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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 S&P Small- Cap

548.46

5.6%

342.59

764.38

60.1%

-28.2%

9.8%

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

0.30

0.27

0.68

11.1%

-55.9%

-22.1%

$23.48

9.8%

30.4%

Hasbro

HAS

0.26

0.23

0.25

13.0%

4.0%

1.0%

$26.46

4.2%

-7.9%

Sybase

SY

0.56

0.52

0.49

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

0.54

0.52

0.55

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

27-Jul

Corning

GLW

$0.32

$0.49

-34.7%

$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