Singular Research May 2021 Director's Letter
Singular Research’s May 2021 Director’s Letter
In May, stocks were lackluster as investors remained cautious of rising inflation which in turn led to a volatile month for almost all asset classes. The release of the Federal Open Market Committee’s April meeting minutes helped create a late month rally that put most indices in positive territory to end the month. Value indices performed stronger than growth indices as the Russell 1000 and 2000 value indices outperformed their growth counterparts by 361 and 587 basis points, respectively. More than 1.86 billion Covid vaccines were administered globally; more than half of the adults in the U.S. have received atleast one dose of the vaccine. The energy sector performed well as WTI Crude closed the month at a 52-week high. The 10-year Treasure decreased in May from 1.7035% in April to 1.5934% at month’s end. It appears America is well under way to reopening, but inflationary concerns are still present which should continue to jitter investors like we have seen over this past month.
The May Purchasing Managers Index® (PMI) registered 61.2 percent, an increase of 0.5 percentage points from the April reading of 60.7 percent. Similarly, the Conference Board Leading Economic Index® (LEI) increased 1.3 percent in May to 114.5 (2016 = 100), following a 1.3 percent increase in April and a 1.4 percent increase in March. The May PMI reading indicates economic expansion for the 12th consecutive month. The unemployment rate declined to 5.8% in May (6.0% in April) as businesses have started the rehiring process.
For the month of May, the Singular coverage list outperformed the S&P 500 and Russell 2000 by 61 and 105 basis points, respectively. Over the last twelve months, the Singular coverage list outperformed the S&P 500 and Russell 2000 by 7,486 and 5,118 basis points, respectively. Since our 2004 inception, the Singular coverage list has outperformed the S&P 500 and Russell 2000 by an annualized 541 and 478 basis points, respectively.
For May, AMRK was our top performer as the Company posted record earnings results. Their acquisition of JM Bullion contributed $8.5 million of gross profit and $6.8 million of pre-tax income to the firm’s Direct-to-Consumer segment in the last 12 days of March following the acquisition. EVC had a strong month as the Company had earnings results with revenue, adjusted EBITDA, and free cash flow up 132, 47, and 149% YoY, respectively. Similarly, in Q1:21, SAMG’s discretionary AUM, which drives revenue, increased 6.3% from the Q4:20 to reach $21.9 billion, an increase of 47% YoY from Q1:20. The firm's total AUM grew to $29.0 billion by the end of Q1:21. GENI also had strong earnings as Q1 revenue increased 52% YoY to $53.7 million; adjusted EBITDA increased 414% YoY to $9.3 million.
BBKCF and VYGVF were our two worst performers for the month largely from the 37% May decline in Bitcoin. These two companies claim to make more money when Bitcoin is volatile, but investors sent prices lower anyway. KIRK had a weak month with no material news and even posted great earnings on June 1; many believe short selling caused the decline in the stock price. QNST management also questioned their stock price decline for the month as the Company posted record earnings with revenue increasing 39% YoY; many investors may believe QNST’s growth is unsustainable and may not truly represent future business operations.
For the month, 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.
Robert Maltbie, CFA
Singular Research, President