Singular Research Director’s Letter : April 2018

Fake Earnings

The U.S Equity markets are not getting any much credit from the tax cuts yet this year. Earnings will be up a record 21%, the best showing in many years. We will focus on revenue growth in the quarter ahead as well as estimates and guidance. Investors are trying to figure out what the real rate of earnings growth is at this point counter balanced against rising interest rates. It looks like the peak for operating margins is in as real growth is lower margin vs financially engineered eps growth.

The” FANG “, continues to bang earnings growth as well as rank among the top spending corporations with lobbyists in DC as forward-thinking monopolists are paving the way for future growth, evidenced by the recent Facebook testimony in front of Congress. Where is the outrage? Where are the new proposals to protect our privacy? Facebook. will still be allowed to self-regulate. What would you pay for 20 to 25% earnings growth for the next five – ten years with virtually no competition. Certainly, more than the 20 to 30% premium the “FANG” is trading to the market right now.

Earnings are to the upside with q3 expected to be up over 20% as well. Valuations are not crazy either at a slight premium to the five-year average and historical average. Interest rates are still below average. But the market seems fairly valued and higher earnings are needed to propel the market higher from this level. Is the Fed neutral, based on money supply growth and GDP growth this seems to be the case. Should we worry that the spread between the two year and ten-year government bond is narrowing down to 40 basis points? Usually this is a strong indicator that a recession on the horizon. Meanwhile, the leading economic indicators continue to edge higher, a very good sign for the economy and the market.

In summary, it might be good to hold in May and go play. It looks like the market is going to have to grind it out until it has for evidence that there is solid earnings growth ahead into early 2019. Also, the mid-term elections in November will start to become an overhang and provide another potential negative for the market.
Another key question, will the market normalize and take the benefit of the tax cut and reinvest into the real economy or continue to engage in financial engineering via share buybacks and M&A.

Don’t get faked out, Stay long.

Singular Research Monthly Performance April 2018

April’s top performers combined were an eclectic bunch with varied influences likely contributing to outperformance. General Finance (GFN) posted a strong q1 and raised estimates slightly. EVIO Inc, (EVIO) was a new initiation with favorable news on growth plans, and Huttig Building Products, Inc. ( HBP) bounced back from an extreme oversold condition.

Top 5 Performers

The worst performer list had was led by LSI Industries (LYTS), hit with a surprise resignation of its CEO, followed by NMI Holdings (NMIH), suffering from some surprising price cuts by a competitor that spooked the market on the outlook for future margins, and closely followed to the downside by Salem Media( SALM), as investors continued to abandon a sector perceived to be another casualty of technological disruption and an aging audience.

Worst 5 Performers

We are excited to announce new coverage on EVIO Inc. (EVIO). EVIO Inc. is a leading provider of quality control testing, consulting and advisory services to the cannabis industry. The company owns 9 laboratories serving five states in the US – California, Colorado, Massachusetts, Oregon and Florida.
At Singular Research, we continue to seek out investment ideas that have minimal to no Wall Street coverage to add alpha for our active institutional following. We thank our clients for your support of independent equity research.

 

Singular Staff

Singular Research Director’s Letter : March 2018

Tough Talk Reverses Rebound

After experiencing an impressive bounce from the prior month’s sell-off, equity markets staged a short-lived rebound that was squelched by fears of a trade war between U.S and China. Although the trade banter has simmered, new anxiety has arisen regarding higher secular inflation and aggressive moves by the special council against Trump. Moving into April, market participants await q1 eps reports to match vs. high expectations as the apex of good news on earnings is feared while eps growth vs. rising rates battle continues.


