Singular Research List up 4.5%, Beats Index, With 11 Stocks up Double Digits; Plus Two New Initiations

October was a strong month for the equity markets and for the Singular Research List. Our recommended list rose 4.5% versus a 3.1% increase for the S&P 500. Year to date, our list is up 19% versus 10.2% for the Index. Eleven of our stocks rose by double digits with just three declining by double digits. We had projected a high single digit performance for the major market averages for 2006 and still believe that to be likely implying a pullback in equity prices in November and December. The current rally seems fueled by an end to the Fed tightening cycle, a drop in long term interest rates, and a lower probability of an inflationary environment. However, given the recent weak GDP report, and a cooling housing market, somewhat offset by falling energy prices, it remains to be seen if consumer spending can continue to prop up the economy. Profit comparisons continue to get more difficult, and analyst estimates for continuation of the run of double digit earnings growth may be tempered when faced with actual results this earnings season and next.

Topping our list of best performing stocks was US Global Investors (GROW:BUY), one of our new initiations this month, up 35.2% in October. Our analyst believed this stock was poised for mid 20% earnings growth over the next couple of years despite being priced at just 11 – 14x earnings. GROW reports Q3:06 results next Thursday and we are looking for 75% revenue growth and 127% earnings growth.

Arrhythmia Research Technology, Inc. (HRT:HOLD) was our second best performing stock in October, up 21.9%. While our analyst continues to like the fundamentals of HRT, he felt it was only worth $17, our price target. Once the stock exceeded our target, we downgraded on valuation. Universal Security Instruments, Inc. (UUU:BUY) rose 21.4% for the month on news of two new accretive acquisitions. When we launched on UUU back in June, our analyst saw a stock with 30%+ earnings growth trading at just 8x our EPS estimates. Since then, the company has beaten our estimates, our analyst has raised his estimates and price target, and UUU is up 49%. Having surpassed our price target, our rating is under review.

Bolt Technology (BTJ:BUY) also had a great month, up 21%. At first, we thought our timing could not have been worse, adding an oil stock just as energy prices collapsed. Indeed, Bolt dropped 26% in September. As we said last month, “We view this selloff as overdone and a great buying opportunity.” BTJ is still down a little from where we launched on it back in August and we still like it for all the same reasons outlined then in our initiation report, namely the strong growth in its primary market for underwater oil & gas seismic equipment, and the potential for substantial operating leverage. The company crushed our earnings estimates for Q1:07 by $0.11, and our analyst raised his estimates for FY:07 and FY:08. Our price target implies 61% upside.

ICOP Digital, Inc. (ICOP:BUY), the second of our new October initiations scored a strong out of the box return of 19.2%. While still a small company, the business model and product offering is easy to understand, and growth prospects are open-ended. We predict the company will transition from losses to profits by Q4:06, and will grow revenues 325% in 2006, and 116% in 2007. Tejon Ranch Co. (TRC:BUY) also had a good month, up 14.3%. While a slowing housing market and declining energy prices are not great news for the company, investors are just beginning to appreciate how valuable 270,000 prime acres near Los Angeles’ housing starved environment is. Our price target implies 44% upside from current levels.

Acacia Technologies (ACTG:BUY) had another great month, up 12.6%, despite missing our revenue and earnings forecasts for Q3:06. Quarter to quarter results are lumpy as license deals can shift from one quarter to the next. We saw this in Q1:06 and Q2:06 where Q1:06 revenue growth was “only” 153% and Q2:06 revenue growth jumped to 436%. We expect a strong rebound in revenue growth in Q4:06 and a return to profitability and would be buyers ahead of that earnings report. Acacia is now up 78% since we launched on it last December and our price target implies another 33% upside. However, we’d note it is early innings in this story as just 18 out of 52 patent portfolios have even generated any revenue yet.

Excel Maritime Carriers (EXM:BUY) rose 12.5% in October. Shipping rates drive everything in this stock and are up substantially since last year. For example, Panamax rates are at $29.7K up from $20.7K a year ago, and Supramax rates are $28.2K up from $20.1K a year ago. EXM reports Monday the 13th, and we’d be buyers ahead of the earnings report as we expect Excel to beat our estimates. Our price target implies 35% additional upside.

Hardinge, Inc. (HDNG:BUY) investors saw an 11.7% increase in its stock price in October. While we continue to expect low teen top line growth, the removal of numerous expenses from prior quarters means comparisons are easy and operating leverage is substantial. Our estimates imply 67% earnings growth in 2006, and 99% earnings growth in 2007. Q3:06 is an especially easy comparison with last year and our forecast is for 270% earnings growth. We’d be buyers ahead of the company’s earnings report a week from today. Our price target implies an additional 41.3% upside.

Psychemedics, Inc. (PMD:BUY) rose 10.8% for the month. PMD reported better than expected Q3:06 results with 19% revenue growth and 42% EPS growth beating our estimate by $0.04. Drug testing using hair samples continues to catch on with employers. For example, Psychemedics signed a five year deal with MGM Mirage (MGM: Not rated) in the quarter. The real upside for Psychemedics will come when and if federal drug testing guidelines change. Since we launched on PMD in August 2005, the stock is up 24.7%

Finally, we closed out our short position in NeuroMetrix Inc. (NURO:HOLD) after the stock dropped another 16% in October. The company reported better than expected results but concerns over reimbursements and an OIG kickback investigation continue to weigh on the stock. We believe the stock may fall further, but after the company has surprised us to the upside several times and now that 40% of the float is already short, we felt the risk/reward tradeoff was no longer favorable. Our SELL call on NURO returned 48.6% since we launched last November.

Our biggest decliner for the month was LOUD Technologies (LTEC:BUY) down 13.4%. The company missed our estimates for Q2:06, but our analyst still expects 160% earnings growth for 2006 and 164% earnings growth for 2007. LTEC trades at just 10.8x our 2007 EPS estimate of $1.30. Our price target implies 78% upside.

Our short call on Travelzoo Inc. (TZOO:SELL) went against us by 13% in October, as the company reported a better than expected Q3:06 result. Our rating is still primarily based on valuation as the company now trades at 32.2x our Street high 2006 EPS estimate of $1.05. Travelzoo is experiencing slowing growth in North America which is being masked by rising foreign sales. Subscriber acquisition costs and customer concentration also continue to be worrisome.

Maxwell Technologies Inc. (MXWL:BUY) declined 11.8% for the month. The company just reported 16.5% revenue growth with 41% sequential growth in the key ultracapacitor sales. Gross margins are currently depressed as initial units carry lower margins. Maxwell is losing money as it invests in increasing capacity. The key to the company’s success is growth in ultracapacitor sales to industrial, automotive and telecom customers. Recent deals include contracts with two separate Tier One automotive suppliers. Despite the drop in October, the stock is up 51.7% since our June 2005 initiation. Our price target implies 34% additional upside.

