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.
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Robert Maltbie, CFA
Singular Research, President