March’s top performers were led by eps beaters and a couple oversold bouncers. As our coverage list and the R2K showed a positive divergence from a decline of over 3% in the S&P 500. Will this become a trend? Too early to detect a change in leadership as of press time. NV 5 Corp. (NVEE), up 28.9% in March, blew away our estimates and CEO Dickerson Wright attested to the strongest operating environment he has witnessed in many cycles. Trecora Resources, (TREC), recovered from a plant shutdown and benefited from a strong lift in operations to beat eps estimates by a wide margin. A-Mark Precious Metals Inc, (AMRK) aided by increased concerns of trade wars and a subsequent increase in market volatility, posted a 10% gain in March.

The worst performer list was largely impacted by disappointing eps reports and/ or guidance. NMI Holding, Inc, (NHIM) was hit by market fears of higher rates and an imminent peak in housing starts. Salem Media (SALM) continued to battle a secular decline in industry fundamentals while it struggles to beat estimates. Acme United (ACU), our inaugural pick , at $9 when we incepted over twelve years ago, while continuing to execute its successful growth plan over the long term, has experienced some occasional bumps, including some execution adjustments as it transitions to online marketing.

In March, we dropped coverage on Vasco Data Services, (VDSI), as it continued to struggle with a transition from a hardware to a software based business model , missing estimates consistently over the last twelve months. We initiated coverage of Olympia Financial, (OLY.to) an Canadian based financial services company with a diversified array of growing products and services with a Buy-Long term rating.

At Singular Research, we continue to seek out investment ideas that have minimal to no Wall Street coverage to add alpha for our active institutional following. We thank our clients for your support of independent equity research.

 

Singular Staff

Singular Research Director’s Letter : February 2018

Hello Volatility

After a near two year hiatus, with the VIX trending at the historical low end of 11-14 bp level, volatility exploded after an employment report showed higher than expected wage growth, pointing to higher interest rates. All the leveraged short vol funds took a huge hit that send shock waves into the broader equity market, creating the first 10% sell-off since early 2016. Better than expected earnings and upward revisions and positive economic news led the markets to recoup to only a 3-4% down draw for February.

February’s top performers combined good eps reports with lower valuations to buck the stiff sell–off. Our top performer was NMI Holdings, Inc.( NMIH) + 8.17%, a mortgage insurer riding the housing recovery. Hennessy Advisors Inc. (HNNA) +4.36%, an undervalued micro-cap posted good earning while our analyst increased his price target . New York Times Co. ( NYT), a short call went against the grain, posing an earnings beat extending the Trump Bump to readership growth.

The worst performers list had some large down draws. Led by Huttig Building Products, Inc. (HBP) -27 %, this suffered from an unexpected departure of its CFO. Next in line was Anika Therapeutics Inc. (ANIK), -22%, hit by tepid guidance and the retirement of its CEO and founder. Finally, dropping over 17%, A-Mark Precious Metals, Inc. (AMRK) missed estimates due to the low volatility in metals, combined with higher than expected acquisition costs.

We are excited to announce new coverage on LSI Industries Inc. (LYTS), a designer of LED indoor and outdoor lighting systems servings retail and industrial sectors. LYTS posted a better than expected quarter last month, led by a new management team and new product offerings. Also, we launched coverage on Full House Resorts Inc. (FLL), a micro-cap Hotel and Casino resort operator that trades at a significant discount to its peers and is also in the process of a major turnaround. At Singular Research, we continue to seek out investment ideas that have minimal to no Wall Street coverage to add alpha for our active institutional following. We thank our clients for your support of independent equity research.

 

Singular Research 

Singular Research Director’s Letter : January 2018

Out of the Box Hot!

As the adage goes, as goes January as will be the year. Thus, we remain encouraged, hoping earnings can continue to lift already lofty valuations. Indeed, aided by lowered corporate tax rates and lessened regulatory burdens, we have much too support encouraged animal spirits. Still, we suggest selectivity and valuation vigilance as the FED is looking to renormalize the rate environment with the hint of perhaps, several hikes in 2018, suggesting a possible push-pull between higher rates vs. higher earnings.

