Singular Research’s February 2021 Director’s Letter

Summary

• The market path to life after the pandemic has been bumpy as investors have begun looking for the "re-opening" trade.
• Inflationary fears and rising bonds yields were the main stories of the month.
• For the month of February, Singular coverage list continued to outperform the S&P 500 and Russell 2000 by 1,103 and 773 basis points, respectively.

In February, Covid vaccinations started to roll out throughout the world with more than 239 million vaccinations administered globally. However, the story of month had more to do with inflationary fears and rising bond yields. With U.S. economies re-opening, talks of fiscal stimulus, and a pledge from Federal Reserve Chairman Powell to keep interest rates low to spur economic growth, investors have been moving more into equities and selling bonds. On Thursday, February 25, the yield on the 10-year Treasury hit 1.60% which was higher than the S&P 500 dividend yield, before settling at 1.42% the next day. As a result of rising yields, investors became more cautious of growth and technology stocks, looking favorably instead on energy and value stocks; WTI and Brent were up 17 and 20% for the month. The market path to life after the pandemic has been bumpy as investors look beyond a “stay at home” trade to a “re-opening” trade.

The February Purchasing Managers Index® (PMI) registered 60.8 percent, an increase of 2.1 percentage points from the January reading of 58.7 percent. Similarly, the Conference Board Leading Economic Index® (LEI) increased 0.5 percent in January to 110.3 (2016 = 100), following a 0.4 percent increase in December and a 0.9 percent increase in November. Both the PMI and LEI increased which suggests investors and businesses are encouraged by vaccinations and reopening plans. The unemployment rate was little changed at 6.2% in February (6.3% in November) as businesses have started the rehiring process.

For the month of February, the Singular coverage list continued to outperform the S&P 500 and Russell 2000 by 1,103 and 773 basis points, respectively. Over the last twelve months, the Singular coverage list outperformed the S&P 500 and Russell 2000 by 4,844 and 3,266 basis points, respectively. Since our 2004 inception, the Singular coverage list has outperformed the S&P 500 and Russell 2000 by an annualized 561 and 456 basis points, respectively.

For February, VYGVF had a great month as their AUM and trades surpassed $1.1 billion and one million, respectively. GMBL also had a stellar month as the firm reported strong Q2 results with the acquisitions of Lucky Dino, Helix eSports, and ggCircuit. Similarly, MGNI excited investors with their fourth quarter year-over-year revenue growth of 69%. NAK was a top performer for the month as investors anticipated positive news from their request for appeal of the Pebble Partnership.

EBIX was our worst performer for the month as their auditor, RSM U.S. LLP, resigned because of “unusual transactions” in their gift card business; however, since then EBIX has brought on a new Indian auditor to complete their 10K filing by the end of April. We view this selloff as a buying opportunity. BYND reported weaker than expected fourth quarter earnings as the company’s foodservice business is still negatively affected by the pandemic. Interestingly, the company signed deals with McDonald’s, Pepsico, and Yum! Brands which should bolster growth once the pandemic subsides. GNOG and IEC had strong months but were largely the victims of a broad market selloff. TA announced fourth quarter results that were weaker than expected.

For the month, we initiated coverage on AE and GNOG. AE is primarily engaged in the business of crude oil marketing, transportation, and storage and tank truck transportation of liquid chemicals and dry bulk through its two wholly owned subsidiaries GulfMark Energy, Inc. and Service Transport Company. GNOG operates online gaming and sports betting in the U.S. under the Golden Nugget brand. The company maintains an 8% market share in New Jersey’s iGaming industry, the most mature market in the U.S., and has also launched iGaming in Michigan, Pennsylvania, and West Virginia.