The rapid rise in Google stock since its IPO has led some to suggest it is now overvalued. But Google may deserve it, and more. The company invented a unique and lucrative business model, has few constraints on growth, and continues to be an extremely innovative company relative to peers. And the stock rise is in part attributable to the IPO being underpriced because of investment banks that did not like the way the deal was brought to market.


How long a ride can Apple get from iPod? Because none of the competing MP3 brands has any cache, Apple’s unique ability to make the iPod a powerful fashion statement will help sustain Apple until their next big idea. However, Apple’s attempts with Motorola to make iPod mobile phones are stymied because of conflicts in business models that caused Steve Jobs to call mobile carriers, “the four orifices.” The problem is very simple: the mobile carriers no doubt want to sell the music, not just sell a phone that allows Apple to sell music through the consumer’s desktop computer (thereby leaving the mobile service operator out of the loop). Steve’s statement will make this hill that much harder to climb, but in the meantime he can sell some iPods in China and elsewhere.


The next round of consoles were introduced by Sony, Microsoft, and Nintendo at the May E3 show. Despite enthusiasm for the future, this triggers a negative phase for software publishers. Their R&D costs will increase because of the greater power of the new platforms. Retailers will reduce inventory of the prior platforms. Consumers will now get the message that the older platforms are obsolete and reduce expenditures. Publishers will slash inventory prices and margins will collapse. All of this will occur even before the new platforms are in the market, and when they do arrive, first year hardware sales may restore only 10% of the customer base. In addition, new platforms mean new licensing agreements, and with recent transitions the platform companies have been gaining leverage. Among the software publishers, only EA has any truly “must have” properties (eg, NFL), but even EA will face a big challenge in repeating the favorable terms they had in the past. EA faces other issues, including the recent delay of their Godfather game and challenges in generating revenue in Asia where Western software brands are of less interest and copyright laws are less respected. Historically, these platform transitions have been a death sentence for some publishers and have triggered consolidation moves for others. The recent sale of Eidos is one such example. Eidos had vaingloriously held out for years, rebuffing numerous M&A proposals. This shift is also bad for Nintendo, who is likely to be a distant third in the platform race. Nintendo’s history is as a successful toy and novelty company, not as a technology company. With platforms increasingly like rocket science, the future belongs to Sony and Microsoft. Nintendo has great youth brands and makes great software, but their days as a mainstream box in the living room are nearing an end. They are a much stronger company than Sega ever was, but their migration path may evoke comparisons.


The PC-Internet gaming sector is misunderstood in both directions. The MMO, or “massively multiplayer online game,” is overrated. This phenomenon uniquely occurred in Korea because of Korean reluctance to buy the foreign console formats. This resulted in the Internet café phenomenon, which eventually drove adoption of PCs and broadband in Korean homes and the exporting of the business model to mainland China. The model is also sensible in these markets because there is no content to pirate or copyright to violate. Instead, the client software can be given away because ongoing access to the server is required, and the server can confirm not just payment, but payment on a recurring basis. However, this model will not dominate in Western markets where the gaming market is highly fragmented and users dislike the high subscription fees and demanding gameplay of MMOs. The most successful MMO in the U.S. has an audience of less than 1 million.

Meanwhile, a form of “social community gaming” is underrated. As Yahoo! well knows, the casual web game is alive and well in the U.S. with more than 30,000,000 regular players. Despite the maturity and doldrums of the boxed PC game market, startups like PopCap Games pioneered a web game model that has been highly successful. They sell over the Internet, offering a free downloadable version with a premium fee to download a “deluxe” version. Games like this are very successful on Internet outlets such as AOL, MSN, and Yahoo!. What they demonstrate is that mass market consumers want to be entertained, and they have a need to interact, but not that much. And much more importantly, they want social interaction rather than feeling like they are playing by themselves. Hence we find that a # 1 console game may sell 5,000,000 copies but a far simpler Internet game with less marketing behind it, like NeoPets, can build an audience of 20,000,000. NeoPets was recently sold to Viacom, although we don’t know how well NeoPets “advertising placement” revenue model performs.


