Tailwind’s Select Portfolio ~ February Performance Review

Well, February sure turned out to be a great month for stocks, didn’t it? Who would have thought that the market would tie a record, by having new highs on 12 consecutive days leading into month end. It’s a shame we didn’t break the record today, but, regardless, it’s been a month to remember.

For the small cap universe, however, the good times are not necessarily rolling. The Russell 2000 index closed on February 28th below its closing price on December 8th. Which means that, despite all the “strength” in the market, small cap stocks have done next to nothing over 3 months. And, it looks like the technical picture is ugly, as the support line was tested on the close today. Will it hold? Time will tell.

That being said, led by AQMS, the Tailwinds’ Select Portfolio had an excellent month. The average stock in the portfolio was up over 8% in the month. This brings the average performance of our stocks since inception to 16% and the return of the portfolio to 22%.

Digging into the individual stocks, it’s apparent that our performance was driven by AQMS, as the rest of the stocks were slightly lower as a group. This, however, is what one can expect with a small cap, catalyst driven investment strategy. Companies will reach catalysts and make big moves, followed by times of consolidation. Aqua Metals has done this twice already, moving up sharply following good news, only to consolidate and drift slightly off from the peak. This establishes higher bases and support for future moves. If only all stocks traded like AQMS!

Portfolio Company Updates:
AQMS: the big mover in the portfolio, Aqua Metals announced a partnership with Johnson Controls in early February. Expect more good news to come as the company will be providing guidance on volumes and costs, in addition to selecting a location for their next facility and possibly announcing more licensing deals. We don’t anticipate this news to be imminent, but should come over the next few months. Meanwhile, there is a large short position and increased institutional interest in AQMS. The stock may consolidate for longer, but is likely headed higher when that’s done.

ESTE: Earthstone put out a press release updating their guidance. The stock has been trending sideways as investors try to gauge the next move in oil. That being said, the guidance was positive in that it beat the street’s forecasts, but still lowballed in our opinion. We should be getting ongoing (positive) drilling results and expect the next quarterly report to beat numbers and cause the street to move estimates higher.

BTI.V: biOasis shares continue to trend lower in a vacuum of newsflow. I think investors are positioned for the next partnership announcement and just some small selling is taking this down. We remain firmly convinced that BTI.V will announce several positive things in the next few months including a new licensing partner, and payment of their first milestone payment from the Vaccinex partnership. Further proof of effectiveness of their licensing model would make for a strong reversal in the downtrend.

iBio: Similar to biOasis, IBIO shares are suffering from a lack of catalysts and news. There was an 8-K put out today regarding repositioning of their partnership with regards to the facility in Texas. While innocuous on the surface, I think there is a reason behind this financial maneuver and would expect that to come clear to the general populace in short order. Meanwhile, the shares are cheap and the company is well positioned to make a move higher on any news at all.

VUZI: our latest recommendation, you should check out the video interview we did with Paul Travers, the CEO. Augmented Reality will be a $40B business in the next decade. No one is better positioned to take share than Vuzix. No one.

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