps, while the operating margin declined by 70 bps.
  • Operating income decreased 9.8% YOY to $2.4 million.
  • Service revenue increased 9.2% to $20.4 million, comprised of ~5.2% organic revenue growth. Higher revenue was the result of new business from the life sciences market and growth in general industrial manufacturing.
  • Distribution revenue declined 6.2% YOY to $20.3 million due to tough comps.

Primary Risk


  • TRNS’s results can be negatively affected by volatility in the oil & gas industry, weak economic activity, timing of customer orders, foreign exchange fluctuations, and competitor pricing.


Olympic Steel, Inc. (ZEUS)

Price Target: $17.00

Percent Upside: 20%


Olympic Steel is a leading U.S. metals service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel, aluminum, tin, pipe and tubular products.


Third quarter highlights include:


  • Q1:19 revenues were $446 million, up ~19% from Q1:18, reflecting momentum across all three company verticals - Carbon Flat (+15.6% YOY), Specialty Metals Flat (+34.4% YOY) and Tubular & Pipe Products (+14.6% YOY).
  • Operating income was $6.0 million in Q1:19, versus $12.3 million in Q1:18. There was no LIFO expense in Q1:19.
  • Excluding the LIFO expense and other adjustments, ZEUS reported adjusted net income of $2.1 million or diluted EPS of $0.18, compared to net income of $7.9 million or $0.70 per diluted share in the year ago period.
  • Management noted that the integration of the acquisition of McCullough Industries completed in January 2019 is progressing well.
  • Management anticipates a relatively steady demand environment QoQ in Q2:19 with a slight uptick in Specialty volumes while the Carbon business will be flat.


Primary Risk


  • Client concentrations remain a key risk. A loss of a key client or a failure to renew a large contract could significantly impact financial results.


Banco Latinoamericano (BLX)

Price Target: $33.00

Percent Upside: 60%


Banco Latinoamericano de Comercio Exterior, S.A., a multinational bank, primarily engages in the financing of foreign trade in Latin America and the Caribbean. The company operates through two segments, Commercial and Treasury. It offers short and medium-term bilateral, structured and syndicated credits, and loan commitments; letter of credit contingencies, such as issued and confirmed letters of credit, and stand-by letters of credit; and guarantees covering commercial risk and other assets.


First quarter highlights include:


  • Bladex reported Profits of $21.2 million for the 1Q19, a 47% YoY increase, reflecting improved total revenues (+4% YoY), a 31% reduction in operating expenses and lower provisions for credit losses.
  • The Bank’s quarterly Profits were up from $20.7 million in 4Q18, a 2% QoQ improvement, on the absence of impairment losses on non-financial assets and lower operating expenses (-20% QoQ).
  • Net Interest Income (“NII”) increased to $28.0 million (+5% YoY; relatively stable QoQ) and Margins (“NIM”) of 1.74% (+6bps YoY; +13bps QoQ), on an improvement in net lending spreads and lesser low-yielding liquidity balances QoQ.
  • Fees and Commissions income totaled $2.4 million in 1Q19 (-23% YoY; -56% QoQ). The decrease in fees and commissions reflects a seasonally slower first quarter of the year, and the uneven nature of the loan syndication business.
  • Quarterly operating expenses were $9.9 million, a decrease of 31% YoY (1Q18 expenses were impacted by non-recurring charges). Expenses were 20% lower QoQ, benefitting from a first quarter seasonal effect. The Bank’s Efficiency Ratio improved to 30.8% in 1Q19, compared to 46.6% in 1Q18 and to 36.3% in 4Q18.


Primary Risk


  • The economy in Central America remains a key concern. Factors such as currency devaluation and government legitimacy are hard to predict and can adversely affect stocks located in the region.


Of course, consult your financial advisor before investing. Small & Micro cap stocks are more volatile and entail high risks.


We will be hosting these companies on our upcoming webcall on Thursday, May 30. To register for this webcall, please click here.


webcall intro report

*Time Period for Singular Research’s performance is from August 31, 2004 to December 31, 2018.