Hutchison, under the brand name of Three, was the first to introduce higher-speed mobile phone services known as 3G, or “third generation.” Three now operates 3G services in a variety of markets including Hong Kong, the UK, Italy, and Australia. Known by other names such as UMTS and EVDO, these services have been rolled out by other major companies in the last year such as Vodafone, Verizon Wireless, and Sprint PCS. Amp’d, led by the co-founder of Boostmobile, will launch this fall as an MVNO partner of Verizon’s. The theory of these services was premium performance for premium price. But the most successful marketing model has been to court the value-oriented heavy users, because the higher speeds provide more capacity. Both marketing models are being used today, and the sweet spot appears to be early adopters in the youth market. These customers use more voice, more message traffic, and buy more content. While this audience today numbers only about 1% of the world’s 1.5 billion subscribers, the market is growing exponentially and the visibility and word-of-mouth from these users will be critical to developing the mass market.


Another trend in relative infancy is the smartphone, a high-end mobile handset that is replacing the PDA. While a mainstream feature (camera) phone may have $75 in components and 2MB of RAM, a smartphone may have $400 in components and feel like a PDA. To be clear, the smartphone is killing the PDA and has already surpassed its 30 million customer base. Many PDA users will transition to a smartphone, which can do much more and is favored by enterprise users. Smartphones now represent 2% of mobile phones. The format is a notable success in China, where lugging around a garishly large handset establishes a “Cadillac” element of status, even for a middle class housewife who only uses it for voice calls. Nokia and Motorola do particularly well in China because of their quality high-end phones and famous brand names. But for every smartphone sold, there are 10 feature phones sold because of the much lower manufacturing cost and smaller form factor. Most consumers are not enterprise users and most do not want to lug around a larger device. Clearly, the next big handset growth wave will be the Java and Brew-programmable feature phones, which will exceed one billion handsets within another year or so, and exceed two billion handsets perhaps 2-3 years from now. No device in history has ever grown that fast or sold that many. During this same time period, the smartphone will also grow fast and get to milestones like 100 million, 200 million, and so on. Beyond the transition from voice phones to feature phones, the smartphones will eventually come down enough in component cost and miniaturization to become the “next generation” of feature phones. While this is going on, there will be a big battle for OS supremacy on the smartphone. Contenders are Symbian (controlled by Nokia), MS Smartphone (Microsoft), Linux, and Palm. Linux may do surprisingly well, because it is an open platform. Handset makers and operators will not want a dominant standard, so there will be pressure against both Symbian and any Microsoft proposals. But Symbian is today a huge front-runner and even with reduced share may remain the OS leader. These handsets also run other platforms like Java, so publishers of mobile content like Digital Chocolate can easily support smartphones simply by using their Java versions. As for Palm, with the decline in the PDA and only a modest foothold in the smartphone market, the format will face a challenging future.


Content for mobile phones, including ringtones, screensavers, and games, has reached a bit of a speed bump. In the late 1990s, this market suffered from the hype of WAP (wireless access protocol) which never panned out as a major content offering. However, the vision of DoCoMo in Japan and the introduction of camera phones triggered a huge growth phase in content from 2001-2004. Growth has now slowed as Japan and Korea have matured, and other regions have too many customers that are unaware of content or don’t attribute much value to it. One telling example is the European mobile operator whose programmable-Java phone handset market grew last year from 2 million to 6 million subscribers. Most of those users don’t understand the data services, and since there is a minimum monthly fee of 5 Euros, only 200,000 subscribers had signed up. At a tactical level, the market will grow faster as the carriers shift marketing emphasis from voice to data. Previously, the U.S. focus was on voice because in 2003 voice revenue was $85 billion compared to only $2 billion for data services. But despite an absence of marketing, data grew 115% in 2004 to $4.3 billion, while voice grew “only” 15% to $98 billion.

But with voice becoming a commodity that threatens margins, data must be the future. In Japan, data marketing has been strong from the beginning, resulting in perhaps $25 in data ARPU (average revenue per user), compared to $4 in Europe and only $2 in the U.S. Voice ARPU is $50 in first tier markets and this underscores the maturity of voice and the need to grow data marketing, consumer awareness and trial, and hence, revenue.

The history of electronic media helps explain these figures. Content media typically result in consumer spending the equivalent of $3 to $15 in ARPU. By contrast, network media have ARPU equivalents of $30 to $150. What this reveals is that consumers put a modest level of value on entertainment content, whereas they will repeatedly spend 10 times more money to have access to networks that improve their social lives. Mobile voice is one such example, but now it is time to use the data side of the equation to create network software solutions.

