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THE SMALL-CAP BEAT

A GEISER CAPITAL CORPORATION WEEKLY PUBLICATION

In this Issue Week of July 24,


2009
• EXPECTATIONS EASILY BEATEN – MARKETS CONTINUE TO
MOVE UP
• EARNINGS SURPRISES & CHANGING GUIDANCES FROM
SMALL-CAPS
• FROM BROKERS’ DESKS
• STARS & DOGS….AND ACTIONS
• LOOKING AHEAD…

EXPECTATIONS EASILY BEATEN – MARKETS CONTINUE TO MOVE UP


Either one has to wonder about current analysts expectations or, possibly, management
guidances to those same analysts. Expectations are simply out of sync with current results.

Clearly, the disaster that investors expected that brought the bears roaring back from mid-2008
up until this March is very unlikely to occur. This recession is likely to turn out as a relatively mild
one, far from the correction that it brought in stock prices last fall which had many to believe that
the world was about to crumble. True, without concerted and significant efforts by governments
around the globe, things may have been much worse.

Out of the 400 or so companies that reported last week that we have looked at less than 20%
reported below expectations. On average, earnings expectations were beaten by nearly 17% -
that is major. With results announced throughout the last week proving to be not only better-than-
expected, but much better, and only a handful of companies not managing to beat expectations,
investors continued to drive up stock prices in a broad fashion.

WEEKLY WRAP-UP
52 - W Range 52 - W % Chg. Year
Current Chg. % Low High Low High To Date
Russell 2000 548.46 5.6% 342.59 764.38 60.1% -28.2% 9.8%
S&P Small- Cap 290.96 5.1% 181.32 401.07 60.5% -27.5% 8.3%

Geiser Top 20 192.20 7.7% 65.17 268.65 194.9% -28.5% 72.0%

S&P 500 979.26 4.1% 666.79 1313.15 46.9% -25.4% 8.4%


Nasdaq 1965.96 4.2% 1265.52 2473.2 55.3% -20.5% 24.7%
Dow 9093.24 4.0% 6440.02 11933.5 41.2% -23.8% 3.6%

With average revenue down -8.8% and earnings dropping -34.9% for those companies that
reported last week, this is certainly a strong indication of the current economic situation, but this is
far from being as awful as analysts had predicted. Further, very slowly but surely, economic
conditions are improving. A reassessment of current expectations is overdue.
A look at the table below is a good indication of how far are current expectations from actual
results. Although results are not necessarily strong with most companies reporting a decline in
sales and earnings, out of the group below only Morgan Stanley (MS) ($28.25; +0.9%) reported
below expectations. More astonishingly, Caterpillar (CAT) ($42.00; +23.6%), Seagate Tech
(STX) ($11.53; +3.4%) and Ericsson (ERIC) ($9.65; -3.9%) managed to beat expectations by
227%, 160% and 136% respectively.

This is simply unheard of. There is surpassing expectations, but beating expectations KO in the
first round….is often the result of a mismatched.

