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.

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