Instead of simple downloads of rings and games, what points the way towards this potential is mobile email and instant messaging (IM). While there is nothing wrong with the $4 billion spending on ringtones, when you spread it across several hundred million consumers you get ARPU numbers like the $2 we have in the U.S. But users of the RIM Blackberry are spending $60 in ARPU. And users of IM are generating $5-10 in ARPU. These are network software applications that have social benefit, hence users are willing to pay much more. Notably, even in Japan the ARPU numbers have flattened out because Japan lags in developing and introducing this kind of network social software. There is a great future ahead for a much wider variety of social applications with different themes, including games, blogs, photo sharing, dating, and so on.


However, RIM (Research in Motion) should be feeling the warmth of numerous red laser dots on their shirt. The Blackberry can attribute its growth to the interoperability of email addresses. With every conceivable competitor wanting a slice of the mobile email pie, this interoperability will become RIM’s Achilles Hell. Because of it, Blackberry lacks “stickiness” and the email market may be carved up among numerous competitors in the future.

Index Corp. in Japan is another high-flying success in mobile software, with a market cap in the vicinity of $2 billion. With a diverse offering of services and revenues in the $300 million per year range, Index may evolve more smoothly than pure mobile content plays like Jamdat or rollups like For-Side and Mforma. Index has higher profit margins and is priced at “only” 6 times revenue run rates. U.S. investors hungry for a mobile pure-play have valued Jamdat at more than $800 million, which is close to 20 times trailing revenue. This phenomenon led For-Side and Cybird of Japan, and Mforma in the U.S., into rollup strategies that may prove hard to operate. Jamdat is also more dependent on content downloads on which they neither control the channel nor own the intellectual property. A desire for continued growth led Jamdat to sacrifice most of their IPO cash in a 15-year license deal for Tetris. If Jamdat can become “the next Index Corp.” then their stock has room for some appreciation. But the current market cap makes their recent success a tough act to follow. As recently as 2003, a rumored EA-Jamdat financing fell apart because of disagreements around a $50 million valuation. The stock has risen 15,600% in the 2 years since. Now, that is a tough act to follow. This may explain the recent rumor that EA was exploring an acquisition of Jamdat, which would give EA an external move to offset their platform transition issues.

SINGULAR RESEARCH 5-Star Awards from StarMine for Earnings accuracy!

Analyst Earnings Estimate Accuracy

Singular Research, a trusted supplier of unbiased independent research on small and micro cap companies, announced today that it has received a five starmine awards for earnings accuracy for its coverage in the first quarter of 2011. The awards Included two 5 star awards, its highest ranking for an analyst.

StarMine analyzes every earnings estimate and revision by thousands of analysts. To receive a high score, an analyst “must make estimates that are both significantly different from, and more accurate than, other analysts’ estimates.” The highest rank of five stars from StarMine is for the top 10% of analysts.

Singular Analayts receiving STARMINE awards include:

AnalystEarningsEstimateAccuracy chart1

Managing Director Robert Maltbie, CFA stated, “We are honored to receive recognition for our efforts and I wish to congratulate our team for their diligence and effort in covering hard to follow companies such as SYNO & SA . We further believe this award serves as a testament to our goal of providing the highest quality of objective & unbiased research on under followed small cap equities.”

About Singular Research

Singular Research aims to be the most trusted supplier of independent research on small-cap companies. Singular analysts research high-quality companies that are typically not covered by any other firms. We provide Honest Advice: Our Independent analysts have no financial interest in the stocks we cover. Analysts are compensated based on the accuracy of their research calls not through trading commissions or investment banking fees. Winner 2008 Top Performers Award from First Coverage

We provide unbiased advice: Our Independent analysts have no financial interest in the stocks we cover. Analysts are compensated based on the accuracy of their research calls not through trading commissions or investment banking fees. Singular Research aims to be the most trusted supplier of unbiased, performance-based research on small micro cap companies to fund managers. Its goal is to provide initiation reports and quarterly updates for approximately 40 micro to small cap companies. In many cases, Singular’s analysts research companies that are not covered by any other firms.