We’d like to take a moment to point out a couple of names we think have excellent prospects and are currently on sale. Among our most liquid growth names, Hansen Natural Corp. (HANS:BUY) strikes us as having an excellent risk/reward profile. Despite over 80% growth in both top and bottom lines in the most recent quarter and our estimates of >60% earnings growth in 2006 and 30.5% growth in 2007, the PE multiple has dropped from 38.5 to 22.1x 2006E EPS and just 17.4x our 2007E EPS. Put another way, the stock is on sale for 43% less than recent highs. Our estimates imply 54% revenue growth in Q3:06 and 49% earnings growth, and our price target implies 98% upside.

Our top value pick would be Miller Industries Inc. (MLR:BUY). We are forecasting 8.6% 2006 revenue growth and 25.8% earnings growth, yet the stock trades at just 9.8x our 2006E EPS of $2.05. Our price target implies 93.6% upside.

We are focused on only one thing, finding the most compelling and attractive investments in the Micro to small cap space for our clients. Thank you for your support.

Singular Research List up 2.2% Despite Falling Energy Prices, Plus Two New Initiations

The big story in September was falling energy prices. After a huge run-up in the price of both oil and natural gas over the last couple of years, September saw a retrenchment. After getting as high as $15 at the end of last year, natural gas futures contracts now trade a tad above $6. Oil, after reaching almost $80 a barrel, has now dropped back to below $60. While falling energy prices are great for the economy, they did take a toll on our energy stocks, accounting for three of the four worst performing stocks on our list in September. Overall, the Singular Research List was up 2.2% in September, just short of the S&P 500’s 2.48% return for the month. Year to date, our research list is up 13.8% versus 6.9% for the benchmark.

The top performing stock on our list in September was one of our shorts, NeuroMetrix (NURO:SELL), up 29.9%. A competitor highlighted the potential risk to the company of not getting reimbursed by health insurance companies for its NC-Stat system. It remains to be seen if the company will be denied coverage, but we had argued it was priced for perfection and that any bad news could seriously deflate its lofty multiple. This is exactly what happened. Since we launched on the stock just over a year ago, it has returned 38.4%.

Hansen Natural Corp. (HANS:BUY) was our second best performing stock. After suffering a recent 40% correction the prior month based on only meeting analysts’ expectations rather than beating them, the stock was up 17.9% in September. A competitor put Hansen on its recommended list which led to the price spike. We felt the earlier correction was overdone, and continue to believe HANS remains an excellent investment opportunity. The company is growing both its top and bottom lines by better than 80%, yet trades at just 23x our estimated 2007 EPS.

Premier Exhibitions (PRXI:BUY) rose 17.5% in September. For those lucky enough to see company management give a rare presentation in New York at our first annual “Best of the Uncovered” conference, they already know why the stock is up. The company restructured its deal with JAM to co-present Bodies exhibitions. Now Premier will assume all expenses for more of these upcoming shows, but will also get to keep all of the revenue. We expect both sales and EPS guidance to rise when the company reports Q2:07 earnings in the next two weeks. Despite the recent run-up in the stock, we’d note it is just about at the level of where we initiated on the company with a BUY rating and remains an excellent growth story.

IRIS International, Inc. (IRIS:BUY) also had a good September, rising 17.2% for the month. The stock had been under pressure and we felt it was oversold. A competitor agreed and launched new coverage on Iris with a BUY rating which helped propel the stock higher. 2006 remains a transition year as Iris digests its Leucadia acquisition, and strengthens its domestic sales effort. Our price target implies 39% upside. Universal Security Instruments, Inc. (UUU:BUY) rose 16.3% last month after the company announced a 4-3 stock split and a new acquisition. Our analyst believes the company can achieve better than 20% earnings growth in FY:07, yet the stock trades at just a trailing PE of 9.8x.

On the down side, our biggest loser was Bolt Technology (BTJ:BUY) down 24.6%. We view this selloff as overdone and a great buying opportunity. Bolt makes air guns for use in underwater seismic surveys used by oil companies to find new oil reserves. The deep water oil exploration boom is just beginning and will likely continue even with oil prices half of what they are currently. Demand for equipment is intense with waiting lines for everything from rigs to seismic survey ships. Bolt just finished a year where it grew sales by 73% and profit by 187%. Our analyst expects revenue and earnings growth of 29% and 35% respectively for FY:07, yet the stock trades at just 16x trailing earnings and 11.4x our FY:07 earnings estimate. The second biggest decliner was CREDO Petroleum Corp. (CRED:BUY) down 22.7% in September. While lower energy prices, especially lower natural gas prices, will negatively impact CREDO, the company is making up for some of this through higher production and several joint venture relationships.

On Track Innovations Ltd. (OTIV:BUY) declined 16.7% in September. It appears that investors are becoming impatient with the company as the large contactless payment market seems further off than originally anticipated. That said, the company did announce several customer wins in the month, including Chevron, although the initial deployment with them will be in Cameroon, not exactly the place where fortunes are made. While we are also disappointed at the slower than expected path to profitability for OTIV, the opportunity is so large that we are willing to wait a while longer. Our price target implies 73% upside from current levels.

September also included two new initiations, Cuisine Solutions (FZN:BUY) and ACS Motion Control (ACSEF:BUY). Cuisine Solutions makes sous-vide food. This is a cooking technique which cooks food in air tight bags at low temperatures for a long time. The result is excellent tasting easy to serve frozen food. Customers include everyone from the US Military, planes and trains to banquet halls and Costco. FZN is a robust growth story with 20%+ sales and earnings growth forecasted. Cuisine Solutions was up 14.8% in September. ACS Motion Control is a turnaround story. The maker of motion control products lost a major customer earlier in the year, but the stock more than reacted dropping from over $10 a share to less than $4. We believe the selloff was overdone. ACS has a strong core business, and no debt. Moreover, its cost structure is highly flexible to better deal with changing customer demand. ACS was up 12.2% in September, but our price target implies another 75% upside.

Other double digit movers for September include American Software Inc. (AMSWA:BUY) up 11%, CTRP International (CTRP:SELL) up 12.9% on the up side, and McDermott International (MDR:BUY), another oil related stock, down 13.3%, Hardinge, Inc. (HDNG:BUY) down 13.1%, and, Inc. (BIDU:SELL) down 12.7%.