Commentary & Strategy by:
Robert Maltbie, CFA
President - Singular Research

How to play The China Syndrome

The China Syndrome was a 1979 movie thriller starring Jane Fonda that was prescient in that the Three Mile Island occurred 12 days after the movie was released. Although the movie disaster was averted, there was much stress and potential disaster; we think the corollary could be the current trade war with China.

We will present a handful of ideas to make money on the short side to hedge your portfolio during this "War" that could play out a bit longer than most expect.

Since the total amount of direct impact on GDP if U.S./ China trade went to zero would be about 1 to 2% on each economy, we believe the real risk here is overstated. We will also place our chips on the U.S. to win this battle as Trump is a very experienced negotiator and businessman and could be successful in rallying the rest of the world against China. In fact, he just held out an olive branch to Canada and Mexico to mend the fences and close the recent trade proposal, the USMCA, with both countries. The other fact that supports our belief is that China has much more to lose then the US when we ponder the trade gap and imbalance that currently exists.

Here are the trades that we feel are most exposed to this ongoing drama.


Apple Inc.: (AAPL)


aapl 1


One of the most exposed US companies, Apple, currently derives nearly 20% of its revenue from China and much of its expected future growth. Apple already is burdened by higher prices, potential market saturation, an ongoing trade war with China, will not help. Analysts estimate Apple earnings will decline 4% in 2019 and then rebound 11% in 2020 to nearly $13 a share. Should the trade war persist combined with these other negative elements, Apple earnings may go flat or possibly declined further. The mean Apple Wall Street estimate is $11.49 for 2019 Furthermore; it is likely that a protracted trade war with these higher-risk elements will compress the Apple PE ratio another 5-10% to the 14 to 15 area providing further downside to the $140- $150 level. Since trade war rumblings reemerged from the Trump tweet last week, Apple has declined approximately 8%. To throw more gasoline on the fire, the technical picture has turned ugly with the stock breaking down through 50-day moving average and 200-day moving averages on huge spikes in volume.


Nike Inc. Cl B: (NKE)




China is Nike's most important growth opportunity and revenues have been increasing 20% to 25% as of late. Although sales have held up recently, this may not persist with another 10% to 20%price markup due to the trade war. Nike may be particularly vulnerable to a sell-off since it trades at a lofty PE ratio of 33 times earnings and it's even higher PEG ratio of 5.5 times 2019 earnings growth. While Nike (NKE) has gone to great lengths to reduce its manufacturing and distribution exposure from China, it may have the greatest downside due to its high valuations. A couple of consecutive negative surprises may cause a compression in the PE multiple and a reduction in earnings growth expectations. If, hypothetically, Nike earnings were to go flat in 2019 and it traded down to its historic PE multiple, a 20% premium to the S&P 500, that would collapse Nike stock to trade at 24 x $2.40 per share earnings per share. That would render a price target of $50. From a technical perspective, should Nike close below $80.50 per share on high volume this would penetrate the 200-day moving average and show the formation of a head and shoulders top.


 Now we present two ETF 's that should provide a One-Stop click to diversified exposure and hedged risk from the China syndrome:


Direxion Daily FTSE China Bear 3X Shares (ETF): (Yang)




On the possibility of a continued and even heightened global trade war versus China, YANG has jumped higher. This targeted ETF provides ample exposure with 3x leverage on the FTSE China 50 index. YANG is up over 11% since the Trump tweet.


Direxion Daily Emerging Markets Bear 3x Shares (ETF): (EDZ)




One strategy that China utilizes to offset tariffs is to devalue their currency. Since the 10% tariffs were imposed by the U.S. , China's currency has been depreciated 8%, nearly offsetting the difference. The side effect of this currency manipulation is increased strength of the dollar which places an extra heavy burden on emerging market economies that are financed by U.S. dollars and are heavily indebted. The 3x leveraged emerging markets inverse ETF is up 14% since the Trump tweet.


Next report: longs that benefit from the trade war fears.