Meanwhile, small caps continue to lag as investors still favor large cap and accompanying ETF’s extending last year’s leadership forward into 2018 thus far.

 

For the top performing companies in January on the Singular Research coverage list, a common theme was biotech, led by HBIO, ANIK & IGXT. Harvard Bioscience (HBIO) announced a major acquisition that should lift growth prospects and margins while shedding a low margin, underperforming division. Whereas Anika Pharmaceuticals, lacking an apparent fundamental catalyst, seems to have benefited from a rebound in the Biotech sector spurred by investor allocation to ETF’s. Transcat, (TRNS), got a nice boost from beating estimates from the 2 analysts (including Singular) that follow it.

The worst performing  stock on the Singular coverage list during January was  by our wrongheaded short call on New York Times, (NYT), which continues to delight with its digit revenue growth results spurred by a long-lived Trump bump. Clear One (CLRO) endured profit taking reaction from a 25% up move in December. It remains an attractive long-term value still trading around book value.  Arlington Asset Investment Corp. (AI), surprised the street with better than forecast results and rebounded from an oversold condition that took it below NAV to a 5 year low.

We continue to work on new ideas and plan to launch coverage in the coming weeks on one or several new names. At Singular Research, we continue to seek out investment ideas that have minimal to no Wall Street coverage. We thank our clients for your support of independent equity research.

 

Singular Research 

Singular Research Director’s Letter : December 2017

A solid year for large caps small caps continue to lag.

The Singular Research coverage list out performed up 1.64% in the month of December. Still, this was not enough to catch up to the strong outperformance again registered by large caps. With growth lead value by a stunning 13% in most asset classes.  The Singular list was up 7.3% trailing the Russell in S&P due to its micro-cap value Focus.

SINGULAR MONTHLY PERFORMANCE STATISTICS

 

Last Month

YTD

Trailing 12 Mo’s

SINGULAR LIST

1.64%

7.30%

7.30%

S&P 500

0.98%

20.79%

20.79%

RUSSELL 2000

-0.56%

13.17%

13.17%

 

The silver lining for micro and small caps may have been the Trump Administration and Congress’s passage of the tax cut package which should benefit small caps on the margin more than big caps providing a basis for outperformance in 2018.

The Singular Research list was led by Clear One (CLRO) up 26.9% in December. After falling to book value from a very oversold condition CLRO benefited in anticipation of patent awards for its video and audio technology. Gray Television   (GTN) bounced 16.3% up from its large secondary stock offering that was used to pay down debt. Stamps.com (STMP) rose 11.6% in anticipation of a strong Christmas selling season.

 
Symbol Rating Target Month Return
CLRO BUY  $  13.00

26.9%

GTN BUY  $  18.00

16.3%

STMP BUY  $250.00

11.6%

 

Laggards were led by Biolase (BIOL), down 14%, which may be due to heavy tax loss selling as the stock has underperformed in 2017. Control 4(CTRL). was down 10.5%, likely some profit-taking consolidating a more than 200% move up from early February this year. 

 

WORST PERFORMERS FOR THE MONTH
 
Target Month Return
 $ 2.00

-14.0%

 $ 28.00

-10.5%

 

WORST PERFORMERS FOR THE MONTH
       
Symbol Rating Target Month Return
BIOL BUY  $    2.00

-14.0%

CTRL SELL  $  28.00

-10.5%

 

Thank you for your continued confidence and support as we will continue to seek to uncover the forgotten, the forlorn and the misunderstood in 2018. Hail to Alpha.

 

Singular Research 

Singular Research Director’s Letter : September 2017

Small Caps Outperform

The small and micro-cap sectors of the equity markets have been on a tear since the mid-August lows. We perceive that is partly due to the YTD underperformance of the small and micro cap sectors, but a huge boost occurred in September which we anticipate has some long legs, its tax reform. Lower corporate taxes is beneficial to investors, but in the current environment when small caps have underperformed and considering the domestic focus of small and micro cap companies, it is no wonder that this group will be supported by any positive news on domestic tax reform. Our contrarian indicators support the continuation of the latest rally. Short selling is at its highest level since before the 2016 election, and individual bullishness is below average.