As alluded to above, during September we hosted our first conference featuring six of our companies, PRXI, ACTG, RIMG, SPAN, ACU, and AMSWA. For those who attended, thank you so much for coming. We got some great feedback and intend to make it even better next year. We believe our conference is truly unique due to our truly unique business model. Many of the companies which present at our conference are only covered by us, and cannot be seen at other venues. Secondly, we have prescreened the companies who present at our conference as among the best investment ideas in the MicroCap space. This prescreening aspect means our clients do not need to waste their time with companies that might be great investment banking clients or investor relations clients, but may not be the most attractive investment opportunities. We are focused on only one thing, finding the most compelling and attractive investments in the Micro to small cap space for our clients. Thank you for your support.

Three New Initiations Added to Singular List in August Take Advantage of Challenging Market Conditions

August was a tough month for us as the Singular Research list failed to beat its S&P 500 benchmark.  Our list declined by 2.4% versus a 1.9% gain for the benchmark.  Volume was low in the month as traders were out on vacation, but volatility was high especially among our small growth and tech oriented names.  Despite this being the worst month of underperformance for us ever, it was just one of six months where we have failed to beat the benchmark out of 26 months, a remarkably consistent record of outperformance.  Moreover, our list remains up 11.4% for the year, still handily beating the S&P 500’s 4.3% return, and is up 131.2% since inception, a 47.2% annualized return.  To get a sense of how volatile our list was this month, 15 out of 33 names moved by double digit percentages, with six moving by greater than 20%.

For the sake of brevity, I will focus on only those six that moved by greater than 20% in August.  Despite the overall underperformance in August, there were some positive standouts.  First among these was Arrhythmia Research Technology, Inc. (HRT:BUY) up 28.7% for the month.  The company beat our revenue estimates, reported a 17% upside EPS surprise, our analyst raised his estimate for next quarter by 18%, and he raised his price target.  Despite estimated 32% revenue growth and 37% profit growth, HRT trades at just 14.7x our 2007 EPS estimate of $0.95.

The second best performer was Excel Maritime Carriers (EXM:BUY) moving up 28.6% for the month.  Despite missing our estimates by a penny, shipping rates are clearly firming up on the back of strong demand for coal, and iron ore from China and India.  We raised our 2006 EPS estimates by 37%.  The company recently chartered one of its Panamax ships at $28,000/day, versus our estimate of just $20,000/day.  Our last 20%+ positive mover was American Physicians Service Group Inc (AMPH:BUY) up 20.2% for August.  While the company reported mildly disappointing results for Q2:06, and we lowered our estimates slightly, the market cheered a merger announcement with its long-time client, American Physicians Insurance Exchange.  It is too early to know exactly what the impact of the combination will be other than higher revenues and lower margins.  Nonetheless, AMPH still has over $9/share in cash and investments.

Our worst performing stock was Parlux Fragrances (PARL:HOLD) down 51% for the month.  The company’s investor relations effort borders on dishonesty.  While we were able to forgive a late 10K filing and somewhat erratic behavior by the CEO, this was only due to our belief that the core business was performing decently.  However, when the company filed a notice with the SEC that its Q1:07 10Q would also be filed late, it slipped in a notice that sales were slowing and prior guidance was unrealistic.  Compounding the negative news was the company’s lack of so much as a press release to announce the fundamental changes to its business, let alone a conference call.  Our mistake was in not recognizing management’s disdain for shareholders sooner.  We downgraded the stock to HOLD and dropped it from our list.

Long time outperformer Hansen Natural Corp. (HANS:BUY) was our second worst performer dropping 40.1% for the month.  Investors, long accustomed to the company beating analysts expectations were disappointed when it merely met them.  The company did beat our more conservative estimates, and we view this as a good entry point on a great growth story with significant room to run.  One reason, HANS did not exhibit greater operating leverage despite 83% sales growth was an aggressive build out of point of sales merchandising equipment ahead of the switch to the Anheuser-Busch distribution system.  HANS trades at 20.5x our 2007 EPS estimate of $1.37 despite an expected 62% and 31% growth rate projected for this year and next.  Hansen is taking market share in a market growing at 50% and our price target implies 114% upside from current levels.  Our last 20%+ decliner was Chad Therapeutics Inc. (CTU:HOLD) down 24.6% in August.  Our investment thesis on Chad was event driven, specifically a review by the Board of whether to sell the company or to secure new distribution agreements.  When the board opted for neither, investors voted with their feet.  We downgraded the stock to HOLD and removed it from our list.

Besides the two downgrades, we also added three new stocks to our coverage list.  Aldila Inc. (ALDA:BUY) is a manufacturer of graphite golf shafts.  Our analyst believed a sell-off on weak Q2:06 results was overdone and represented a great buying opportunity.  The company has leading market share positions in some of its key products and has the great potential operating leverage of a manufacturer.  Next, we added a new short name, crowd favorite, CTRP International (CTRP:SELL).  Driven to the stratosphere by the dual hype of Chinese stocks and Internet stocks, CTRP boasts a 57.3x PE and trades at 21x sales.  While our analyst believes the company does have a bright future, numerous risks exist which are not priced into the stock such as declining operating margins, slowing top line growth, and more general risks associated with investing in China.  Our last new stock is Bolt Technology (BTJ:BUY).  The company manufactures air guns and underwater electrical connectors used in seismic surveys of undersea oil and natural gas fields.  Growth has been phenomenal, but looks set to continue and our analyst believes the market is underpricing this future growth.  Our estimates imply 35% and 22% earnings growth this year and next, yet the stock trades at just 13.7x our 2007 EPS estimate of $1.42.

Investing is a marathon, not a sprint, so we are not overly concerned by short-term underperformance.  Indeed, many of the best opportunities exist due to so many investors’ obsessive focus on short-term performance.  In addition to HANS, already mentioned, we’d cite PRXI, and MLR as two other names with significant room to our price targets.  In many cases, we see no good reason for our stocks to be down, other than general market currents, and one thing we believe in here at Singular is that earnings growth drives stock prices ultimately.  While multiple expansion is nice, we don’t count on it.  Our companies have an average projected earnings growth of 26.4%, yet trade at a PE of just 15.4x.  Even these numbers are understated, as they fail to include the companies with explosive revenue growth that are just turning the corner to profitability.  The stocks on our list have an average of 52.9% upside to their price targets.  We at Singular are working hard to find compelling, actionable and investable ideas in the MicroCap space for our subscribers.  As always, we are grateful to our clients and strive to earn their trust.