REPORTED EARNINGS FROM THE BIG WORLD


Chg
Yr % Y/Y Cur. % Chg %
Companies Sym EPSa EPSe Ago Surp Y/Y EPS REV Price W/W Y/Date
Halliburton HAL 0.27 0.68
0.30 11.1% -55.9% -22.1% $23.48 9.8% 30.4%
Hasbro HAS 0.23 0.25
0.26 13.0% 4.0% 1.0% $26.46 4.2% -7.9%
Sybase SY 0.52 0.49
0.56 7.7% 14.3% -1.7% $35.77 11.1% 44.4%
Caterpillar CAT 0.72 0.22 1.74 227% -58.6% -41.5% $42.00 23.6% -6.9%
Coca-Cola KO 0.92 0.89 1.01 3.4% -8.9% -8.6% $49.36 -1.9% 11.1%
DuPont DD 0.61 0.53 1.11 15.1% -45.0% -22.4% $30.04 9.0% 22.6%
Lockheed LMT 1.81 2.01
Martin 1.88 3.9% -6.5% 1.8% $74.08 -8.6% -10.6%
Apple AAPL 1.35 1.16 1.19 16.4% 13.4% 11.7% $159.9 5.4% 87.5%
Seagate Tech STX 0.06 -0.10 0.44 160% -86.4% -18.8% $11.53 3.4% 162%
Starbucks SBUX 0.24 0.19 0.16 26.3% 50.0% -6.6% $17.22 19.3% 82.0%
Yahoo! YHOO 0.10 0.08 0.10 25.0% 0.0% -15.6% $17.48 3.8% 43.3%
Boeing BA 1.41 1.21 1.16 16.5% 21.6% 1.1% $42.37 2.4% 1.3%
Morgan MS
Stanley -1.37 -0.49 -179% -11.3% $28.25 0.9% 79.1%
PepsiCo PEP 1.06 1.00 1.05 6.0% 1.0% -3.2% $56.41 -0.4% 4.8%
Citrix Syst CTXS 0.39 0.38 0.38 2.6% 2.6% 0.3% $35.53 1.5% 50.7%
eBay EBAY 0.37 0.36 0.43 2.8% -14.0% -4.5% $21.24 14.5% 52.1%
Qualcomm QCOM 0.52 0.55
0.54 3.8% -1.8% -0.6% $47.35 -0.1% 33.3%
3M MMM 1.20 0.94 1.39 27.7% -13.7% -15.1% $69.42 10.3% 23.0%
EMC Corp EMC 0.18 0.16 0.18 12.5% 0.0% -11.3% $14.95 7.4% 42.8%
Ford Motor F
-0.21 -0.52 -0.62 59.6% -66.1% -33.8% $6.78 10.4% 196%
Kimberly-Clark
KMB 1.16 0.94 1.03 23.4% 12.6% -5.6% $58.02 6.5% 12.7%
McDonald's MCD 0.98 0.97 0.94 1.0% 4.3% -7.0% $56.08 -3.0% -8.2%
UPS UPS 0.49 0.49 0.85 0.0% -42.4% -16.7% $53.40 2.4% -1.3%
Amazon.com AMZN 0.32 0.31 0.37 3.2% -13.5% 14.5% $86.49 0.7% 68.7%
American
Express AXP 0.27 0.26 0.56 3.8% -51.8% -18.3% $29.51 5.3% 63.9%
Baidu.com BIDU 1.61 1.43 1.11 12.6% 45.0% 37.4% $358.1 11.3% 174%
Microsoft MSFT 0.36 0.36 0.46 0.0% -21.7% -17.3% $23.45 -5.4% 22.2%
Ingersoll-Rand
IR 0.50 0.39 1.03 28.2% -51.5% 12.8% $27.48 26.7% 61.6%
LM Ericsson ERIC 0.26 0.11 0.60 136% -56.7% -13.4% $9.65 -3.9% 26.6%
Schlumberg SLB 0.68 0.63 1.16 7.9% -41.4% -18.1% $57.34 2.4% 36.7%
AVERAGE 12.8% -21.1% -7.8% 5.6% 46.6%

Surprisingly, earnings reports from selected small-caps last week were not as consistently
beating expectations as it was the case by their larger counterparts, but also, average declines in
sales and earnings were somewhat lower for small-caps. This suggest that smaller-caps may well
come out of the recession in better shape than the larger ones with some gaining market share
over their bigger competitors. And this may explain why consensus for the better known names is
so far off….main street may not be following up comers closely enough.

As the table below indicates, results reported last week by selected small-caps were not as
evenly beating expectations, but on average, they were much closer to meeting consensus
estimates. But obviously, for small-caps there is often no in-between, surprises are more likely to
come either way.