Analysts do not receive any form of direct compensation from companies under coverage. Analysts are compensated based on the accuracy of their research calls, not through paid for research by companies or potential deal flow.

The Singular Research Coverage list track record since inception, August ’04, is up 151.53% through December 2010, compared to the S&P 500 at 13.90%

Singular Research List up 1.9%, Beats Index, Plus New Initiation

November was a busy month as we got the rest of the Q3 earnings calendar and almost all of the 10Qs filed. For the September quarter, earnings surprises ranged from -1,400% to an upside surprise of 467%. Excluding the ICOP outlier, the average surprise was a positive 9% on the longs and 0.2% on our short calls. Not surprisingly, many of our stocks moved quite dramatically on the earnings results. We had six stocks up by double digits and five stocks down by double digits. Despite recommending a long/short portfolio against a bull market backdrop, we still managed to outperform the S&P 500 again in November. The Singular Research list was up 1.9% versus the S&P 500’s 1.6%. With one month left in 2006, our list is up 21.3% year to date versus 11.9% for the S&P 500.

On the macroeconomic front, some areas of concern have moderated, and others remain. Commodity inflation has eased in some cases, yet core inflation remains a major concern of the Federal Reserve, especially with historically low unemployment. Yet, rather than bargain for higher wages leading to wage and, ultimately, price inflation, workers seem convinced the economy is far weaker than headline statistics suggest. Investors seem manic/depressive, vacillating between fears of inflation leading to Federal Reserve tightening, and fears of a recession just around the corner.

Our bigger concern is a simple one. It stems from the simple belief that earnings drive stock prices. After a long string of double digit earnings growth, corporate profits as a percent of the economy are near record levels. If profit margins decline, rather than see earnings growth in excess of nominal GDP growth, investors will see low single digit earnings growth. We do not believe the market is properly discounting this possibility. Moreover, even if strong earnings growth can continue, there is the very real possibility of rising interest rates from today’s very low levels, which would also be detrimental to stock returns.

Looking more closely at our list, our top performer was one of our newer initiations, US Global Investors (GROW:BUY). GROW grew 58.8% bigger in November and is now up 145.4% since our October 9th initiation. Investors have been impressed with the company’s 81% revenue growth and 125% growth in earnings as mutual fund assets under management nearly doubled from $2.4 billion to $4.6 billion. Our price target and rating are under review.

The second best performer was Bolt Technology (BTJ:BUY) up 24.1% on top of the 21% last month. We had viewed last quarter’s selloff as an excellent opportunity to add this oil services name at reduced prices. With oil starting to back up again, investors have rediscovered why they liked Bolt in the first place, namely 25% top line growth and 94% earnings growth. BTJ beat our $0.24 estimate by 46%, the second biggest earnings surprise on our list.

ACS Motion Control (ACSEF:BUY) rose 20% in November as investors realized they had overreacted to the downside earlier in the year. Despite missing our estimates slightly, ACS proved it could still be profitable despite the loss of a major customer suffered earlier on the year. ACSEF is now up 31.1% since we launched on it in September, but our price target implies another 70% upside.

McDermott International (MDR:BUY) also had a great month rising 16.5% after beating our estimates. After watching the company report backlog growth of 169%, 122% revenue growth and 74% profit growth, our analyst raised his estimates. Investors seem not to have appreciated just how profitable MDR would be once its Power Generations Systems subsidiary was reconsolidated, now that asbestos headaches are behind the segment. MDR is now up 85.8% since we launched on it last December.

American Software Inc. (AMSWA:BUY) was up 15.7% in November ahead of its earnings report due out next Thursday. We are looking for 17% revenue growth and 206% earnings growth. News flow for the month was not unusual, consisting of new customer wins, new awards won and conferences attended. Investors may have been attracted to the hefty dividend yield which, while now 3.9%, was 4.4% at the start of the month. AMSWA is now up 20.2% since we launched on it in June, not counting the dividend.

Miller Industries Inc. (MLR:BUY) rose 11.7% for the month after reporting an 11.5% upside earnings surprise. This remains one of our favorite value ideas, and at just 10.9x our 2007E estimates is still very reasonably priced considering its 20% revenue and 23% earnings growth last quarter. Our price target implies 75% upside.

