Atlas Selected to Join Russell 3000, Russell 2000, and Russell Global Indexes

Atlas Selected to Join Russell 3000, Russell 2000, and Russell Global Indexes

Atlas Financial Holdings, Inc. (AFH) (“Atlas” or the “Company”) has been selected to join the Russell 3000®, Russell 2000®, and Russell Global® Indexes as part of Russell Investments reconstitution of its comprehensive set of U.S. and global equity indexes. The final 2014 reconstitution of the Russell Indexes took place after the market closed on June 27, 2014 and final membership lists will be posted on June 30, 2014 on www.russell.com.

The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

Membership in the Russell Indexes remains in place for one year, and means automatic inclusion in the appropriate growth and value style indexes. Russell determines membership for its equity indexes primarily by objective, market-capitalization rankings and style attributes.

Scott D. Wollney, Atlas’ Chief Executive Officer stated, “We are pleased to be added to the Russell Indexes. We believe that the inclusion (in the Indexes) is a testament to the Company’s growth over the past year and we are proud of this accomplishment. We expect this opportunity to enhance awareness of the Company amongst the investment community and potentially broaden our shareholder base.”

Russell indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for both passive and active investment strategies. Russell calculates more than 700,000 benchmarks daily covering approximately 98 percent of the investable market globally, 80 countries and more than 10,000 securities. Approximately $4.1 trillion in assets are benchmarked to the Russell Indexes.

About Atlas Financial Holdings, Inc.

The primary business of Atlas is commercial automobile insurance in the United States, with a niche market orientation and focus on insurance for the “light” commercial automobile sector including taxi cabs, non-emergency paratransit, limousine/livery and business auto. The business of Atlas is carried on through its insurance subsidiaries American Country Insurance Company, American Service Insurance Company, Inc. and Gateway Insurance Company. Atlas’ insurance subsidiaries have decades of experience with a commitment to being an industry leader in these specialized areas of insurance.

Forward-looking Statements

This release includes forward-looking statements regarding Atlas and its insurance subsidiaries and businesses. Such statements are based on the current expectations of the management of each entity. The words “anticipate”, “expect”, “believe”, “may”, “should”, “estimate”, “project”, “outlook”, “forecast” or similar words are used to identify such forward looking information. The forward-looking events and circumstances discussed in this release may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting the Company and its subsidiaries, including risks regarding the insurance industry, economic factors and the equity markets generally and the risk factors discussed in the “Risk Factors” section of the Company’s registration statement on Form S-3 and the prospectus supplement. No forward-looking statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Atlas and its subsidiaries undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Volatile Month for Small Caps

Volatile Month for Small Caps

 

After the Large Cap/Small Cap divergence seen in April, May was characterized by increased volatility in the Russell 2000 as the month featured several days of +/- 1% moves. In many cases, the intraday swings were even wider, with late-day trading reducing the extremity of the move. To an extent, some of the volatility can be attributed to macroeconomic data that fails to show a clear trend. A good example of that is Q1 GDP, which came in below consensus at -1%. Market participants that maintain an optimistic view regarding the overall trend of the US economy are quick to point out that Q1 was negatively impacted by the severe cold weather which a litany of companies cited as a factor in their Q1 earnings reports. Others that have a more pessimistic stance point to an economy that is, at best, in slow growth mode and thus can be easily tipped into negative growth. With the data ambiguous, volatility often follows.

Real GDP Growth

For May, the S&P 500 was up 2.10%, the Russell 2000 was up 0.72% and the aggregate Singular List was down 1.11%. For the trailing twelve months, the S&P was up 18.5%, the Russell 2000 was also up 18.5%, and the Singular Research List was up 16.8%. We initiated coverage on two companies during May, Gentherm (THRM) and Gencor (GENC). Both are BUY-rated, with THRM having a price target of $50 and GENC a target of $13.75. Our top five performers in May include companies from a variety of industries and are also a mix of BUY and SELL rated ideas. As our table shows, the Singular List produced two standout performers in May – NNBR and VTNR. Top 5As with our top performers, our worst performers in May were also from a variety of industries and with a range of reasons for the declines. In the case of ACET for example, results are driven by the continued introduction of new products and some periods feature more than others. We see current weakness as a buying opportunity as the company has a healthy pipeline of product launches planned over the next several quarters which we expect to drive earnings growth. Bottom 5  At Singular Research we continue to seek out investment ideas that have minimal to no Wall Street coverage. There are a number of uncovered and under-covered names we have been investigating, and we plan to launch coverage on several names in the coming weeks.  We thank our clients for your support of independent equity research.   Sincerely, Jeremy Hellman, CFA Chief Operating Officer

Singular Research Director’s Letter May 2014: Small Caps Continue to Lag

Singular Research Director’s Letter: May 2014

 

Small Caps Continue to Lag April saw the main market indices we track – the Russell 2000 and the S&P 500 – diverge as investors sought safety in larger companies.  For the month, the S&P500 was in the black, outperforming the Russell 2000 by 429 basis points (+0.61% vs -3.68%).  Given that our Singular Coverage universe is heavily skewed to small cap companies, the overall market action presented a significant headwind.  Offsetting this negative, we saw several of our SELL-rated companies drop significantly while several other BUY-rated companies posted gains driven by quality earnings reports. Looking at key macroeconomic statistics, manufacturing-related data looks to be trending positively.  Beyond the data points, many pundits and economists have been offering commentary with a positive tone regarding the manufacturing sector.  In particular, many theorize that Capex budgets need to grow which would be supportive of broader economic activity.  This would be in contrast with recent years where many companies have favored financial engineering, such as share buybacks, as a preferred use of cash.