July was a Volatile Month with Some Great Companies Now on Sale

July was another volatile month, and a difficult one for our small growth names.  Our research list underperformed the S&P 500 by 3%.  The Singular Research list was down 2.5% Vs. the S&P 500 return of 0.5%.  Year to date, our research list is up 14.2% Vs. the S&P 500’s 2.3%.  As 2nd quarter earnings come out, so far we have mostly been pleased with results from our companies.  While the bulk of earnings will come in August, of those companies which reported in July, eight beat our analysts’ estimates, one tied, and three came up short.  However, while our companies beat by an average of 6.2%, the stocks rose by an average of just 0.3%.

As mentioned above, July was a very volatile month with twelve of our stocks moving by double digits.  Our top gainer was Rimage (RIMG:BUY) up 19.2% on the month.  Rimage has become very adept at lowering expectations and then beating those lowered expectations.  The company had guided to a range of $0.18 – 0.23, and reported $0.33, well ahead of our estimate of $0.24.  Sales of producer units to large retail chains like Wal-Mart continue to hold out the promise of significant gains in future quarters.  In the meantime, consumables revenue (up 23% in Q2:06) is driving top line growth.

Our second biggest gainer was Span-America Medical Systems (SPAN:BUY) up 14.4% in July after reporting earnings results that beat our estimates by a wide margin.  SPAN reported EPS of $0.26 vs. our $0.16 estimate, a 63% upside surprise.  While custom product sales continue to struggle, high margin medical sales grew almost 40%, and expenses were well managed leading to a doubling of the company’s operating margin and 72% profit growth.  At just 11x our 2007 EPS estimate of $1.11, we believe the stock has plenty more room to run.

The last two biggest gainers were both short calls, not surprising given how growth stocks struggled in July.  Our short call on XM Satellite radio (XMSR:HOLD) returned 13.5% last month as the company missed expectations and lowered guidance again.  At this point, our analyst felt the risks of a buyout outweighed the potential for a further stock price decline and we upgraded XMSR to HOLD from SELL.  Since we launched on XMSR last December, the stock has returned 59.1%., Inc. (BIDU:SELL) returned 13.1% in July as it reported lower than expected results.  We had forecasted EPS of $0.25 and EPS came in at $0.21.  Our thesis was that BIDU was priced for perfection, and so far, we have been right.

On the down side, the biggest loser was On Track Innovations Ltd. (OTIV:BUY) down 16.8%.  While the company has reported some new customer wins, it was rejected in its bid to supply new US passports utilizing its technology.  The company intends to appeal the decision.  Nonetheless, investors are waiting for concrete proof that this technology can translate into profits at some point.  This decision provides just the opposite.  The company does itself no favors by its poor investor relations effort.  However, we continue to believe that the ultimate market opportunity for OTIV is too big to ignore, and we expect profitability in 2007 and movement towards profitability in 2H:06.  Our price target implies 85% upside.

NVE Corp. (NVEC:HOLD) returned -15.8% in July as the company reported much better than expected results from its core business.  While our thesis that MRAM was not a near term commercial opportunity turned out to be correct, we underestimated the improvement in the company’s core business.  Our analyst upgraded NVEC from SELL to HOLD.  Since our initiation last October, NVEC returned 53.1% for our subscribers.

The next largest decliner was Acacia Research (ACTG:BUY), down 14.2% last month.  This is baffling considering the stellar performance the company reported for Q2:06.  Not only did revenue rise 436%, but the company reported its first quarter of GAAP profitability, $0.04 Vs our breakeven estimate.  The drop in ACTG is inexplicable in light of its fundamentals and can only be explained by its low visibility and small cap tech profile.  This is a great buying opportunity for a first rate business that is temporarily on sale.  The stock is already up 71.4% since we launched on it last December and our price target implies an additional 41% upside.

Excel Maritime (EXM:BUY) shares fell 13.1% in July as the market did not like the continuing earnings decline the company reported yet again.  While the company reported better than expected revenue, earnings missed our estimate by a penny.  Nonetheless, we see the selloff as an overreaction.  Shipping rates are firming and vessel prices are rising.  Our price target implies 33.5% upside.  Miller Industries (MLR:BUY) declined 10.9% last month on no news.  The company is now priced at just 9.1x our 2006 EPS estimate of $1.98.  This seems awfully cheap for a company with a dominant and defensible position in its niche, 156% earnings growth last year and 22% earnings growth projected for 2006.

American Software (AMSWA:BUY) was also caught up in the small cap tech selloff, dropping 10.7%.  One of the attributes we especially liked about AMSWA was its generous dividend which should provide some downside protection.  The dividend yield now stands at 4.8%, which should attract both value and growth investors to this name.  The company has an impressive customer list and is in a consolidating industry.  Our price target implies 66.7% upside.

Premier Exhibitions (PRXI:BUY) shares fell 10.6% despite beating our earnings estimates.  Premier is poised for significant long term growth which is already in evidence.  Revenues grew 130% and earnings were up 76.3% last quarter.  Attendance at the company’s “Bodies” exhibitions is far surpassing expectations and is growing.  The company’s operating leverage will only improve once its agreement with Jam productions ends and it begins to recognize all of the revenue from its shows.  This is a great name on sale and we don’t expect it to stay here long as investors come to better understand the story.  Hardinge (HDNG:BUY) was our last double digit decliner down 10.2% on no news.  Its earnings call is scheduled for August 9th and we are looking for 10% sales growth and 27% earnings growth, yet the stock trades at just 9.7x our 2006 EPS estimate of $1.38.  HDNG is a great name for value investors to take a look at.  Our price target implies 51% upside.

While we are never pleased with any month where we failed to beat our benchmark, out of 24 months this marks just our 5th month of underperformance, a remarkably consistent record.  Moreover, we are heartened by the fact that in many cases, we see no good reason for our stocks to be down, other than general market currents.  One thing we believe in here at Singular is that earnings growth drives stock prices ultimately.  While multiple expansion is nice, we don’t count on it.  Our companies have an average projected earnings growth of 24%, yet trade at just a median PE of just 15x.  Even these numbers are understated, as they fail to include the companies with explosive revenue growth that are just turning the corner to profitability.  The stocks on our list have an average of 58% upside to their price targets.  We at Singular are working hard to find compelling, actionable and investable ideas in the MicroCap space for our subscribers.  As always, we are grateful to our clients and strive to earn their trust.

Volatile Month, but Singular Research List Beats S&P 500 by 2.0%

June was a month full of volatility as market participants weighed the potential for inflation expectations to grow against the prospect of slowing economic growth brought on by Fed rate hikes and stubbornly high energy prices.  Our list was not immune with six of our stock moving by double digit percentages.  Fortunately for us and our clients, five of those six were up double digits with only one double digit decliner.  For the month of June, the Singular Research List returned 2.06% versus the S&P 500’s 0.09% return leading to another positive alpha month and 1.97% of outperformance.  We are proud to report that year to date our list is up 17.1% versus a 1.9% return for the benchmark; from inception, our stocks are up 141.1% versus a 15.3% return for the S&P 500 index.