SELECTED EARNINGS REPORTS FROM THE SMALL-CAP WORLD


Chg
EPSa % Y/Y Y/Y Cur. % Chg %
Companies Sym EPSa EPSe LY Surp EPS REV Price W/W Y/Date
Ceragon CRNT
0.03 0.04 0.13 -25.0% -76.9% -23.6% $7.47 1.2% 47.9%
PetMed Expr PETS
0.36 0.31 0.28 16.1% 28.6% 12.9% $17.75 6.6% 0.7%
Sensient SXT
0.53 0.51 0.53 3.9% 0.0% -8.7% $24.61 2.3% 2.8%
JDA Software JDAS
0.47 0.30 0.29 56.7% 62.1% 8.4% $17.74 10.8% 35.1%
Arbitron ARB
0.13 0.10 0.02 30.0% 550% 10.3% $17.74 1.1% 34.7%
Lexmark LXK
0.55 0.60 0.96 -8.3% -42.7% -20.6% $15.25 -18.1% -43.3%
Allegiant ALGT
1.17 1.18 0.13 -0.8% 800% 12.5% $43.80 -4.3% -9.8%
Atheros
Communica ATHR
0.20 0.14 0.31 42.9% -35.5% -7.7% $24.85 13.9% 73.7%
Vocus VOCS
0.18 0.16 0.21 12.5% -14.3% 10.5% $17.18 -9.4% -5.7%
iGATE IGTE
0.11 0.09 0.15 22.2% -26.7% -16.7% $6.81 7.8% 8.1%
Navigant Consult
NCI
0.14 0.20 0.24 -30.0% -41.7% 17.9% $12.35 -10.1% -22.2%
Affymetrix AFFX
-0.12 -0.19 0.04 36.8% -200% -6.1% $7.94 51.2% 165%
Cirrus Logic CRUS
-0.01 -0.01 0.06 0.0% -116% -14.8% $5.49 20.4% 104%
Encore Wire WIRE
0.03 0.25 0.06 -88.0% -50.0% -55.6% $21.09 -3.6% 11.5%
Knight Transport
KNX
0.15 0.15 0.15 0.0% 0.0% -21.3% $16.83 2.2% 5.0%
NETGEAR NTGR
-0.02 -0.01 0.41 -100% -104% -29.2% $15.79 2.9% 38.4%
TriQuint Semi TQNT
0.08 0.03 0.07 166% 14.3% 33.2% $6.97 10.1% 102%
Columbus
McKinnon CMCO
0.06 0.14 0.61 -57.1% -90.2% -21.3% $12.89 -4.8% -5.6%
Jetblue Airways JBLU
0.05 0.02 -0.03 150% 266% -6.1% $5.03 9.1% -29.2%
CyberSource CYBS
0.19 0.16 0.16 18.8% 18.8% 12.9% $16.85 17.0% 40.5%
Healthways HWAY
0.16 0.24 0.39 -33.3% -59.0% -7.9% $15.78 19.9% 37.5%
Lance LNCE
0.30 0.31 0.09 -3.2% 233.3% 10.7% $25.15 4.5% 11.2%
OptionsXpress OXPS
0.28 0.26 0.39 7.7% -28.2% 0.2% $16.60 8.9% 25.2%
AVERAGE
0.8% -9.9% -6.3% 6.1% 27.4%

Aside from corporate headlines which were obviously rather positive, economic data released last
week were not particularly helpful, but only simply confirming some improvements, all rather
slowly.
THE ECONOMIC SNAP-SHOT OF THE WEEK
Revised
Date Economic Release For Actual Expected Prior from
Jul-20 Leading Indicators Jun 0.70% 0.50% 1.30% 1.20%
Jul-23 Initial Claims Jul-18 554K 557K 524K 522K
Jul-23 Existing Home Sales Jun 4.89M 4.84M 4.72M 4.77M

Jul-24 Mich Sentiment-Rev Jul 66 65 64.6 --

Our view is that results to be announced this coming week are again likely to be much better than
currently expected, particularly for the larger ones. Results are not expected to be particularly
strong, but they should be a mile away from the catastrophe that markets were expecting not long
ago.

Thus far, since the earnings season began two weeks ago, reported results have exceeded
expectations by about 17% while markets have moved up 10% to 11%. This would suggest that
markets would have to increase 5% to 6% simply to catch up to actual results. That is one view to
look at it; all assuming markets were in perfect sync prior with results to be released.

But our mid-term view is that markets actually went through an over correction in the last year
compared to what could have been actually warranted and, as a consequence, simply to catch
up, there are more gains to be expected by markets and those could be significant. In fact, we
would not be particularly surprised if current 52 highs by most indices would not be broken on the
way up within a timeframe of 6 to 12 months. For the Russell 2000 and the S&P Small-Cap, this
would suggest another 30% to be made within a reasonable period.

Some of our arguments for continued market strength are:

• Prior correction of equity prices suggested a much deeper and prolonged recession than
what is very likely to occur – a catch-up is called for;
• Current yields in bond markets are at an historically low level and this is expected to
remain in the near future;
• Economic conditions are improving slowly but surely – forward earnings are likely under-
estimated; and,
• Even with forward earnings likely to turn out better-than-expected, markets are still
trading on forward P/Es well below reasonable limits.

But between now and then, with such a market performance over the last two weeks and
investors now expecting more of the same, this is will be an awfully difficult act to follow for a third
week in a row. Disappointments are bound to happen, profit taking are likely occur and, while
stocks rotations is likely to increase, this is a market still well undervalued.

