September Performance Review…Total Portfolio Return Now at 40%

Well, the market certainly skated through the two weakest months of the year with flying colors, didn’t it? Historically, August and September are the worst two months for being in the market, yet that certainly wasn’t the case this year. Which, as they say in sports, is why we play the game.

Where did the strength in September originate? For the overall market, it came from a space that had most recently been left for dead…Energy. Oil prices rebounded and, with them, took the group up over 8% for the month. An impressive performance for stocks that nobody wanted to touch just a little while ago.

For Tailwinds, we put up another strong month, bringing our total return to 40%. Similar to the market, the strength in our portfolio came from a rebound in a rather beaten down stock. In this case, biOasis, a company with many good things happening internally, has transformed into The Phoenix over the last two months, rising from the ashes to just about breakeven in the portfolio.

The result of biOasis gaining 47%, especially after we doubled the position size recently, was its leading a total return to the Tailwinds Select Portfolio of 5% in August. This was more than double the S&P 500’s return of 2% and pushed us up to 18% for the year.

Will the strength in biOasis continue? Will CYRX, our second best performer in September and the runaway leader of this portfolio this year, continue to go higher month after month? We discuss these questions along with an update on all our stocks below…

The Tailwinds Select Portfolio in alphabetical order:
Aqua Metals: I’m not sure what else AQMS needs to do besides put up a video of lead production and announce that Johnson Controls is moving forward with them. However, that’s not enough as both happened and the stock still traded down 8% for the month. Perhaps a good press release detailing recent accomplishments would be helpful? We believe the bottom is in place and share price will start to reflect the fundamentals soon. However, the stock isn’t agreeing with us and, frankly, it’s pissing me off.

biOasis: BIOAF shares are up over 50% in the last two months. Headcount at the company is probably up a similar amount with several key new hires. The new management and board is positioning biOasis for long-term success. Expect to see some institutions picking away at shares as the institutional relationships being brought to the company are great.

Catasys: Similar to AQMS, the future for CATS is so bright I need shades. However, the stock is acting weak as the future appears to be a quarter late in arriving. Next catalyst is earnings, or more exactly, the forecasts given out by the Company when they report on November 15th. 2018 should be huge for them. When will that become reflected in shares?

ChromaDex: a big winner in Sept, up 28% on the back of a positive trial, the launch of Tru Niagen through Watson’s pharmaceuticals, and a positive push from the sell-side. Business is looking like it can hockey stick from here. We expect big things from the stock as well.

Cryoport: the little engine that could put up another impressive month, closing up 28%. It’s looking like it’s ready for a pullback, however, but the big catalyst of KITE getting approval is in the near future. We have been trimming on the way up and will likely be out of the name if it moves upwards sharply again.

Dyadic: back before Fusion spiked, I called it the most undervalued name in the portfolio that was just looking for a catalyst. That title now belongs to Dyadic. The risk reward here is borderline astronomical. Shares are being repurchased at below cash, which just increases the exit valuation for investors. Someday we’ll look back and say, “Man, that was a no-brainer!”

Fusion Telecommunications: speaking of FSNN, the shares have had a very logical pullback from the strong move in August. It’s really cheap, still. The next obvious catalyst is closing of their merger in Q4. Until then, it will likely trade flat to slightly higher. Once the deal is closed, it should start heading north with more urgency.

Patriot One: got their FCC approval on the last trading day of September, but shares were halted, otherwise we would have had an even better month; they were up 13% on October 2nd. The Company has stated that they are sold out through year-end, pending approval. Well, now they have it. Let’s watch them execute. If they do $25M in sales in 2018, which is my forecast, we have a real winner here.

Polar Power: POLA stock is sitting around waiting to see if the ramp is going to take place in Q3 or Q4. Verizon is slow coming back, we know. However, AT&T is coming fast, especially with the new government contract kicking in. If they score a large order from T-Mobile, look out. Regardless, at this price it likely won’t go lower while we wait for business to turn strong again.

Resonant: a top pick here, the only negative in the story was financing, which they got done in September. This kept the stock from being a nice winner last month, but expect this month to be different. They are landing new clients, revenue started last quarter and is accelerating, the space is hot and they have a long runway in front of them with all the financing they need. Big believer here in RESN.

3D Signatures: truly a disappointing stock, they are on the verge of closing financing. If/when that happens, this screening technology is cutting edge and the company should see a rebound in share price. Not giving up here, but been a painful ride.

Trakopolis: the latest addition to the Portfolio, they are seeing growing revenues and have a great opportunity in front of them as the IoT buildout happens globally. Logistics tracking software is a hot space and this is an up and comer to be watching closely.

Vuzix: Q3 should be yet another quarter of strong revenues as the ramp in their business starts to accelerate. Moving production to China and some key wins positions them to start generating cash in a few quarters. Meanwhile, they also got a financing done recently and insiders have been buying.

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  1. On AQMS, it seems like this is a billion dollar technology (patent and proof of concept alone) trading for 100+ million. Guess they need to show some more tactical progress on more production out of Reno and something more than JCI having conversations on one plant. Definitely suffering as tiny microcap with no real institutional following / visibility which is good for early investors like us, but suffering the early pain. Crazy it was 20+ and now in 5s, and the story is even better than it was in the 20s.


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