Commentary & Strategy by:
Robert Maltbie, CFA
President - Singular Research

A Wall too Tall

As of late the concept of a wall has been a controversial item, causing great discord between political partisans, left and right. Historically, in reference to financial markets the proverbial wall of worry that a bull market faces is a unifying concept.

Our indicators are showing too many big bricks in the wall, at the moment.

This week's renewed trade strife between China and the US may have just put that wall at a level that is hard to scale for any bull.

Let's dissect some of these bricks of worry. The trade war with China is back on.

In efforts to motivate the Chinese to get back to the table with some urgency, President Trump has threatened to restart and escalate a trade war.

Threatening to increase current levels from 10% to.25 % percent on $200 billion and then to ramp that up on the remaining $300 billion of exports from China to 25% ,Trump wants attention now. As of this writing the Chinese trade team still is making its way to meet in the US later this week to discuss possible solutions.

A second ugly geopolitical brick layering was placed on the wall with the outbreak of hostilities this weekend in missile fire between Iran and Israel. With US military peacemaking assets steaming towards the Persian Gulf, a real war although remote, is now a very slight possibility. Although tensions have leveled off as a ceasefire has been called in Egypt between combatants Monday.

Now let's examine the mounting, negative internal indicators that are very disturbing.

Low volatility smacks of overconfidence, the vix indicator of volatility has reached lows not seen since last September preceding a 20% drop.

wall too tall img 1

Overly bullish sentiment. The Citigroup Market Sentiment Panic/Euphoria is again indicating euphoria. After the last buyer has bought who's left? Warren Buffett just announced that he sees Amazon (AMZN) as a value stock and therefore, is taking a large position. He has watched it go nearly up 1000 fold, from a billion to a almost trillion, before he capitulated.

wall too tall img 2

Not to be overlooked, we can mention the old standbys, high insider selling and the flat yield curve to provide more bricks.

wall too tall img 3

wall too tall img 4

Finally, in the tradition of saving the worst for last. The pipeline of IPO issuance this year could blow away the dot com. bubble levels from 1999 and 2000 by a large margin. Uber, the mother of all IPOs will be sucking a lot of the liquidity out of the market, later this week. Uber, Lyft, Palantir and Slack, Airbnb, and others could reach a combined valuation over $200 billion, with Uber the largest by far. This would make 2019 the year of the “Balloonicorm, shattering IPO issuance from the bubble with 226 companies set to launch of which there are 119 companies that would be classified as “unicorns,” or private companies with valuations over $1 billion. This could more than exceed 1999 and 2000 where just under $100 billion was issued in those years.

A bull market climbs the proverbial wall of worry but this looks like a great wall too high.
We like select shorts (HDGE), gold (GLD) ,Bitcoin (GBTC), as shelter from the storm.
For a free trail please visit us at :

Commentary & Strategy by:
Robert Maltbie, CFA
President - Singular Research

Sports Gaming USA: The Next Big thing or Fool's Gold?

This is the first in a series of interviews with C- level execs, industry insiders and movers, shakers and influencers in the sports gaming.


We will be bringing you, in real time, our conversations and analysis of winners and losers in the burgeoning sports gaming industry.


US Sports Gaming Index:

  • MGM Resorts International (MGM)
  • Eldorado Resorts (ERI)
  • Caesar's Entertainment Corp. (CZR)
  • Scientific Games Corp. (SGMS)
  • International Gaming Technology Plc (IGT)
  • William Hill Pl/Adr (WIMHY)
  • Boyd Gaming Corp. (BYD)
  • Golden Entertainment Inc. (GDEN)
  • Churchill Downs (CHDN)
  • Stars Group Inc. (TSG)
  • VBX: Vegas Betting Exchange (Private)
  • Miomni (private UK based company)


The legal sports betting industry is on the verge of an $400 billion explosion following the U.S. Supreme Court ruling on Christie vs. NCAA, opening the door for major gaming and technology companies to develop systems for sports bettors nationwide.


MGM Resorts International (MGM) has signed wagering partnerships with the NBA, MLB, the NHL and a few professional sports teams that allow it to promote its sports books. It seeks to leverage its existing resorts location, driving additional traffic to these locations via its association with the organizations.