For the top performing companies in September on the Singular Research coverage list, most reported strong fundamental performance in Q2, along with positive outlooks. Arotech Corp. (ARTX) was the top performer in September. The company provides engineering and security solutions to government agencies, municipalities and commercial organizations. The company recently received a new contract from the Army National Guard. Harvard Biosciences (HBIO) makes scientific equipment and consumables that are used by researchers worldwide. The company is benefiting by growth in China, increased spending from the National Institute of Health (NIH). The company is benefiting from the expanding gene editing market. Century Casinos (CNTY) has casino operations in a diverse set of venues including cruise ships and horse racing. The company beat earnings estimates in Q2. Control4 Corp (CTRL) provides smart home and business solutions that integrate audio, video, lighting, temperature, security, and communications. The company was a recent new initiation and has consistently been beating estimates.  Biolase (BIOL) makes laser dental products that are very patient friendly and recently introduced two new products in Q1. Sales of new products are ramping up slowly and the is rebounding after recent underperformance.

The worst performing group of the Singular Research coverage list during September include several companies that reported lower than expected Q2 results. The worst performing stock of the coverage list was IntelGenx Technologies (IGTX) focuses on novel drug delivery systems. Although the company missed our analysts’ expectations for Q2, there are several promising items in the near term pipeline. The New Your Times (NYT) underperformed as a short. The company had a stronger than expected Q2. Vasco Data Security (VDSI) makes hardware and software security products. Revenues declined in Q2 as expected, but our analyst expects revenue growth to resume in Q3 driven by software and service-centric offerings. A-Mark Precious Metals (AMRK) is a full-service precious metals trading company. Q4 performance (June 2017) was below expectations but our analyst notes management’s focus on expanding the high margin revenue streams in logistics, storage, financing, and minting. Acme United (ACU) reported lower than expected revenue and EPS in Q2, but management cites a shift of Q2 revenue into the second half and maintained its earlier annual guidance.

We continue to work on new ideas in the small and micro cap space. At Singular Research, we continue to seek out investment ideas that have minimal to no Wall Street coverage. We thank our clients for your support of independent equity research.

Singular Research Director’s Letter : July 2017

Small Cap Companies Bounce Back

The small and micro-cap sectors of the equity markets began to play catch-up to the broader market indices in the past month. The outperformance of the small caps is a necessary component for the longevity of this bull market since small caps have underperformed for some time. But we still anticipate there is likely to be some rough riding for the broader market in the coming months. The employment picture remains strong and is at the point where higher wages are anticipated and with that will come increasing inflationary pressures. Fed tightening is still in its early phase. So what might cause the bullishness to question itself? Any number of unforeseen events could occur but what we do see is a slowing in the aggregate earnings growth for the broader market. We are not forecasting a bear market at this time but it would be ‘normal’ to have some corrective pressures. This bull market seems a bit extended, and the seasonally weak autumn timeframe is coming soon.

For the top performing companies in June on the Singular Research coverage list, most reported strong fundamental performance in Q1. IntelGenx Technologies (IGXT) was the top performer in June. The company has designed oral film drug delivery systems and is working on several pharma products that are likely to be launched in 2018. In Q1, IGXT reported revenues above expectations and during June, the company received approval for a patent on its oral film dosage form, which will lead to long-term exclusivity for its products. The new patent allows for instant or sustained release. Lakeland Industries (LAKE) makes safety garments for industrial and public protective clothing markets. The company reported good unit volume growth and healthy gross margins in Q1 and beat our analysts’ estimates.  NV 5 Global (NVEE) provides professional engineering and consulting solutions for infrastructure, construction, real estate and energy markets. NVEE reported higher than expected revenues in Q1 with a record backlog. Gray Television Networks (GTN) owns television stations and digital assets in many US markets. GTN reported stronger than expected revenue and EPS in Q1:17, and the stock is rebounding after a weak performance in May. Stamps.com (STMP) provides online postage services and reported a Q1 that was far better than expected and increased guidance.

