IDW - Singular Research's April Director's Letter

2023-05-10 17:56:52 ET

Summary

• For the month, the Singular coverage list underperformed the S&P 500 Index and the Russell 2000 by (507) and (174) basis points, respectively.
• Since our 2004 inception, the Singular coverage list has outperformed the S&P 500 and Russell 2000 by an annualized 252 and 331 basis points, respectively.
• Harvard Bioscience, Inc. was our top performer for the month, as the Company released strong quarterly earnings with gross margins above 60%.

For April, the month was mixed, as large and mega-cap stocks outperformed small and micro-cap stocks; the Dow Jones Industrial Average (DJI) and the S&P 500 (SP500) returned 2.6% and 1.6%, respectively, while the Russell 2000 (IWM) and the Russell MicroCap indices had returns of (1.8)% and (2.6)%, respectively.

As we head into earnings season, S&P 500 companies are reporting their best performance relative to analysts' expectations since the end of 2021. On the economic front, CPI month-over-month was up 0.1% versus a 0.2% estimate and up 5.0% annually versus a 5.1% estimate. March core PCE was up 0.3% sequentially, little changed from the February reading. The U.S. debt ceiling standoff has heightened tensions in the market as CDS spreads are at levels not seen since the 2008 crisis. Investors are also buying the 1-month and selling the 3-month T-Bill as most Treasury maturity dates are between July and August. This market apprehension can also be seen in the recent uptrend in the price of gold, which is breaking out to new highs while the M2 money supply has contracted for the first time ever after a Covid crisis surge. Q1 GDP was 1.1% which was down sequentially from 2.6% and below the consensus average of 2.0%. It appears we are in a holding pattern as markets are not moving much in either direction. Arguments can be made for a second-half rally or recession, place your bets!

The April Manufacturing Purchasing Managers Index® ((PMI)) registered 47.1% percent while reading 46.3 percent in March. Similarly, the Conference Board Leading Economic Index® ((LEI)) declined by 1.2 percent in March to 108.4 (2016 = 100), following a decline of 0.3 percent in February. The LEI is now down 4.5 percent from September 2022 to March 2023. The unemployment rate ticked up to 3.5% in March (3.4% in February).

For the month, the Singular coverage list underperformed the S&P 500 and the Russell 2000 by (507) and (174) basis points, respectively. Since our 2004 inception, the Singular coverage list has outperformed the S&P 500 and Russell 2000 by an annualized 252 and 331 basis points, respectively.

Harvard Bioscience, Inc. ( HBIO ) was our top performer for the month, as the Company released strong quarterly earnings with gross margins above 60%. Ebix, Inc. ( EBIX ) also had a strong month as the Company released favorable news regarding its planned IPO spinoff of EbixCash. Mistras Group, Inc. ( MG ) and Riot Platforms, Inc. ( RIOT ) also performed well, as the Companies released strong fourth-quarter results. Bitcoin (BTC-USD) appreciated about 3% for the month of April. It is important to note that HBIO, MG, and RIOT were on the top five performers' list for the month of March.

IDW Media Holdings, Inc. ( IDW ) was our worst performer of the month as the Company announced cost-cutting measures by reducing its workforce by 40%. Digital Media Solutions, Inc. ( DMS ) also performed poorly as the Company had weaker-than-expected quarterly results. QuinStreet, Inc. ( QNST ), Kimball Electronics, Inc. ( KE ), and Emergent BioSolutions Inc. ( EBS ) had weak months on general market volatility.

For the month, we had one new initiation. Conduent Incorporated ( CNDT ) offers business outsourcing and payment solutions to corporations and government agencies worldwide.

We wish to thank our clients for their support and belief in our process.

Thank you,

Robert Maltbie, CFA

Singular Research, President

818-222-6234 (office).

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