Not surprisingly, our worst call of the month was one of our short calls,, Inc. (BIDU:SELL) up 32.7%. Investors’ infatuation with Chinese stocks, especially Chinese Internet stocks defies rationality. In scenes reminiscent of the worst parts of the Internet bubble, we have seen competitors justify price targets based on multiples years out in the future. Indeed, it is hard to imagine how a company trading at 104x EV/EBITDA, 24.5x Book value, and 69.7x forward earnings could be undervalued. BIDU’s recent announcement of its entry into the Japanese market seems ill fated according to our analyst and may say more about growth prospects and the competitive environment in China than anything else. Our price target implies 57% downside for BIDU.

IRIS International, Inc. (IRIS:BUY) shares fell 25.1% in November on weaker than expected results. The company reported numerous one-time charges, and a CFO change, however we believe investors are not giving the company credit for the likely resumption of profitable growth next year. We also find the insider buying by the CEO and several directors encouraging. Our price target implies 78.2% upside.

Maxwell Technologies Inc. (MXWL:BUY) dropped 21.1% last month despite better than expected earnings results. Ultracapacitor sales are lumpy and the company is being unfairly punished for lower guidance in our analyst’s opinion. Maxwell is turning the corner to profitability so investors are going to be concerned by continued losses. MXWL is still up 37.6% since we launched on it back in June 2005. The recent selloff gives event-driven and technology oriented investors a great entry point to this stock with 70% upside to our target.

The fourth biggest decliner in November was our other Chinese Internet stock, CTRP International (CTRP:SELL) up 13.3%. This stock remains perhaps an ever better short candidate than BIDU given the lower barriers to entry. This is the Chinese equivalent of Travelocity before Orbitz was created. Only, it is worse than that as Chinese customers with lower per capita GDP are even more price sensitive than Americans. We project that CTRP will face a very competitive marketplace with downward pressure on margins. For a company facing slowing growth rates and margin compression in an increasingly competitive environment, we do not see how multiples such as EV/EBITDA of 45x, PE of 44x, and P/S of 19x can be maintained.

Last but not least, Hansen Natural Corp. (HANS:BUY) fell 11.4% in November. Hansen got caught up in the growing stock option backdating scandal. By caught up, I mean they received a letter from the SEC and have begun an internal investigation. As a result, the 10Q has been delayed and the class action lawyers have swooped in. Lost in the fracas was better than expected Q3:06 earnings results. Sometimes, the best investments are made when everyone else is running for the exists. We believe this may well be the case with HANS. Despite an estimated 75% earnings growth rate for 2006, HANS trades at just 22x our 2007E estimates. Our price target implies 113% upside.

During the quarter we added a new name, The Lamson & Sessions Co. (LMS:BUY). LMS has had very strong historical results such as 15.8% sales and 111% earnings growth last quarter, yet trades at just 7.8x trailing EPS and EV/EBITDA of 4.2x. The stock has already rallied sharply as at least one investor has pressured the company to buy back more of its own stock. Our price target implies 40% upside. We also dropped On Track Innovations Ltd. (OTIV:HOLD) from our list. Despite a large market opportunity, the company continues to fumble and losses are piling up. Making matters worse, the company shows a disregard for investors that is unrivaled, and may well have run afoul of Reg. FD. We aren’t willing to stick around to find out.

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 growth oriented names, Premier Exhibitions, Inc. (PRXI:BUY) strikes us as having an excellent risk/reward profile. The company is poised to move from a net revenue to a gross revenue model, and will no longer have to share profits on its shows. Due to the complexities of its prior revenue sharing arrangements, we do not believe the market fully appreciates how explosive the financial results are likely to be in the coming quarters. We are looking for 137% and 62% revenue growth for FY:06 and FY:07 ended February respectively. Earnings growth could accelerate from an expected 42% in FY:07 to 83% in FY:08, yet the company is priced at just 14.4x our FY:08 estimates.

Our top value pick would be Acme United Corp. (ACU:BUY). The company is executing well and taking market share. We expect 16% revenue growth in 2006 and 14% in 2007. Despite an estimated 25% EPS growth rate in 2007 and 20.2% return on equity, the stock trades at just 9.7x our estimates. European operations have been a drag on reported results. If, as we expect, European operations turn profitable, our estimates could well prove conservative.

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 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.