The worst performing group of the Singular Research coverage list during June include several companies that are correcting after strong runs. The worst performing stock of the coverage list was Biolase (BIOL) which makes laser dental products that are very patient-friendly, and recently introduced two new products in Q1. Supreme Industries (STS) had a weak Q1 due to delays in customer supplied chassis. Management noted the delays did not result in lost orders. Century Casinos (CNTY) has casino operations in a diverse set of venues including cruise ships and horse racing. CNTY reported a strong Q4 with adjusted EBITDA up 40%, and the stock is correcting after a strong run. Multi-Color Corp. (LABL) makes labels for consumer products, and our analyst has increased estimates after the strong Q1 that was above expectations. The stock has been correcting after a strong run. ClearOne (CLRO) provides audio/video conferencing tools for Fortune 500 companies. The company has developed new products that are expected to drive growth in 2H17, but the product transition was detrimental to Q1 results. Q4:16 was below expectations.

We continue to work on new ideas in the small and micro cap space. At Singular Research, we continue to seek out investment ideas that have minimal to no Wall Street coverage. We thank our clients for your support of independent equity research.

Singular Research Director’s Letter : June 2017

Is This Equity Market Getting Frothy?

The US equity markets have an underlying bullishness that has been absent for several years. Even in the face of rising interest rates this year, the averages keep inching higher. Despite the self-induced political challenges from the new US administration, any market setback is temporary. Whatever happened to the era of healthy corrections? Will the equity markets obliterate the old adage of ‘sell in May and go away’?

Our takeaway on this equity market advance is that it would be normal for some corrective pressures or at least a sideways movement for a while. Small and micro cap indices have underperformed this year and this is a typical warning sign for the broader market. As anticipated, the manufacturing sector has shown recent strength after weakness in Q1, but surprisingly consumers are, overall, spending less than anticipated. The remnants of the Great Recession are still in the aggregate consumer psyche. The positive employment metrics lead us to anticipate a healthy consumer appetite, even if not as robust as in previous expansions. This economic cycle and bull market has much further to go before it peaks out, but some corrective pressures are normal and the higher interest rate environment may be the catalyst for some temporary weakness in the equity markets.

For the top performing companies in May on the Singular Research coverage list, most have reported a good Q1, while others are rebounding after recent weakness. Stamps.com (STMP) was the strongest performer in May. The company provides online postage services and reported a Q1 that was far better than expected and increased guidance. State National (SNC) provides property and casualty coverage and has other ancillary businesses. Revenues and EPS both beat our analysts’ expectations and the price target was raised. Control4 Corp (CTRL) provides smart home and business solutions that integrates audio, video, lighting, temperature, security, and communications. The company was a recent new initiation and has consistently been beating estimates. Multi-Color Corp. (LABL) makes labels for consumer products, and our analyst has increased estimates after the strong Q1 that was above expectations. Lakeland Industries (LAKE) makes safety garments for industrial and public protective clothing markets. The company reported a mixed Q1 with good unit volume growth and healthy gross margins, but exchange rates were detrimental. Our analyst remains positive on the stock.

The worst performing group of the Singular Research coverage list during May have several hidden gems that we anticipate will perform well in the next year, some of which are moving through a product transition. The worst performing stock of the coverage list was New York Times (NYT) as a short. Our analyst has labelled the recent good fundamental performance as a temporary ‘Trump Bump’ while high legacy pension costs and the decline in print product persists. Iridex (IRIX), posted a disappointing Q1 despite double digit growth in the new product platform. Although estimates were lowered, our analyst still expects strong earnings growth over the next two years. Gray Television Networks (GTN) owns television stations and digital assets in many US markets. GTN reported stronger than expected revenue and EPS in Q1:17, and the stock is correcting after a multi-month run. Biolase (BIOL) makes laser dental products that are very patient friendly, and recently introduced two new products in Q1. Supreme Industries (STS) had a weak Q1 due to delays in customer supplied chassis.