EARNING SURPRISES & CHANGING GUIDANCES FROM SMALL-CAPS

Although earnings season was just in its second week, there was plenty of action in the small-cap
world last week. While there were some misses, but only a few which are highlighted below, most
companies that reported came in-line, above or well-above expectations. Generally speaking,
earnings declines were less important for small-caps and surprises were not necessarily as
significant as those that apparently caught off-guard investors looking at the bigger ones – that is
itself a surprise – but price movements following surprising results by small-cap tended to be
more important than those occurring in the big world.
Some of the results that caught our attention included;

EARNINGS SURPRISES IN THE SMALL-CAP WORLD


Chg Chg
EPSa % Y/Y Y/Y Cur. % %
Companies Sym EPSa EPSe LY Surp EPS REV Price W/W Y/Dte

POSITIVE
JDA Software JDAS
$0.47 $0.30 $0.29 56.7% 62.1% 8.4% $17.74 10.8% 35.1%
RLI Corp RLI
$1.32 1.04 $1.01 26.9% 30.7% $47.98 4.6% -20.7%
Volterra Semi VLTR
$0.10 $0.06 $0.25 66.7% -60.0% -20.6% $16.00 6.0% 123%
Arbitron ARB
$0.13 $0.09 $0.02 44.4% 550% 10.3% $17.74 1.1% 34.7%
Atheros Commun ATHR
$0.20 $0.14 $0.31 42.9% -35.5% -7.7% $24.85 13.9% 73.7%
Charlotte Russe CHIC
$0.33 $0.24 $0.31 37.5% 6.5% 4.9% $14.10 10.8% 117%
RC2 RCRC
$0.20 $0.12 $0.21 66.7% -4.8% -2.5% $16.92 12.9% 59.0%
Precision Drilling PDS
$0.22 $0.04 $0.17 450% 29.4% $5.55 14.7% -33.5%
Cohu COHU
-$0.06 -$0.22 $0.01 72.7% -700% -25.9% $12.10 22.6% 1.0%
Conceptus CPTS
-$0.02 -$0.06 -$0.05 66.7% 60.0% 28.4% $16.69 -1.9% 9.7%
Cymer CYMI
$0.02 -$0.05 $0.46 140% -95.7% -48.6% $33.52 9.9% 53.0%
Fair Isaac FIC
$0.45 $0.36 $0.41 25.0% 9.8% -14.9% $17.80 18.8% 5.8%
Quidel QDEL
$0.02 -$0.01 -$0.02 300% 200% 90.7% $15.72 4.2% 20.3%
TriQuint Semi TQNT
$0.08 $0.03 $0.07 166% 14.3% 33.2% $6.97 10.1% 102%
DSP Group DSPG
$0.03 -$0.11 $0.04 127% -25.0% -29.9% $9.35 29.3% 16.6%
Jetblue Airways JBLU
$0.05 $0.02 -$0.03 150% 266% -6.1% $5.03 9.1% -29.2%
Align Tech ALGN
$0.07 $0.01 $0.06 600% 16.7% -4.5% $11.46 11.3% 31.0%
Deckers Outdoor DECK
$0.26 -$0.09 $0.39 388% -33.3% $69.78 0.0% -12.6%
Digi Intl DGII -
$0.09 $0.02 $0.15 350% -40.0% 5.3% $10.63 3.7% 31.1%
SonicWALL SNWL
$0.10 $0.07 $0.06 42.9% 66.7% -12.9% $7.13 18.0% 79.1%
Pinnacle PNK -
$0.08 $0.05 $0.30 60.0% 126% 0.0% $10.60 6.6% 38.0%
AVERAGE
$0.20 $0.10 $0.18 102% 8.4% -0.2% 10.3% 35.0%
NEGATIVE
Arkansas Best ABFS
-$0.50 -$0.27 $0.64 85.2% -178% -27.3% $26.36 2.0% -11.4%
Navigant Consult NCI
$0.14 $0.20 $0.24 -30.0% -41.7% -17.9% $12.35 -10.1% -22.2%
Encore Wire WIRE -
$0.03 $0.25 $0.06 -88.0% -50.0% 55.6% $21.09 -3.6% 11.5%
Columbus CMCO
McKinnon $0.06 $0.13 $0.61 -53.8% -90.2% -21.3% $12.89 -4.8% -5.6%
Amcol ACO
$0.20 $0.31 $0.58 -35.5% -65.5% -26.8% $19.92 -12.8% -2.7%
Saia SAIA
-$0.13 -$0.09 $0.46 -44.4% -128% -21.0% $15.97 0.3% 46.6%
AVERAGE - -
-137% 107% 28.3% -4.8% 2.7%

There are a few points to be noted;

• Contrary to last week when overall market’s strength did not appear to particularly affect
stocks of companies posting lower-than-expected results, investors are back
discriminating.

• Although there were exceptions, the importance of a stock movement following a positive
surprise did not appear to be guided by the importance of the said surprise, but more so
by concurring management’s guidances and/or by a change in analysts
recommendations.

• When looking at short term data, a surprise is a surprise that sets a trend; the importance
of the surprise has only a marginal impact on the importance of subsequent price
movements.