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For April, the S&P 500 was up 0.61%, the Russell 2000 was down 3.68% and the aggregate Singular List was down 1.2%.  For the trailing twelve months, the S&P was up 18.3%, the Russell 2000 was up 17.2%, and the Singular Research List was up 16.8%. We initiated coverage on three companies during April, Innovative Systems and Solutions (ISSC), Comstock Mining (LODE), and Aviat Networks (AVNW).  All three are BUY-rated, with ISSC having a price target of $10; LODE a target of $2.25; and AVNW a target of $2.80. Our top five performers in April include companies from a variety of industries and are also a mix of BUY and SELL rated ideas.  In a departure from our prior format, we present our top five in the table below in lieu of the prose version we have used previously.

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As with our top performers, our worst performers in April were also from a variety of industries.  A key theme with all five was the absence of a directly-observable cause, thus leading us to attribute the negative performance to the shares moving down in sync with overall weakness in small caps in general and some sectors in particular, such as biotech.

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At Singular Research we continue to seek out investment ideas that have minimal to no Wall Street coverage.  There are a number of uncovered and under-covered names we have been investigating, and we plan to launch coverage on several names in the coming weeks.  We thank our clients for your support of independent equity research.

Sincerely,

Jeremy Hellman,
CFA Chief Operating Officer

LSI Industries, Inc. (LYTS:BUY) Q3:14 revenues and EPS below our expectations largely due to sales decline in Graphics segment.

LSI Industries, Inc. (LYTS:BUY) Q3:14 revenues and EPS below our expectations largely due to sales decline in Graphics segment.

29-APR-14 – LSI Industries, Inc. (LYTS:BUY) Q3:14 revenues and EPS below our expectations largely due to sales decline in Graphics segment. Strong LED growth during the quarter. Lowering FY:14 estimates, maintaining our price target of $11.00, and reiterate BUY rating.

Q3:14 HIGHLIGHTS

  • LYTS reported revenues of $69.0 million compared to Q3:13 revenues of $66.2 million, and below our estimate of $72.1 million.
  • Graphics segment revenues failed to materialize during the quarter due to the absence of orders from key retail clients.
  • Gross margin declined to 19.9% compared to 21.0% in Q3:13, and was below our estimate of 22.1%.
  • EPS was ($0.04) in Q3:14 compared to EPS of ($0.01) in Q3:13 and was below our estimate of $0.04.
  • We are lowering our FY:14 EPS estimate to $0.08 from $0.24 and lowering our FY:15 estimate to $0.36 from $0.42.
  • We maintain our BUY rating and our 12-month target price is maintained at $11.00. The current dividend yield is 3.0%.

RISKS

  • LYTS may experience volatility in its COGS from increased commodity and component costs, particularly steel, aluminum, light bulbs, fluorescent tubes, plastic, lenses, inks, and LEDs.
  • LYTS has traditionally focused on the gas station and convenience store markets for key customers which combined represents over 30% of total sales during Q3:14.

Manitex International (MNTX:BUY) Solid finish to 2013 and end markets appear to be improving as backlog begins to climb.

Manitex International (MNTX:BUY) Solid finish to 2013 and end markets appear to be improving as backlog begins to climb.

29-APR-14 – Manitex International (MNTX:BUY) Solid finish to 2013 and end markets appear to be improving as backlog begins to climb. We reduce our FY:14 estimate by $0.02 and raise FY:15 by $0.02, maintain our BUY rating while raising our price target to $19.50, as we continue to believe MNTX’s niche focus provides long-term growth opportunities.

Q4:13 HIGHLIGHTS

  • MNTX turned in a solid Q4 performance. EPS rose 37.5% to $0.22 from $0.16 per share; in line with our $0.22 estimate and $0.22 consensus.
  • Q4 revenues advanced 15.8% to $65.4 million from $56.5 million in Q412, just below our $66.5 million estimate. Gains in container handling equipment (77%) and cranes (16%) were partially offset by declines in material handling and equipment distribution revenues due to the timing of orders.
  • Gross margins improved 120 bps from Q4:12 levels to 19.5% of revenues and were just below our 19.8% estimate. The gain was attributable to an improved sales mix and increased operating efficiencies.
  • Operating expenses fell 60 bps to 11.9% of revenues from 12.5% as costs were controlled and leveraged against the increased revenues.
  • We reduce our FY:14 estimate to $0.96 from $0.98 per share to reflect extra marketing costs for the CONEXPO industry tradeshow in 1Q as well as a slight reduction to 1Q forecast revenues, partially offset by upward revisions to our Q2 and Q3 EPS estimates. Our FY:15 estimate is raised $0.02 to $1.16 per share; we maintain our BUY rating; and raise our price target to $19.50 from $18.50, we continue to believe MNTX’s niche focus provides long-term growth opportunities.

