Times are good in the market. Really good. It seems that every time there’s a hiccup in stocks, they simply pause, then accelerate to new highs. The latest run up was related to enthusiasm over the republican’s tax plans, but make no mistake…tax plans, sexual harassment, Russian meddling, it doesn’t matter, the market just keeps chugging along.
Can this continue? Well, while all good things must come to an end, picking the top is very hard. And, history being adept at repeating itself, one shouldn’t necessarily expect to see anything other than a strong market in December. It is after all the month of the year with the highest return, averaging 1.9% historically. Why should this year be different?
Therefore, while we expect volatility to continue picking up, we believe that portfolio managers will spend December putting more money into winning shares, pushing them and their indexes continually higher through the month, continuing November’s record setting ways.
Speaking of November, it was not only good for the market as a whole, it was also the best month in the history of Tailwinds. The Tailwinds Select Portfolio returned 14% during the month, with several of our stocks turning in outstanding performances.
Our Portfolio is now up 31% for 2017 and 58% since its inception last August. To put that in perspective, the S&P 500 is up 18% YTD and 21% since last August. Or, if you’d prefer a more apples-to-apples small-stock comparison, the Russell 2000 is up 13% and 25% during those respective timeframes.
The really good news is that small cap stocks appear to be playing catch-up with their larger brethren, after significantly underperforming during the first half of the year. This bodes well for Tailwinds heading into the holidays; maybe we’ll get a big enough move to be able to splurge on the GI Joe with the Kung Fu Grip???
Looking at the individual Tailwinds’ names, we feel well positioned for the upcoming month but our enthusiasm across the board is slightly tempered as several of our stocks could see tax-loss selling affecting them in December. However, as long-term investors, that’s the kind of opportunity we look for. Any weakness this month just adds to the opportunity for what already looks like an exciting 2018 coming at us.
Here’s a recap of November along with a preview of the year-end for each stock in the Tailwinds Select Portfolio.
Remark Holdings, +167%…Remark was a recent addition to the Portfolio and it has been a stellar performer. It’s growth rate in its Artificial Intelligence unit is outstanding, and the company trades for a discount to its sum of the parts. Earnings in November brought attention to MARK, but we believe it will remain strong through year-end and beyond.
Chromadex, +69%…when Mark Zuckerberg backed ICONIQ invested in CDXC, that made it two very high-profile billionaire investors who believe in the company and their lead product Niagen. Expect this stock to also continue on its winning streak as sales are just now beginning to launch and the opportunity is immense.
Resonant, +52%…the little company that could disrupt an $8 billion market. RESN had positive news regarding recent design successes and we expect to see more customer traction in the near future. 2018 is the year revenues start to accelerate.
Fusion, +34%…a great performer, we removed Fusion from the Tailwinds Select Portfolio this last week, due to the upside being more limited on a relative basis to many other stocks in the portfolio. The stock was up nicely as investors gained clarity into its merger that should close early next year. It’s likely to continue trading well into the close, however, while it’s a great company and still cheap, we find it tough to see it doubling soon from this level. Hence being opportunistic in moving funds elsewhere.
Vuzix, +26%…its all about execution and delivery for these guys. The company appears to be well-positioned. Will revenue hockey-stick? If recent guidance is met, the answer is yes. Shares went up this month post their earnings report, and we love VUZI heading into 2018.
ITUS, +20%…with two programs in place, and each showing great early results, ITUS could be the best performer in our portfolio in 2018…there’ just that much upside here, most of which is not at all reflected in the current valuation. The shares have gone up since we assumed coverage due to the closing of their CAR-T therapy license, and issuance of a patent.
Trakopolis, +8%…this is a very illiquid stock which has resulted in sporadic price movement. Expect more clarity into revenues soon, but, with the stock hovering near its last deal price, could see some tax-loss selling.
Dyadic, +8%…there is a floor in the stock at $1.40 as the Company will buy back up to 5 million shares there. Meanwhile, any good news should pop the stock. Risk/reward here is off the chart. When will it spike? No one knows, but likely in the next few months. Meanwhile, we’re happy to buy it here and wait for the good news.
Polar Power, -5%…terrible earnings combined with super confident management results in a small loss for this stock in November. Q4 is the quarter where their AT&T sales start to spike. It may be a tax-loss selling candidate, but, when business starts to pick up, the stock should go back to old highs and then some.
Catasys, -6%…sitting below its deal price has resulted in some tax-loss selling here, but recent guidance by the Company demonstrates the size of the opportunity. Another stock that could be a HUGE winner in 2018. Per guidance, expect to see a contract win soon, which should propel this stock back towards its highs in the near term, with much more longer term.
Cryoport, -9%…still retrenching after the amazing performance earlier in the year, this Company is growing rapidly and has a very well protected niche in the hottest space in biotech; personalized therapies. Portfolio managers will likely want to have this in size by year-end, so December could be quite nice.
SG Blocks, -11%…amazing growth prospects and a total show-me stock. Sitting below the recent financing, likely will suffer from tax-loss selling…it’s rather illiquid, so this is the time to build a position as 2018 will be a different story altogether.
Aqua Metals, -18%…do I really need to discuss this one? Yes, sadly. They have suffered yet another delay, but appear very close to working out the kinks and going into production. Meanwhile, investors are showing fatigue (I sure am), and abandoning in droves. I suspect December will be more of the same. If they can start production, as they have forecasted, in early 2018, the stock will move up after year-end. If not, we’ll move on.
Bioasis, -20%…a little retreat after a 50% up move, BTI.V is on the verge of some big things. Yes, it’s biotech, so there’s big risk. But, the management and board are top notch, the company has some catalysts coming and they are positioning for NASDAQ, which would be huge. Take advantage of any traders who give up on this in December to build a position as it’s ready for a big 2018.
Patriot One, -21%…don’t let the down month fool you, this thing was up huge in October. PTOTF will be bringing a disruptive technology to market in 2018. Pre-orders are very large and they have yet to really start marketing the product as it is just now going through live testing. I think the stock has bottomed after its pullback and will start trending higher in December and beyond.
3D Signatures, -22%…this company has struggled to raise money, but it looks like they are finally getting over that hurdle which positions them incredibly well for a big rebound here in December and could propel them nicely into next year.
UGE, -30%…solar is a big buzz word, and these guys are growing rapidly. However, the story doesn’t appear to be resonating loudly enough to help investors. December could be more of the same, but 2018 will likely see the stock match the sales and start moving higher.
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