We initiated coverage on one new company in May. We initiated coverage of Gladstone Land Corp. (LAND) with a BUY rating. Gladstone owns farmland and leases it out to producers that focus on high-value crops. The company has a solid pipeline of additional acquisitions along with adequate financing in place. The amount of available land for high-value produce is declining and the company has demonstrated strong growth in cash flows since the IPO in 2013.

We continue to work on new ideas in the small and micro cap space. At Singular Research, we continue to seek out investment ideas that have minimal to no Wall Street coverage. We thank our clients for your support of independent equity research.

 

Sincerely,

 

Singular Research

Singular Research Director’s Letter : May 2017

Is Economic Growth Slowing – Is This Bull Market About to End?

US economic growth was expected to improve in 2017 but the initial release of the first quarter GDP was less than stellar. And bond yields declined recently – is this a forewarning of a weaker economy and what are the impacts on the equity markets? Our perception of the weaker than anticipated Q1:17 GDP growth is that it fits a pattern of the last several years where the first or second quarter has been the low point of the year. Any concerns about consumer spending which was weak in Q1:17? Our view is the lull in consumer spending is temporary – the data is preliminary and will likely be revised upwards. We anticipate the trends of lower productivity growth and higher labor costs of the past few years are at the point to drive increasing capital investments for greater productivity, and continued job growth. These major trends will support GDP growth for the next few years. In the process there may be lulls and sparks, but we are not close to the top of this economic cycle or the end of this Bull market, in our opinion.

For the top performing companies in April on the Singular Research coverage list, several have forecasts of consistent revenue and earnings growth while others are rebounding after recent weakness. Control4 Corp (CTRL) was the strongest performer in April. The company provides smart home and business solutions that integrates audio, video, lighting, temperature, security, and communications. The company has consistently been beating estimates. Century Casinos (CNTY) has casino operations in a diverse set of venues including cruise ships and horse racing. CNTY reported a strong Q4 with adjusted EBITDA up 40%. Arotech (ARTX) provides innovative defense and security solutions for government agencies and commercial users. The stock is rebounding from a recent dip. Multi-Color Corp. (LABL) makes labels for consumer products, and our analyst is forecasting consistent revenue and earnings growth in the next year. The stock is rebounding from a recent dip. Anika Therapeutics (ANIK) provides treatments for early stage osteoarthritic joints with its innovative products. The company has been consistently gaining share in the viscosupplement market.

 

The worst performing group of the Singular Research coverage list during April have several hidden gems that we anticipate will perform well in the next year, some of which are moving through a product transition. The worst performing stock of the coverage list, Stealthgass (GASS) provides seaborne transportation for LPG. The company reported an uptick in contract rates for its vessels. There are very few industry builds coming online in the next two years which will likely lead to higher dayrates. Stamps.com (STMP) provides online postage services and after reporting a strong Q4:16, the stock is consolidating recent gains. Harvard Bioscience (HBIO) provides scientific equipment and consumables to the research markets. Our analyst expects the company to have consistent earnings growth in the next year, but concerns over NIH funding is having a negative impact on the stock. Seabridge Gold (SA) is a development stage company that explores and acquires gold properties. The company announced a resource expansion as a result of recent drilling and also made an acquisition. Iridex (IRIX), posted a loss in Q4:16 driven by higher expenses associated with a new product platform. Our analyst expects strong revenue and earnings growth over the next two years.