• When looking for stock prices movement consistency, there is not much better than
changing management guidances.

CHANGING GUIDANCES IN THE SMALL-CAP WORLD


Company Symbol Period Est Guidance Close W% MKT
Chg Cap
POSITIVE
Charlotte Russe CHIC Q4 $0.16 $0.18-0.26 $14.10 10.8% 296.1M
MKS Instruments MKSI Q3 -$0.25 ($0.18)-(0.07) 19.53 14.5% 962.9M
TriQuint Semi TQNT Q3 $0.08 $0.08-0.10 $6.97 10.1% 1.03B
TrueBlue TBI Q3 $0.04 $0.10-0.15 $12.89 42.3% 564.6M
Scholastic Corp SCHL FY10 $1.70 $1.80-2.30 $21.88 14.0% 796.3M
LIFE TIME Fitness LTM FY09 $1.60 $1.65-1.75 27.15 21.7% 1.09B
Healthways FY09 $0.96 $0.97-1.05 $15.78 19.9% 534.3M
SolarWinds SWI FY09 $0.52 $0.56-0.58 19.17 17.2% 1.23B
NEGATIVE
Forward Air FWRD Q3 $0.17 $0.08-0.14 21.25 -0.7% 614.7M
Lexmark LXK Q3 $0.52 $0.40-0.50 $15.25 -18.1% 1.19B
Navigant Consult NCI FY09 $0.86 $0.60-0.70 $12.35 -10.1% 595.4M
Conceptus CPTS Q3 $0.14 0.06-0.07 $16.69 -1.9% 509.4M
IRobot IRBT Q3 $0.07 $0.00-0.03 10.52 -18.2% 262.6M
IPG Photonics IPGP Q2 $0.03 ($0.04)-($0.03) 10.33 -2.4% 468.7M
Viad Corp VVI Q3 $0.20 ($0.27)-($0.12)
16.85 -4.2% 346.9M

FROM BROKERS’ DESKS


While brokers were busy updating some of their recommendations with quite a few calls being
released during the course of last week, most were related to larger caps and for those pertaining
to small-caps, only a few are still inspiring and worth further digging.

Companies that have both exceed the performance of the Russell 2000 last week (+5.6%) and
whose expected return from their current prices is above 20%; all are highlighted in green for
further review.

All in all, we can only view analysts remaining quite sceptics on markets conditions and outlook.
While upgrades on stocks at brokerage firms are still far and in between, set target prices often
attained on the same week or just about, downgrades are very much the standard.
Nevertheless, there was a lot more coming from brokers to digest last week. In itself, that may be
an indication.

SELECTED BUYING IDEAS FROM BROKERS


Exp. Close W% MKT
Company Sym Broker Rating Target Ret Chg Cap
PolyOne POL KeyBanc Buy $5.00 17.6%
$4.25 38.0% 392.6M
OfficeMax OMX KeyBanc Buy $8.00 3.9% $7.70 14.8% 587.4M
Cytec CYT Jefferies & Co Buy $28.00 11.5% $25.12 11.4% 1.22B
Comverge COMV Lazard Buy $14.00 25.4% $11.16 1.5% 245.8
COMV Roth Capital Buy $14.00 25.4%
Syniverse
Holdings SVR Wedbush Outper $21.00 20.0% $17.50 1.7% 1.20B
SRA Intl SRX Sun Trust Buy $25.00 27.2% $19.65 5.1% 1.11B
Cubic CUB Dougherty Buy $46.00 14.8% $40.07 2.3% 1.07B
Volterra Semi VLTR Caris & Co Above $20.00 25.0% $16.00 6.0% 363.2M
VLTR Roth Hold $16.00 0.0%
iGATE IGTE Needham Buy $9.00 32.2% $6.81 7.8% 369.5M
IGTE Roth Capital Buy $8.00 17.5%
Terremark World TMRK Oppenheimer Outper $8.00 35.6% $5.90 18.2% 378.4M
HHGregg HGG Credit Suisse Outper $22.00 17.1% $18.79 15.4% 615.5M
SuccessFactors SFSF Wedbush Outper $11.00 7.5% $10.23 6.3% 581.1M
Atheros Comm ATHR Lazard Buy $29.00 19.1% $24.35 11.6% 1.50B
ATHR Caris & Co Buy $31.00 27.3%
ATHR Jefferies & Co Hold $23.00 -5.5%
RC2 RCRC Wedbush Outper $17.00 0.5% $16.92 12.9% 291.9M
TrueBlue TBI Davenport Buy $12.00 -6.9% $12.89 42.0% 552.M
TBI Baird Outper $12.00 -6.9%
TBI BMO Capital Outper
LIFE TIME
Fitness LTM Dougherty Buy $30.00 10.5% $27.15 21.7% 1.07B
MKS Instruments MKSI Canaccord Buy $24.00 22.9% $19.53 14.5% 962.9M
NETGEAR NTGR BWS Buy $20.00 26.7% $15.79 2.7% 543.1M
Cohu COHU Needham Buy $13.00 7.4% $12.10 22.6% 282.9M
Cymer CYMI Caris & Co Above $39.00 16.3% $33.52 9.9% 995.7M
Knight Transport KNX Maxim Group Buy $20.00 18.8% $16.83 2.2% 1.40B
Omniture OMTR MKM Partners Buy $16.00 20.8% $13.24 2.7% 1.01B
CyberSource CYBS Wedbush Outper $18.00 6.8% $16.85 17.0% 666.9M
CYBS Barrington Outper $20.00 18.7%
SonicWALL SNWL Baird Outper $10.00 40.3% $7.13
18.0% 383.6M

