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.
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Robert Maltbie, CFA
Singular Research, President