The best performer of the month was Excel Maritime Carriers (EXM:BUY) up 27% in June.  This was a nice surprise as the stock has been our single worst performer.  We were initially attracted to EXM by its impressive growth in revenues and earnings coupled with very low price multiples.  However, many of its time charters were at rates higher than prevailing shipping rates and as ships came off old charters and signed new ones at the lower rates, performance rapidly deteriorated.  We believed that the stock price decline was unwarranted and that as older ships got scrapped, leading to a smaller global fleet, shipping rates would firm up.  That is exactly what happened in June with shipping rates exceeding our estimates.  We would not be surprised to see an upside quarter reported for Q2:06.

Loud Technologies (LTEC:BUY), one of our newest initiations, was our second best performer gaining 23.3% on the month.  The company is in the process of a turnaround and is well positioned to benefit from Guitar Center’s (GTRC:NR) growth.  GTRC is adding 35 – 40 new stores a year and growing revenues at 17%, figures likely to rise as international expansion plans get underway.  LTEC is the market leader in branded professional audio and other music products.

Amrep (AXR:HOLD) increased 22.4% in June before we downgraded the stock from BUY to HOLD on valuation concerns.  Amrep has a confusing combination of businesses including a real estate development subsidiary and a magazine fulfillment business.  While results from the magazine fulfillment business have been lackluster, results from the company’s real estate subsidiary have been stellar.  Our analyst was concerned that comparisons were becoming more difficult and that the stock had gotten ahead of itself.  Amrep was up 123.7% since our February 2005 initiation.

Acacia Technologies (ACTG:BUY) gained 17.4% in June.  Acacia signed numerous licenses in Q2:06 with such companies as Fujitsu, Philips Electronics and Intel just to name a few.  The company has ramped up its acquisition of patent portfolios and now has 47 different patent portfolios although only around ten have been converted to active licensing programs.  Acacia remains one of our best ideas and is at the vanguard of an entirely new industry of intellectual property acquisition and licensing companies.  Since our December 2005 initiation, the stock is already up 108.3%.

On Track Innovations Ltd. (OTIV:BUY) rose 16.6% for the month.  OTIV has been a bit of a disappointment since our December 2005 launch, as the company could benefit from a better investor relations strategy.  The company needs to better describe its business model to investors.  That said, the opportunities for the company in its Smart ID, contactless payment solutions, and petroleum solutions product lines is almost open ended.

Our only double digit decliner for the month was Parlux Fragrances (PARL:BUY) down 29.7% in June.  Parlux has been a very controversial story with a great deal of mistrust in company management.  Sixty-three percent of the float is short.  While the company reported better than expected Q4:06 and FY:06 results, the company has delayed the filing of its 10K as it struggles to comply with Sarbanes-Oxley requirements for internal controls.  Both of our competitors have downgraded the stock to HOLD.  We feel this is a mistake.  Management’s guidance for FY:07 implies 32 – 36% earnings growth, and the company has a history of beating its guidance.  Trading at just 7.5x FY:07 EPS and with so much of the stock already short, we feel downside is limited here.  If management is found to be fraudulent, then clearly all bets are off, but we do not see compelling evidence of this yet and believe the risk/reward profile of PARL is attractive.  Despite the recent decline in the share price, Parlux is still up 133.5% since we launched on it back in August of 2004.

June was also a busy month for our research team in terms of new initiations.  Early in the month, we launched on a new short call, (BIDU:SELL) with a $50 price target.  BIDU has the honor of appealing to speculators in two ways: one as a play on the fast growing Chinese market, and secondly as a major player in online search.  The company has been crowned the “Chinese Google” by fans who have driven the valuation into the stratosphere.  When we initiated coverage on  BIDU, it traded at 95.2x our Street high 2006 EPS estimate of $0.91, and 142x 2006 consensus EPS.  While we believe the company will experience rapid growth, it is priced for perfection and the market is discounting all the potential risks to its business plan which we laid out in our report.

We also added American Software (AMSWA:BUY) to our list in June.  The company has a very attractive enterprise software business model complete with recurring revenues and high gross margins.  The company is the industry leader in its supply chain planning niche and we believe the economy is poised for a return to information technology spending by corporations both in the U.S. and abroad.  Moreover, the enterprise software space has seen rapid consolidation leading us to believe that American Software may get acquired at an attractive premium to current levels.  Finally, the company pays investors a 4.3% dividend yield while they wait.

One of the most interesting and attractive investment ideas we have seen in awhile is Premier Exhibitions, Inc. (PRXI:BUY).  The company has an attractive and profitable legacy business in exhibiting artifacts from the RMS Titanic shipwreck.  With a new permanent exhibition planned for lower Manhattan which could generate $8 million per year in gross profit, this business alone is set to grow nicely in FY:07 and FY:08.  However, the real growth story is the company’s “Bodies” exhibitions, showing carefully dissected and preserved cadavers in various poses.  This is a unique, hugely popular, and surprisingly profitable business.  The company currently partners with another company on the exhibits, but once the partnership ends (probably FY:08), these exhibits will get even more profitable.  We forecast revenue growth, 90.2% in FY:06, will accelerate to 161% in FY:07.

We continue to be cautious on the outlook for stocks for 2H:06 and believe it is unlikely that interest rate hikes will abate any time soon.  Stocks seldom perform well in a rising interest rate environment.  We continue to believe that in a low return market environment, stock selection is more important than ever.  Opportunities abound in the Microcap space for those diligent and savvy investors willing to put in the hard work.  Here at Singular, we do that work for you.  As always, we thank our clients for having faith in us and hope that we continue to earn your trust.

Singular Research List beats S&P 500 by 5.9% in May

Last month we pointed out that we thought we were seeing signs of speculation, of a lack of appreciation for risk. We highlighted the fact that the VIXX was at its lowest level in a decade, and that money was flooding into Emerging Markets Funds. We highlighted that major stock indices were at five to six year highs, and we pointed out that certain commodity prices were soaring. What conclusions did we draw? That a hedged portfolio with some short exposure makes sense. The month of May proved us right with all five of our short calls returning double digit returns. The Singular Research List returned 2.96% in May versus a negative (2.91)% return for the S&P 500. Year to date, our list is up 14.8% versus the S&P 500’s 1.8%.