STARS & DOGS……AND ACTIONS


Our publisher, Geiser Capital Corp, maintains for clients a list of 20 small-cap stocks expected to
outperform the Russell 2000. In a nutshell, the Geiser Top 20 is rolling weighted index; that is,
stocks are added when their expected returns are above the expected returns of stocks in the
selection and, inversely, stocks are deleted when expected returns are lower than what is
expected from other opportunities.
If the prior week was simply out of this world, the last one was not too bad either!

In a week characterized again by strong upward pressure on stock prices across all sectors, the
Russell 2000 picked up +5.6%, the S&P Small-Cap was not that far moving up +5.1% last week,
a tad higher than the NASDAQ which increased by +4.2, followed closely by the S&P 500 picking
up +4.1%, and the Dow closing rank with an increase of +4.0%, not all that far behind others.

The Geiser Top 20 finished the week up +7.7%, again well ahead of all indices.

Although the Geiser Top 20 is designed to represent stocks that would be found in accounts
under management, not to render it’s tracking overly complex and difficult to follow for readers,
our publisher aims to limit the number of switches in stock to a minimum, even though market
conditions may call for higher stock rotation. This is currently the case.

In the prior edition of The Small-Cap Beat, we indicated that we had added Dana Corp (DAN) to
the Top 20 at a base price of $1.80. In just two weeks, DAN has already increased by +65.6%
and, last week was the best performer of our Top 20 moving up +40.5% alone to become our top
holding. Not necessarily very far is Blyth (BTH), a stock mentioned three weeks ago as being
purchased at $32.50. Since then, BTH has increased +40.2% and now represents our second top
holding.

Our trade of week last week was a switch from ViaSat (VSAT) which was removed at $26.40 last
Friday to be replaced by CyberSource Corp (CYBS) at $15.75. VSAT had been purchased in
late May at a cost of $21.00, after recently lagging for too long to our publisher’s taste, the stock
was disposed at a profit of 25% attained in less than two months.

GEISER TOP 20 – THE TOP 3 HOLDING


Company Sym Cost Price Chg. Chg. % % Total MKT
% vs Holding Cap
W/W Cost
Dana Corp DAN $1.80 $2.97 40.6% 65.6% 6.9% $298.3M
Blyth BTH $32.50 $44.17 10.8% 40.2% 6.8% $393.1M
TriQuint TQNT $3.35 $6.97 10.1% 108.1% 5.8% $1.03B

LOOKING AHEAD…
Investors are expected again to have a lot to digest this coming week as the second quarter
earnings season continues to unfold. But with such a market performance over the last two
weeks, it is likely to prove awfully difficult to keep up the pace – even if we are quite bullish over
the next year. Although most, if not all of the bigger names have beaten expectations last week,
except Morgan Stanley (MS) to name one, and expectations last week were often beaten by
more than a fair margin, out of the bunch of marquee names that will be reporting this week some
may disappoint, or at least they may not beat expectations as widely as those that reported last
week.

And even if results to be reported this week were to surpass expectations, unless results
exceedingly went beyond expectations – and it would be difficult to do better than last week – it is
likely that investors have most likely already discounted results for those set to report this week.
There are only so many times investors can be surprised by more of the same and still continue
to push markets further higher.