Caesars Entertainment Corp. (CZR), the largest U.S. casino operator by properties, has signed wagering deals with the Philadelphia 76ers and the New Jersey Devils. Caesars looks to leverage expertise from its World Series of Poker brand.


Mixing it up with the corporate players are entrepreneurs like Anthony Curtis, publisher of Huntington Press and an authority on gambling, having been booted from most Las Vegas casinos for being what they call a "sharpie," someone who consistently beats the house.


"It's huge, gigantic," Curtis said about the Supreme Court ruling during an interview with Singular Research at South Point Casino in Las Vegas.


anthony curtis

Anthony Curtis President of Vegas Betting Exchange


"It was a landmark, powerhouse decision that is absolutely going to change the gambling landscape. We're seeing it already, but it's not the gold rush everybody thinks because the margins are relatively small."


Curtis and his business partners are developing Vegas Betting Exchange (VBX-private), a mobile software application that would allow bettors to circumvent the 10 percent commission, known as the "vig," collected by sports books and illegal bookies around the country.


It's a peer-to-peer betting exchange, premised on European exchanges where the action is between consumers.


Vegas Betting Exchange would retain 4 percent of the amount wagered – 2 percent from each side – not as vigorous, but as a transaction charge for providing the platform. It still greatly reduces the books' edge.


"It's a better deal for the consumer and that's a big selling point," said Curtis, who quit college at age 21 to make his living as a professional gambler in Las Vegas. "It's the same product and less expensive."


VBX feels that an initial goal of garnering a 5 percent market share is achievable with an efficient marketing plan and customer-acquisition strategy.


While the U.S. Supreme Court ruled in May 2018 to overturn the Professional and Amateur Sports Protection Act (PASPA), essentially allowing states to legalize sports betting, it's going to be a slow process.


Only eight states are currently accepting sports wagers, including Nevada and New Jersey, while about a dozen are introducing legislation with an expected approval time frame of two to three years.


"This is why we're not rushing our product," Curtis said. "We're just perfecting our product until we think the landscape is mature. Right now, it's a matter of states legalizing it."


Olaf Vancura, former vice president of game development at Mikohn Gaming and American Gaming Systems, is developing the software for Vegas Betting Exchange.


Louis Fenn, who's worked with startups in Northern California, is heading up the financial side.


The venture has been self-funded in its early stages. VBX is seeking to raise $1.5 million in its first round of funding, $20 million in the second round and $100 million-plus in the third round, Curtis said.


Market research shows more than $150 billion is wagered illegally in the United States and offshore and several gaming consultants have placed the betting handle above $400 billion when the market is fully mature.


Curtis is monitoring progress in California, which could generate more than $2.5 billion in revenue once legalization and mobile capabilities are in place.


He believes the betting exchange model will be a "disrupter" in the sports betting industry.


"This thing's going to be cool," Curtis said. "Maybe it won't be us, but I believe it's the way people will end up betting sports in the future."


Anthony then offered insights from 30,000 feet on major emerging players in sports gaming USA. On Scientific Gaming; "they're doing quite a bit in the sports betting field as far as I can tell. As discussed, Stars Group (TSG) (formerly PokerStars) is probably one to watch, as they've already done it with poker. Same with Caesars (CZR) mimicking its World Series of Poker brand, plus it has casinos in lots of states. Of those we didn't discuss, Boyd (BYD) could be an under-the-radar player -- also with lots of locations in different states. Churchill Downs (CHDN) is interesting, but I assume they're mostly horse racing. I doubt that Sands (LVS) will be a significant player given Adelson's dislike of online gaming". On Draft Kings and Fan Duel "They're both positioned because of their customer lists that were built during the big DFS push of a couple years ago. Also aggressive in deal-making and poised to move into new markets as they open. DraftKings established the Sports Betting National Championship this year, a $10K buy-in contest that was held in New Jersey, which they have designs on making the sports betting equivalent of the World Series of Poker." Curtis is also bullish on a broadly exposed player in online solutions with some huge contracts with many leaders in sports gaming called Miomni (private UK based company). Miomni delivers the best end-to-end solution in the online gaming industry. It is a veteran in the online space for over 10 years with emphasis in the gaming industry for the last 8 years. It has specialization in all areas of online development and product design, and has built the best-of-breed apps with intuitive user experience and full interactivity.