It was not only short calls which helped propel our May performance. Three of our long calls bucked the market trend and returned double digit performances. Topping the list was Hansen Natural Corp (HANS:BUY) which was up an impressive 42.8% in May. The company continued its longstanding trend of beating analysts’ expectations in Q1:06 with revenues doubling and earnings growing by 130%. We continue to be very positive on HANS and have raised our price target to $240. Since inception, HANS is up 1,369%.

Our second best long call was Iris International (IRIS:BUY) up 20.1% for May. While the company’s core business is growing at a healthy clip, and remains a large opportunity, it is just a $350 million market. IRIS has taken steps through new distribution agreements, new product introductions and recent acquisitions to address a much larger $2 billion market. Our price target implies 48% additional upside.

Arrhythmia Research Technology, Inc. (HRT:BUY) rose 15.3% in May as the company reported better than expected Q1:06 earnings results. Organic revenue growth was 37.4% prompting our analyst to raise his price target. Our new 2007 estimates imply 19% EPS growth, yet the stock still trades at just 12.9x those earnings. Our price target implies 38% further upside.

As previously mentioned, all five of our short positions had big months, starting with XM Satellite Radio (XMSR:HOLD) down 28.9%. The company is now facing lawsuits and an FTC inquiry among other problems. It continues to hemorrhage cash and profitability seems ever farther away despite strong revenue growth. The company may also be losing share to its rival, Sirius Satellite Radio (SIRI: Not rated). Losses per share were actually aided by massive shares outstanding dilution. Since we launched on XMSR with a SELL rating at the end of last year, the stock has been cut in half.

Our short call on Foxhollow Technologies, Inc. (FOXH:HOLD) returned 26.1% in May. Not only is the company rudderless as it struggles to find a new CEO (now five months into the search), but losses continue to be greater than expected and revenue growth is slowing. However, after declining 48.6%, our analyst felt the shares were now more appropriately valued and upgraded his rating from SELL to HOLD. Shares of NeuroMetrix Inc. (NURO:SELL) fell 22.8% in May as the company reported much weaker than expected Q1:06 results. We were looking for $0.15/share and the company reported a penny. Revenues missed as well. Our thesis has long been that sales growth will slow to the rate of customer growth and that 2005’s growth rate of 91% was not sustainable in light of just 50% customer growth rates. The company has a nice business model but at 56x our street high estimate for 2006 earnings, it is poised to fall further.

Travelzoo Inc. (TZOO:SELL) came back to earth after the short squeeze last month, falling 22.7% in May. The story here remains the same. Decent business model, but priced for perfection, especially in light of rising customer acquisition costs. One new wrinkle is the CEO sold $120 million worth of his holdings into the short squeeze raising the float to greater than 6 million. Our hunch is that this will temper future short squeezes and keep the stock steadily heading toward our price target of $16 implying an additional 46% return. NVE Corp. (NVEC:SELL) declined another 12.5% in May as investors get tired of waiting for MRAM revenue which seems eternally just over the horizon. Importantly, St. Jude Medical (STJ:not rated), a major customer of NVEC, has recently reported very disappointing results, driven by slow sales of the products that NVEC’s equipment goes into, namely pacemakers and defibrillators. Investors should not overlook the potential problem of inventory building at STJ that might impact NVEC’s sales in coming quarters.

May also had some double digit decliners. Topping that list was Miller Industries Inc. (MLR:BUY) down 27.9%. We launched on the stock in April and now wish we had waited a month. Nonetheless, we believe the market is misinterpreting management’s comments regarding the upcoming quarter. Miller gets orders from the US government all the time and a sizeable order will slip from Q2:06 into Q3:06 due to Pentagon procurements issues. The company actually reported much better than expected Q1:06 results beating our revenue estimates by $10 million and our EPS estimates by 13%. Just as we thought IRIS was a screaming bargain before it went up 20% this month, so MLR is now on the for sale rack. It is confounding to see a company that grew sales and earnings 49% and 156% respectively trading at just 10x our 2006 EPS estimate. We doubt it will stay like that for long.

On Track Innovations Ltd. (OTIV:BUY) fell 24.2% in May as investors are unhappily surprised that profitability seems further off than previously expected. Part of the problem is how little concrete information the company provides. Not only does the company give opaque guidance, but even such basic metrics such as how much the company’s smart cards are sold for is unavailable. That said, revenues did increase 38% in Q1:06 double the pace of the quarter before and gross margins jumped 1,600 basis points. With metrics like those, we expect the company will be profitable by Q1:07. Moreover, the markets the company is targeting are enormous, and the opportunity is almost open ended if the company can execute. Our price target implies 80% upside.

Hardinge, Inc. (HDNG:BUY) declined 11.9% in May on disappointing Q1:06 results. One bright spot here is sales growth which adjusted for currency was actually up 15%, very healthy for this value stock. Due to recent acquisitions of former partners, the company’s expense structure will be markedly different over the course of the next two years and we continue to believe investors are not expecting the kind of earnings growth we forecast. Despite relatively modest revenue growth projections, we see earnings growth of 73% and 91% respectively for 2006 and 2007. Expense reductions include $2.5 million of minority interest expense, $300 – 500K/year in SG&A costs, and reduced royalty expense of $1.5 million per year. Even with no sales growth, these operating cost cuts would lead to 50% EPS growth, yet the stock trades at just 10.5x our 2006 EPS estimate and just 5.5x our 2007 EPS estimate.

Amrep Corp (AXR:BUY) declined 10.7% in May which normally would lead me to highlight it as a good name to look at adding or building a new position. Unfortunately, or fortunately depending on whether you already own it or not, the stock was up 22% yesterday and is above our price target. Our BUY rating is under review. CREDO Petroleum Corp. (CRED:BUY) fell 10.3% in May. It was poised for a breather after a monstrous run that still leaves it up 77% since we launched with a BUY rating last August. The company reported a great first quarter beating our analyst’s already lofty expectations as energy prices remain high. Our price target implies another 48% upside for this Microcap energy stock.

While we dropped Foxhollow Technologies, Inc. from our list, we added a new name, LOUD Technologies (LOUD:BUY). Our analyst believes the name is poised for a turnaround over the next few years, and our price target implies 80% upside. We believe that May, once again, illustrated the wisdom of our dual alpha strategy, profiting from both long and short ideas in a market likely to return mediocre results overall. Since we started, our average recommendation has returned 67.2%. We continue to believe that in a low return market environment, stock selection is more important than ever. Opportunities abound in the Microcap space for those diligent and savvy investors willing to put in the work. Here at Singular, we do that work for you. As always, we thank our clients for having faith in us and hope that we continue to earn your trust.