Out of many that will be reporting from the big world this week, those on next page should be of
particular interest.
EARNINGS TO BE REPORTED THIS WEEK FROM THE BIG WORLD
Chg % Cur. Chg % Chg %
Date Companies Symb EPSe Yr Ago Y/Y Price W/W Y/Date
Corning GLW $0.32 $0.49 -34.7%
27-Jul $17.00 2.2% 79.9%
Honeywell HON $0.60 $0.96 -37.5% $33.99 4.8% 5.6%
Verizon VZ $0.63 $0.67 -6.0% $31.50 6.5% -2.9%
28-Jul McGraw-Hill MHP $0.55 $0.71 -22.5% $32.53 0.5% 42.8%
Textron TXT -$0.01 $1.03 -101.0% $11.31 11.0% -18.0%
McKesson MCK $0.86 $0.83 3.6% $46.71 2.3% 21.3%
ConocoPhillips COP $0.85 $3.50 -75.7% $44.95 6.1% -11.3%
29-Jul General Dynamics GD $1.57 $1.60 -1.9% $52.49 -2.0% -6.9%
Qwest Q $0.09 $0.11 -18.2% $3.99 0.0% 14.3%
Time Warner TWX $0.37 $0.24 54.2% $27.58 5.5% 1.7%
Owens-Illinois OI $0.90 $1.35 -33.3% $31.31 6.7% 14.6%
Symantec SYMC $0.35 $0.40 -12.5% $17.37 5.9% 28.5%
Visa V $0.64 $0.59 8.5% $67.29 5.0% 28.8%
Alcatel-Lucent ALU -$0.11 -$0.16 31.3% $2.54 1.2% 18.1%
30-Jul CIGNA CI $0.96 $1.08 -11.1% $26.20 5.3% 56.0%
Colgate-Palmolive CL $1.05 $0.98 7.1%
$75.10 2.8% 11.7%
Dow Chemical DOW -$0.08 $0.81 -109.9%
$20.19 18.8% 37.3%
Expedia EXPE $0.32 $0.40 -20.0% $18.45 10.8% 123.9%
Exxon Mobil XOM $1.02 $2.27 -55.1% $72.29 5.5% -7.4%
MasterCard MA $2.42 $2.11 14.7%
$185.47 3.1% 30.1%
Travelers TRV $1.28 $1.50 -14.7% $43.32 7.2% -2.6%
Tyco TYC $0.45 $0.88 -48.9% $29.38 3.1% 37.2%
Waste Mgt WMI $0.54 $0.63 -14.3%
$29.39 4.6% -9.3%
First Solar FSLR $1.62 $0.85 90.6%
$169.43 17.2% 22.8%
Walt Disney DIS $0.50 $0.62 -19.4%
$26.56 8.4% 17.1%
Chevron CVX $0.95 $2.90 -67.2%
$68.43 5.1% -5.7%
Weyerhaeuser WY -$0.71 $0.03
31-Jul $34.75 13.4% 14.3%

AVERAGE $17.93 $27.38 -34.5% 6.0% 20.1%

While we have been a long time proponent of the worst is behind and better days are just ahead,
all questioning the lack of market direction for the better part of June and early July, after picking
up nearly 10% in the last two weeks, earnings reports would have to be very positively surprising
for investors to still continue to push markets much higher in the short term. We are certainly ‘’en
route’’ to an economic recovery but, between now and then, there will likely be some setbacks
and disappointments. At this point some caution is warranted in the short term; after all markets
picking 5% per week, this certainly not sustainable.

As in the big world, small-caps set to report this week may have a hard time fulfilling markets’
expectations.

