August Marks the 10th Month in a Row of Singular Research Beating the S&P 500
August marked another month of outperformance for the Singular Research List, up 0.71% while the S&P 500 declined 1.08%. Seven of our companies reported earnings during August and results are summarized below.
Overall, we are pleased with the earnings results. Misses were small and positive surprises more numerous and larger. August was a difficult month for the markets and it should come as no surprise that our best stock in August was one of our SELL recommendations, TZOO down 23.3%. This is the stock which keeps on giving as it is now down 75.4% since we recommended investors short the name. As we can only get 100% on our short calls, this is about as good as we can expect. Nonetheless, our analyst has lowered his price target on TZOO to $14 from $23 representing 40% downside from current levels. Our short call on NVEC also did well, up 11.5% for the month.
Of our long calls, only CRED was up more than 10%. This is one of three new stocks we added to the research list in August and I will get to them in a minute. Finally on the downside, we had three significant disappointments. ATRI was down 17.9% on the heels of a weaker than expected earnings report at the end of July. We feel the sell off is overdone and this represents an attractive entry point on the stock. Our price target of $85 represents 30% potential upside, and we'd note that ATRI is still up 38.5% from where we recommended investors buy it.
DRTK was down 15.8% for the month also on weaker than expected earnings reported at the end of July. The company now trades at just 11.3x our 2006 EPS estimate of $1.86. Just yesterday, the company announced a new $16 million contract to cleanup a nuclear power plant in Wisconsin. HRT was our last double digit decliner down 14.1% in August. While we were disappointed that the company missed our estimates right out of the box (we initiated with a BUY August 12th). Our analyst believes HRT can generate mid teens type sales and earnings growth and his price target of $19 implies 68% upside from its current price.
Arrhythmia Research Technology, Inc. (AMEX:HRT) was one of three new stocks Singular Research launched coverage on in August. The other two were Credo Petroleum Corp. (NASDAQ:CRED) and Psychemedics Corp. (AMEX:PMD). HRT engages in the licensing of medical software to detect and aid in the treatment of potentially lethal arrhythmias. The company manufactures and distributes conductive resin sensors, and metal snap fasteners used in disposable electrodes for diagnostic and monitoring instruments. CRED is an independent oil and gas exploration and development company. The company has two business lines: one locates and drills new oil and gas wells; and one uses its patented Calliope Gas Recovery System to extract the hard to reach remnants of older wells. Finally, PMD provides testing services for the detection of abused substances through the analysis of hair samples. The Company's patented technology provides quantitative and historical data, which can show a pattern of individual drug use over time.
In a down market such as August was, it helps to have stocks which pay dividends. Many investors are initially startled to learn that so many microcaps pay dividends. Dividends can provide a floor under a stock in down markets as Merck investors are unfortunately learning in larger caps names. Below is the list of our companies which pay a dividend. It's important to remember that many of these names as well as our other names have significant share buyback programs as well.
Year to date, the Singular Research list is up 32%, versus 0.7% for the S&P 500. We continue to feel that the broad market will face difficulties closing the year with more than mid-single digit type gains. As a result, security selection will be more important than ever for those investors looking to outperform. We believe few areas of the market offer a better return to traditional fundamental research than the Microcap area does. Finally, in closing we welcome clients to join our Bi-Weekly Monday morning call during we which we discuss our latest research, performance, the economy, and market trends. Additionally, we occasionally invite management teams from our covered companies to discuss their companies for our investors. We hope to see you there.
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