The Rise of the Speculators?

We have noticed with increasing wariness a seeming abandonment of appreciation of risk in the investment world. This rise in speculation is the result of too much savings chasing too few good investment ideas and it is a global phenomenon. It spreads like a cancer from market to market as ever more desperate investors refuse to come to terms with the low return environment we find ourselves in. Hot money is chasing recent performance wherever it can be found. If ever there was a time to hew to a strict valuation methodology and framework, this is it. Before getting to performance on individual stocks on our list, I wanted to review how we see the global economic and investment landscape and make a few observations.

VIXX is at its lowest levels in a decade.
Investors are using margin loans to pay tax bills, children’s tuition, and to buy real estate and cars.
Emerging Markets funds saw inflows of $5.4 billion in Q4:05 (second largest inflow in category history), and $6.3 billion in the first two months of 2006.
Venture capital funding in the first quarter of $6.02 billion was the highest since Q1:01.
The syndicated loan market is up to $1.5 trillion and lenders are dropping covenants from loan terms.
What each of these have in common is a disregard for risk. The VIXX index is perhaps the cleanest and clearest view of the price of risk as an indicator of implied volatility in the options market. In the face of arguably overpriced markets and rising interest rates, such complacence is difficult to explain. Markets are becoming more inefficient as millions of individuals are moved from defined benefit pension plans run by professional institutional investors to self directed defined contribution plans such as 401Ks. Investors weaned on the 20%+ returns of the 1980s and 1990s are using more leverage and seeking out riskier investments such as Emerging Markets. Institutional investors are not immune either as fiduciaries seek higher return ways to meet their liabilities and obligations. Torrents of cash flooding the Venture Capital market and easing of lending covenants confirm this.

Dow is at a six year high.
Nikkei is near a 5.5 year high.
NASDAQ is near 5 year high.
The $1.5 trillion hedge fund market is now competing with the $261 billion venture capital market to finance private companies, driving up valuations.
The number of stocks on our Cocktail Party screen used to identify speculative overpriced stocks has more than doubled to 34 names from just 16 at year-end.
After a difficult period following the tech stock bubble collapse, markets are roaring back to life and hitting new highs, nor is this phenomenon limited to the United States by any stretch. Hedge funds, looking for ways to justify their ample fees, are muscling into new arenas such as the venture capital market. Our own proprietary indicators of overvaluation are flashing caution as well.

Oil prices are at record highs.
Silver is approaching levels last seen when the Hunt brothers cornered the market.
Gold is at a 25 year high.
Strong global economic demand is driving up the prices of many raw materials such as oil, copper and steel. Yet, here too, there is speculative froth as precious metals prices hit new highs, not explained by industrial uses. Individuals, led by ETF enablers, are piling into precious metals funds chasing recent performance. Another interpretation, equally menacing, is that with GDP growth rampaging ahead at 4.8% and unemployment down to 4.7%, investors are seeking traditional safe harbors from inflation, such as gold.

Interest rates are rising, not just in the US but aboard, as central banks raise overnight rates. Stocks seldom do well in the face of rising interest rates.
Corporate profit margins are at historically high levels.
We’ve had 10 quarters in a row of double digit profit growth, longest streak in over 30 years.
The very fact of recent impressive corporate performance makes the future that much more difficult. Rising interest rates mean the tsunami of excess savings circling the globe will find enticing alternatives in fixed income instruments and cash, rather than stocks. Corporate profit margins have expanded nicely as excess capacity has been brought back on line and costs have been cut. However, demand is rising and companies must add new staff which may mean falling profit margins in future quarters. Falling profit margins may spell the end of double digit profit growth, making it even more difficult for stocks to advance.

So what does this mean for our clients? One conclusion is the relative attractiveness of earning 5% risk free in money market accounts. Another, is a hedged portfolio such as ours. Last year, we returned 37%, with every short call we made beating the S&P’s paltry 2.5%. However, shorting stock carries its own peculiar risks. Speculative and pricey stocks can become more speculative and pricier and the loss is open ended. In April, we experienced this with Travelzoo Inc. (TZOO:SELL).

The Singular Research list declined 2.4% in April vs. the S&P 500 which returned 1.2%. Year to date, our list is up 11.5% versus the S&P 500 which is up 4.8%. Our best call in April was Acacia Technologies (ACTG:BUY) up 26.6%. While the company did not meet our aggressive assumptions for Q1:06, it is well positioned for explosive and lucrative growth in the coming years. Investors can see the long and full pipeline of patent portfolios which have not even begun to be exploited. Q1:06 revenues grew 153% and we project GAAP profitability in 2H:06. The company is already cash flow breakeven.

Amrep Corp (AXR:BUY) reported a 68% upside surprise in March and the stock has never looked back. Our analyst raised his estimates and price target in early April only to see the stock test his new price target. The company is monetizing its vast real estate holdings in New Mexico. Amrep is up 111% since we launched on it February of last year. McDermott International (MDR:BUY) gained 11.7% in April as the supply of oil rigs continues to lag demand. McDermott International is now up 50% from year end when we launched on it.

On the down side, our call on Travelzoo Inc. (TZOO:SELL) lost 96.73% moving up from $19.58 to $38.52. It had been as high as $52 before giving back some of the gains. It was a classic short squeeze. After missing estimates for three quarters in a row, the company reported EPS of $0.24/share for Q1:05 versus our estimate of $0.18 and the First Call consensus of $0.14. We continue to believe the stock is worth around $16, representing 58% upside to our target.

IRIS International, Inc. (IRIS:BUY) declined 24.3% in April. The company announced it had acquired Leucadia Technologies, Inc., a molecular diagnostics company, for $10.1 million in cash and stock. While the acquisition gives Iris entrée into the fast growing $1.5 billion Molecular Diagnostics market, it was dilutive, and as a result, Iris lowered its 2006 guidance to $0.45 versus our projections of $0.53. The stock is now as cheap as it was a year ago. Meanwhile, revenues have grown 44% and earnings have grown 141% over that time frame. Our price target implies 111% upside.

Parlux Fragrances (PARL:BUY) declined 15.4% for the month on no news save the signing of a worldwide license for Paris Hilton sunglasses. While we are wary of the probable need to fund increasing working capital balances to meet the company’s growth plan, the stock is ridiculously cheap. Our FY:06 estimates imply 91% revenue growth and 103% earnings growth yet the stock trades at just 12.6x FY:06 earnings. Span-America Medical Systems (SPAN:BUY) reported a disappointing Q1:06, and the stock fell 15.1%. The company missed our estimate by 3¢ as higher foam prices and an inventory correction at Wal-Mart hurt reported results. However, the company is just beginning to sell its new safety catheter product which we expect will excite investors once it reaches meaningful sales volumes.