Although far from exhaustive, small-caps that will reporting this week and on which we will keep
our eyes wide open, the list include:
THIS WEEK SELECTED REPORTS IN THE SMALL-CAP WORLD
Exp.
Chg % Cur. Chg % Chg % MKT
Date Companies Symb EPSe Yr Ago Y/Y Price W/W Y/Date Cap
Actuate ACTU $0.09 $0.08 12.5%
27-Jul $4.55 -5.8% 53.7% 203.4M
Crane CR $0.49 $0.93 -47.3% $23.79 5.1% 40.9% 1.39B
Health Managt HMA $0.10 $0.10 0.0% $5.39 5.3% 201.1% 1.33B
Phase Forward PFWD $0.12 $0.12 0.0% $15.56 8.7% 24.3% 671.1M
28-Jul AMEDISYS AMED $1.02 $0.76 34.2% $38.72 6.4% -6.3% 1.06B
Aftermarket ATAC $0.44 $0.42 4.8%
Tech $16.82 1.6% 15.0% 332.6M
Black Box BBOX $0.62 $0.74 -16.2% $29.83 -11.7% 14.7% 523.0M
eHealth EHTH $0.15 $0.16 -6.3% $17.69 3.1% 33.2% 437.7M
EPIQ Systems EPIQ $0.17 $0.15 13.3% $16.25 4.1% -2.8% 585.8M
Office Depot ODP -$0.12 $0.04 -400% $4.99 10.9% 67.4% 1.37B
Websense WBSN $0.31 $0.37 -16.2% $16.37 2.8% 9.4% 724.7M
29-Jul Nice Systems NICE $0.35 $0.39 -10.3% $26.95 11.3% 19.9% 1.64B
Nu Skin NUS $0.30 $0.32 -6.3% $17.40 6.9% 70.1% 1.10B
Acxiom ACXM $0.05 $0.12 -58.3% $9.28 6.4% 14.4% 729.9M
Bare Escentuals BARE $0.20 $0.26 -23.1% $7.57 -5.4% 44.7% 696.0M
Digital River DRIV $0.41 $0.37 10.8% $41.10 6.4% 65.7% 1.57B
NetLogic NETL $0.25 $0.40 -37.5% $39.63 5.0% 80.1% 870.1M
Plexus PLXS $0.23 $0.41 -43.9%
$25.80 8.8% 52.2% 1.02B
Calgon Carbon CCC $0.16 $0.19 -15.8%
30-Jul $12.23 7.8% -20.4% 669.2M
Convergys CVG $0.22 $0.32 -31.3% $10.39 12.0% 62.1% 1.27B
Eastman Kodak EK -$0.37 $0.66 -156% $3.19 0.9% -51.5% 855.5M
Littelfuse LFUS $0.09 $0.45 -80.0% $24.43 4.4% 47.2% 530.6M
Revlon REV -$0.08 $0.04 -300% $5.53 8.6% -17.1% 284.9M
Ariba ARBA $0.16 $0.13 23.1% $11.29 25.4% 56.6% 986.5M
Cray CRAY $0.00 -$0.15 $8.14 -1.5% 291.3% 278.3M
Evergreen Solar ESLR -$0.08 -$0.08 0.0% $2.34 13.6% -26.6% 385.9M
Monolithic
Power MPWR $0.14 $0.20 -30.0% $23.91 0.1% 89.6% 809.7M
Radiant Systems RADS $0.15 $0.20 -25.0% $8.96 3.8% 165.9% 294.9M
Taleo TLEO $0.16 $0.14 14.3%
$17.00 -0.6% 117.1% 531.0M
Belo BLC $0.10 $0.26 -61.5%
31-Jul $2.58 28.4% 80.4% 264.4M
Interline Brands IBI $0.22 $0.33 -33.3% $15.82 10.5% 48.8% 513.4M
Kaydon KDN $0.31 $0.64 -51.6% $36.72 12.6% 8.1% 1.22B
AVERAGE
$6.36 $9.47 -32.8% 6.1% 51.5%

As last week, with so many corporate reports to go out this coming week and be digested,
economic releases are likely to take a back seat. Yet, there will be a some numbers highly
expected, including new home sales for June on Monday, consumer confidence also for June on
Tuesday, durable orders for June on Wednesday and, as usual on Thursdays, initial jobless
claims for the prior week. As suggested below, the state of current economic activity is not
exactly where the action is expected to come from. But, activity and action there should plenty
this week.
LOOKING FORWARD ON THE ECONOMY
Date Economic Release For Expected Prior
27-Jul Jun 352K 342K
New Home Sales
28-Jul Consumer Confidence Jul 48.7 49.3
28-Jul S&P/C-S Home Price Index May -17.80% -18.12%
29-Jul Jun -0.50% 1.80%
Durable Orders
29-Jul Jun 0.10% 1.10%
Durables, Ex Transportation
30-Jul Initial Claims Jul-25 585K 554K
31-Jul GDP-Adv. Q2 -1.50% -5.50%
31-Jul Core PCE Q2 2.40% 1.60%
31-Jul Employment Cost Index Q2 0.30% 0.30%
31-Jul Jul 42 39.9
Chicago PMI

After such performance by markets over the last two weeks, our guess is anything below much
better-than-expected earnings is very likely to trigger some form of a market pull back and out of
the large number that will be reporting next week, some misses are bound to occur. At this time,
the point remaining unanswered is what will be the catalyst and how significant may be the
market pullback. Best case scenario in the immediate would be for markets to trade sideways,
just to let everyone catch their breath.

This said, as noted above and even though markets may have to go through some sort of a pull
back in the short term, markets are still offering much more potential on the upside than there are
risks on the downside; and this by a wide margin. Although recent gains are impressive, there are
more to come.

On this note, have all a good investing week!

Stephane Solis
Editor
The Small-Cap Beat

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