We initiated coverage on two new companies in April. We initiated coverage of Biolase (BIOL) with a BUY rating. BIOL is a leader in laser dental products, which reduces pain, trauma, and bleeding for patients. The company has installed over 33,000 lasers in 90 countries, and has recently had improving international success. The cash burn has declined significantly and the addressable market is very large. We initiated coverage on Control4 Corp. (CTRL) with a BUY rating. CTRL provides smart home and business systems that integrate many functional items including audio, video, lighting, temperature, security, communications, and network management. The company integrates its proprietary software with its chip designs. Thousands of devices are “enabled” on the CTRL system, the company has a strong intellectual property portfolio, and markets primarily through independent dealers.

We continue to work on new ideas in the small and micro cap space. At Singular Research, we continue to seek out investment ideas that have minimal to no Wall Street coverage. We thank our clients for your support of independent equity research.

Sincerely,

 

Singular Research

Singular Research Director’s Letter : April 2017

All Rallies Come to an End

The US equity markets have been on a consistent bullish run since the early November 2016 lows. It is normal to have a correction after such a run and in the face of rising interest rates during 2016, we are happy this equity market is taking a breather. We expect some digestion of recent gains in the coming months. Our read of the economic signposts point to slightly expanding GDP growth in 2017 that can easily withstand higher interest rates.

For the top performing companies in March on the Singular Research coverage list, a common theme is strong revenue and earnings growth in recently reported quarters. Century Casinos (CNTY) was the strongest performer in March. The company has casino operations in a diverse set of venues including cruise ships and horse racing. CNTY reported a strong Q4 with adjusted EBITDA up 40%. Acme United (ACU) provides innovative cutting devices, measuring instruments and safety devices for the school, home and industrial markets. The company reported a strong Q4:16 with much higher than anticipated revenues. Lakeland Industries (LAKE) makes safety garments for industrial and public protective clothing markets. The company is performing well, and the stock rebounded from a recent dip. Gray Television Networks (GTN) owns television stations and digital assets in many US markets. GTN reported stronger than expected revenue growth and the stock has been on a rebound since the November lows. Seabridge Gold (SA) is a development stage company that explores and acquires gold properties. The company announced a resource expansion as a result of recent drilling and also made an acquisition.

The worst performing group of the Singular coverage list during March have several hidden gems that we anticipate will perform well in the next year. The worst performing stock of the coverage list, Iridex (IRIX), posted a loss in Q4:16 driven by higher expenses associated with a new product platform. Our analyst expects strong revenue and earnings growth over the next two years. Arotech (ARTX) provides innovative defense and security solutions for government agencies and commercial users. The company reported lower than expected revenues in Q4:16. ClearOne (CLRO) provides audio/video conferencing tools for Fortune 500 companies. The company has developed new products that are expected to drive growth in 2017, but during the product transition Q4:16 was below expectations. IntelGenx Technologies (IRIX) reported a strong Q4:16 and has favorable licensing opportunities. Stealthgass (GASS) provides seaborne transportation for LPG. The company reported an uptick in contract rates for its vessels. There are very few industry builds coming online in the next two years which will likely lead to higher day rates.

We initiated coverage on one new company, and dropped coverage on another in March. We initiated coverage of Arotech (ARTX) with a BUY rating. ARTX operates two divisions to serve the defense and security markets. The Training and Simulation division provides simulation equipment and services for the military and law enforcement markets. The Power Systems division provides portable energy solutions for the military, aerospace and industrial customers. ARTX customer list includes Boeing, Raytheon, other defense and aerospace companies, and the US military. The company signed new multi-year contracts in 2016, and our analyst expects the increasing need for highly trained security personnel worldwide will support revenue growth. We dropped coverage of Nova Measuring Instruments (NVMI) because the stock had reached its target valuation. We may revisit NVMI at another time if the valuation parameters become favorable.
We continue to work on new ideas in the small and micro cap space. At Singular Research, we continue to seek out investment ideas that have minimal to no Wall Street coverage. We thank our clients for your support of independent equity research.