Excel Maritime Carriers (EXM:BUY) declined 13.4% as the dry good bulk shipping industry remains an unpopular sector. We loved the company when it traded at 0.75x book value, and now love it even more at 0.58x book value. The company stands to benefit from global economic growth especially in the Far East where Excel ships grain, coal, and iron ore. Industry dynamics are complicated. High scrap steel prices lead shippers to scrap older ships, yet many new ships are coming on line in the next few years. This is a deep value play and we expect the next catalyst will be the announcement of a share buyback program.

While we never like to have a down month, we are focused on long-term results. Since we started, our average recommendation has returned 60.3%. We have never had a quarter where we did not beat the S&P 500, and April marks only the fourth month we have underperformed. We continue to believe that in a low return market environment, stock selection is more important than ever. Opportunities abound in the Microcap space for those diligent and savvy investors willing to put in the work. Here at Singular, we do that work for you. As always, we thank our clients for having faith in us and hope that we continue to earn your trust.

Singular Research List Outperforms the S&P 500 by over 10% in Q1:06

We are pleased to report that March was yet another month of the Singular Research list outperforming the S&P 500.  Our list returned 2.12% in March versus the S&P 500’s 1.11%.  For the first quarter, we were up 14.2% versus the S&P 500’s 3.6% return.  Indeed, our list has outperformed the S&P 500 in every quarter going back to August 2004.  March was a very volatile month for the list as well with 10 stocks moving up or down by double digit percentages.

On the positive side, our biggest gainer for March was Insteel Industries (IIIN:HOLD) up 48.5%.  We only just initiated on the company with a BUY rating in late January.  However, since then the stock has climbed 121%.  Prior to our initiation, the company had recently announced a share repurchase program and that it had repaid all of its debt.  Insteel had also announced impressive Q1:06 results.  On March 20th, our analyst raised her price target to $54 from $42 on some more aggressive assumptions.  However as much as we like the company, now that it has more than doubled, we feel it is fairly valued and we downgraded to HOLD on March 27th.

Our second biggest winner was Hansen Natural Corp. (HANS:BUY) up 35%.  The company again reported stronger than expected Q4:05 results with sales growing 95% and EPS up 142%.  One thing we know is true is that stock prices follow earnings growth, and that clearly has been the case for HANS.  We raised our price target from $120 to $130 but with recent speculation that Anheuser-Busch (BUD:NR) might be interested in partnering with Hansen or buying the company outright, the stock is already testing our higher price target.  HANS is now up 914.4% since we launched with a BUY rating on it.

Showing that value stocks can produce strong returns as well as growth stocks, our third biggest gainer was Amrep Corp (AXR:BUY) up 26.8% for the month.  The company reported much better than expected results driven by strong real estate sales up 80% YoY from New Mexico.  Our analyst continues to worry about the health of the core publishing business, but the market clearly is not too worried with the stock testing our $39 price target.  Continuing the recent trend of one company a month being acquired, Outlook Group announced it was being sold to an investor group for $13.50 per share.  While we feel the company is selling itself too cheap, the stock was up 23.3% in March on the news.

March was a big earnings month for our list and the market did not react favorably to some of our company’s reports.  Topping the list of decliners this month was Preformed Line Products Company (PLPC:BUY) down 16.9%.  The company reported worse than expected Q4:05 results because customers took a break from their rapid Fiber-To-The-Premise (FTTP) rollout to draw down inventory.  We view this as a great buying opportunity as the long-term fundamental catalysts for growth for PLPC remain very much in place.  These include the FTTP rollout, the recently passed federal Energy bill and Hurricane Katrina reconstruction.  The types of projects that PLPC works on are massive and take a long time to get started.  We expect revenue growth acceleration throughout 2006 and 2007, yet the stock trades at just 12.5x our 2006 EPS estimates.

The second biggest decliner for March was Hampshire Group, Ltd. (HAMP:BUY) down 15.2% also on a disappointing earnings result for Q4:05.  While margins are coming under pressure and the company operates in a fiercely competitive industry, the expectations for the company are very low as well and the valuation is compelling.  The company generates prodigious free cash flow and has been buying back its own stock.  Our price target implies 63% upside.  Foxhollow Technologies, Inc. (FOXH:SELL) rose 15% in March.  The company reported worse results than our analyst had projected, but results in line with prior guidance.  The company is seeing slowing revenue growth and recently lowered guidance.  Our price target implies 29% downside from current levels.

On Track Innovations Ltd. (OTIV:BUY) fell 14.9% in March on disappointing Q4:05 results.  We had expected the first quarter of profitability, but that now seems delayed until 2H:06.  The company does a poor job of communicating with investors and we suspect that is contributing to the stock’s decline.  Furthermore, the options and warrant issuance is excessive.  Despite all this, however, the market opportunity for OTIV is truly enormous and we continue to believe that patient investors will be rewarded.  Excel Maritime Carriers (EXM:BUY) declined 11.8% in March as the company experienced negative operating leverage in Q4:05.  The company is trading for less than book value and is trading at close to our estimate of liquidation value.  We expect a share buyback announcement before too long which could serve as a catalyst to get the stock moving back up.

On March 3rd, we raised IRIS International, Inc. (IRIS:BUY) from HOLD to BUY and added it back to our list.  We had downgraded on valuation concerns last November when the stock reached $22.91.  The company reported almost exactly what we had forecast for Q4:05, yet the market took it poorly sending the stock sharply lower.  When the stock hit $17.73, we thought it was sufficiently undervalued relative to our $25 estimate of intrinsic value to upgrade.  In hindsight, we were a little early as the stock kept falling to $15.63 down 11.8% since our upgrade.  The company is well positioned and well run and remains one of our best ideas.  Our price target implies 61% upside.

March was a very busy month for Singular Research as we were inundated with earnings reports and 10K filings.  It is important for our clients to know that we read all the SEC filings for our companies as there are few better sources of detailed information on these businesses.  Our models reflect information from these documents such as operating lease liabilities and options outstanding.  Each year, we capitalize our company’s operating leases to move this off balance sheet debt back on balance sheet in our analysis.  Furthermore, we revalue all options outstanding at our companies using the Black-Scholes model to estimate how much of firm value the option holders lay claim to.  Detail oriented and time consuming work like this is what separates us from other similar equity research firms.

We are excited that 2006 is off to such a strong start and we are working hard to find more uncovered companies with explosive potential.  As always, we thank our clients for having faith in us and hope that we continue to earn your trust.