RISKS

  • With more than 50% of its revenues from the energy sector MNTX is vulnerable to a downturn in that sector’s capital spending.
  • MNTX’s niche focus involves making acquisitions. Failure to acquire and successfully integrate additional acquisitions would likely have a negative impact on results and the stock price.

Angie’s List, Inc. (ANGI:NA) Our SELL thesis as outlined in our August 20, 2013 Initiation report has played out with the stock declining approximately 50% from that date.

Angie’s List, Inc. (ANGI:NA) Our SELL thesis as outlined in our August 20, 2013 Initiation report has played out with the stock declining approximately 50% from that date.

29-APR-14- Angie’s List, Inc. (ANGI:NA) Our SELL thesis as outlined in our August 20, 2013 Initiation report has played out with the stock declining approximately 50% from that date. Our price target of $11.00 was achieved on April 28, 2014. We drop coverage to focus on names with greater visibility and more immediate investment potential.

DROP COVERAGE

  • We include the points of our initiation thesis along with most recent financials and estimates for reference purposes only.
  • At the time of initiation, ANGI’s high valuation was excessive considering the low barriers to entry, legacy competition, and limited advertising spends from local businesses.
  • The company’s revenue growth depends on advertising from its participating local service providers which is dependent on a rapidly growing paid membership base. The high member churn rate continues to raise growth concerns.
  • We expect ANGI will not generate positive operating or net profits during FY:14. If ANGI becomes profitable in FY:15 as expected, investor focus will shift to margins and levels of profitability, which may not be good for valuations.
  • Although still showing very strong growth rates across most metrics, many of those growth rates have been decelerating recently.
  • Gross membership adds during Q1:14 were 286.6k, a increase of 4.3% from 274.9k in Q1:13. Net adds were only 143.8k implying the member churn rate remains high.
  • Cash levels at the end of Q1:14 were $64.6 million which increased from $55.9 million in Q3:13 due to positive working capital management.
  • We drop coverage to focus our resources on actionable names with greater certainty of positive returns.

Aviat Networks, Inc. (AVNW:BUY) Telecom equipment company expected to return to profitability on strong demand for microwave transmission products in emerging markets.

Aviat Networks, Inc. (AVNW:BUY) Telecom equipment company expected to return to profitability on strong demand for microwave transmission products in emerging markets.

29-APR-14- Aviat Networks, Inc. (AVNW:BUY) Telecom equipment company expected to return to profitability on strong demand for microwave transmission products in emerging markets. Growth expectations reset, compelling valuation and strong cash position. Initiating coverage with a BUY rating and $2.80 price target.

INVESTMENT SUMMARY

  • 4G LTE spending in emerging markets is still in its early stages, offering a significant opportunity for Aviat over the next 2-3 years.
  • We view Aviat as having the right technology offerings to benefit from an increasing preference for microwave-based backhaul.
  • We also believe Aviat’s restructuring efforts should result in significant operating leverage, which will lead to sharply improved profitability.
  • Aviat’s growth expectations have been reset and the stock has capitulated; the Company is now a compelling value play given its attractive valuation and strong cash levels.
  • We initiate coverage of Aviat with a BUY rating and a target price of $2.80.

RISKS

  • US business with Verizon could decline at a faster rate if capacity enhancement related deployments are de-prioritized.
  • MTN Group, Aviat’s largest customer, may further lower their order rate.
  • Competition from Alcatel-Lucent and Ericsson in small cell and microwave backhaul.

Pandora Media (P:SELL) Slowing user growth and increased Pandora One churn will make future revenue growth more challenging.

Pandora Media (P:SELL) Slowing user growth and increased Pandora One churn will make future revenue growth more challenging.

28-APR-14- Pandora Media (P:SELL) Slowing user growth and increased Pandora One churn will make future revenue growth more challenging. High content acquisition costs and investment in the business continue to weigh on margins. We maintain our $17 price target and reiterate our SELL rating.

Q1:14 HIGHLIGHTS

  • Revenues were slightly ahead of our forecast and up more than 56.5% YOY on a non-GAAP basis due to a 94% increase in non-GAAP subscription revenues.
  • Gross margin of 36.6% was below our estimate of 38.0% as a result of higher content licensing costs, offset by improved mobile monetization from increased ad loads and higher pricing.
  • GAAP EPS was two cents below our estimate, while pro-forma EPS of $(0.13) was below consensus of $(0.08), but a penny ahead of our estimate thanks to higher than projected stock-based compensation.
  • Listener hours increased almost 13% YOY in the quarter, and active users of 75.3 million were up more than 8%.
  • We expect a premium valuation will be difficult to maintain in the face of continued losses and increased competition.
  • We reiterate our SELL rating and maintain our $17 price target.

RISKS

  • Pandora may improve its mobile monetization faster than anticipated, in particular by gaining share in the market for radio advertising.
  • The company may successfully penetrate the automobile market where almost 50% of radio listing in the U.S. takes place.