For more information on VBX
or any other companies mentioned please contact:

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and type in "sports"

ETFs: A Triumph of the Slothful and A Guaranteed Disaster

ETFs are a poor excuse for real investing, they are a manifestation of a surrender to laziness and a bonus to wealth managers who don't do anything. but sponge off 1-2% of your NAV perpetually. They also guarantee their investors a 100% participation in the next market crash.


ETFs create large capital market misallocations, equally rewarding the strong and the weak. When you go to buy a suit,do you buy every suit on the rack? Nope, you look for that perfect suit that has the best quality, best value.and best look. Why do that when investing?


Soon investors will realize the wastefulness of ETFs and get fed up with just average returns as the market averages revert back to a 4% annual return. They will realize that they are allocating over 95% of their capital to suits they would never wear and never want to wear and would never actively buy. Active management and deep research are worth the time spent and will be rewarded - as it always has been and should be. (particularly when applied to small-caps where information inefficiencies and a higher relative cost for research prevails).


etf research img 1


Dispersion is typically higher for small-cap stocks than large caps. Value added opportunities for skillful stock selection among small caps are therefore much larger than in the large-cap universe.


etf research img 2


Financial Gurus Warren Buffett, John Bogel, and Larry Fink have reaped massive fortunes by propagating the false proposition that the average investor should never expect better than average returns.and should therefore surrender to passive indexing.


etf research img 3


*The dispersion of the S&P 500 as of Nov. 30, 2017 was 18.3%, moderately low by historical standards.


The mass migration out of active managed funds into passive ETFs has accelerated greatly since the great crash of 2008. This represents the mass collective evasion by wealth managers to be held accountable for underperformance and their allegiance to the Wall Street profit machine of maximizing fees to the detriment of their clients best interests. It is an act of oligarchic collusion to collect egregious management fees to match only the return of the market indices. Isn't that what a prudent fiduciary should do? How can anyone be held liable or culpable for the crime of being average?


ETF growth has been very consistent and shows no signs of slowing down. ETFs had an organic growth rate of 16.5% on average over the last 10 years, which is much higher than the 2% growth of mutual funds. Organic growth strips out the effect of market returns to highlight where investors are putting their new investment dollars.


etf research img 4



Corporate managers seem to have bought into this contempt full form of greed. They deplore individual shareholders,preferring the silent, supporting passivity of ETFs.WItness the lack of stock splits. They manipulate their stock prices and manage earnings by wave after wave of share buy backs while consistently selling shares into financially engineered, artificial price levels inflated by low cost borrowed funds. Buybacks lower a stock's beta and provides a consistent flow of demand, regardless of management's performance.


Since this bull market began, there have been at most 16 stock splits in a year, which happened in 2011. In each of the last three years, the number of splits has shrunken. The average number of stock splits per year since 2008, when the bull market began, is just 10.


But in the bull market from 1998 to 2000, there were an average of 91 stock splits per year. And in the bull market from 1987 to 1990, there were 57 on average per year.


etf research img 5


What will be the catalyst of change? What will create a prevailing aura of disdain and disgust for ETFs.? WIll it be a globally synchronized crash where correlation approaches unity? Or will it be a dull aching period of underperformance? Have we as the investing masses exchanged "a walk on part in a war for a lead role in a cage" Will we take a guaranteed universal income stipend, weekly home deliveries from Amazon prime, accept a passive 4% over a volatile 9% and spend our remaining days tweeting, googling, facebooking and Netflixing B movies ad infinitum?


*Roger Waters - Wish you were here 1975


Robert Maltbie CFA
This email address is being protected from spambots. You need JavaScript enabled to view it.
President, Singular Research
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