June 2019 Director’s Letter
Major market indices recover from May sell off.
Singular Coverage List continues to lead.
A dovish Fed signals rate cuts to stimulate stalling economic growth. The Singular Research Coverage list continued to lead the S&P500 & Russell 2000 YTD, although the major indices slightly outperformed bouncing back from the May correction. Although, the small caps and unweighted indices have not kept pace, we will wait to see if this lag becomes a divergence.
Our top performers in June were led by Geospace Technologies Corp. (GEOS), Management announced strong second quarter results with revenue up 36% YOY driven by OBX rental demand. Our next chart topper was Salem Media Group (SALM). Total revenues declined 5.2% YOY to $60.5 million in q1 19 as a result of drops in Broadcast, Digital Media and Publishing revenues. At a significant discount to book value at $8, SALM looks to have found some fans. Acme United Corp (ACU) gave positive forward guidance after a difficult TTM outlook, Management reiterated its sales guidance for CY 2019 of ~$140-$143 million, net income of $5.0-$5.3 million and earnings per share of $1.41-$1.50.
Our worst performers were led by Floor & Décor Holdings Inc(FND), a short call that suffered both from profit taking and covering as the June rally in the overall equity markets gained traction. Harvard Bioscience, Inc. (HBIO) continued to fall in June, GAAP revenues improved 5% in Q119, but organic revenues fell 4% and adjusted EPS declined YOY from $0.03 from $0.02. HBIO expects a challenging H119 and improving results in H219. Daktronics, Inc. (DAKT) reported fourth quarter fiscal 2019 results below our projections.Management guided for slightly higher sales for Q1:20. However, we expect near-term EPS growth to remain muted amid trade tensions. We cut our rating to Buy/Long Term and lower our target price to $6.50.
In June, we initiated coverage on LB Foster (FSTR) LB Foster Co. engages in the manufacture, fabrication, and distribution of products and services for the transportation and energy infrastructure. We caught a nice move up powered by strong Q1:19 results with EBITDA increasing ~92% YOY driving FSTR up 11% and into our top five for June.
At Singular Research we wish to thank our clients and followers for their continued commitment and support of our unbiased, independence research model as we strive to consistently deliver Alpha generated from the lack of coverage out- performance anomaly.
Singular research Staff