THE SMALL-CAP BEAT

A GEISER CAPITAL CORPORATION WEEKLY PUBLICATION

In this Issue Week of July 10, 2009

• ANOTHER LONG WEEK FOR MARKETS – BUT THE

ONE TO BE DECISIVE IS THIS COMING WEEK
• EARNINGS SURPRISES & CHANGING GUIDANCES
• FROM BROKERS’ DESKS
• STARS & DOGS….AND ACTIONS
• LOOKING AHEAD…

ANOTHER LONG WEEK FOR MARKETS – BUT THE ONE TO BE DECISIVE

IS THIS COMING WEEK
Again, in a week very much lacking news from the corporate world and with only a few economic
releases to chew on, and those coming out not always all that clear as to where the US economy
is heading, investors continued to sit on the sidelines ahead of second quarter earnings
announcements set to kick off this coming Tuesday. With many still concerned over the prospects
of the economic recovery in the US, or more precisely how quickly will it occur, investors decided
to play it better safe than sorry.

At the end of the week, a week very much driven by falling commodity prices with crude oil losing
alone 10.3% to settle last Friday at $59.83 per barrel, a first since mid-May, the Russell 2000
shed -3.3%, the S&P Small-Cap doing slightly better but still losing -2.6%, all pretty much in-line
with the NASDAQ which dropped -2.3%, the S&P 500 losing -1.9%, a tad worst than the Dow
which managed a lost of -1.6% for the week. Not surprisingly, energy stocks (-3.8%) were major
laggards, underperforming the broader market along with industrial (-2.7%) and basic materials
stocks (-2.9%). In fact, all 10 economic sectors lost ground last week with defensive-oriented
health care (-0.3%) and consumer staples (-0.3%) stocks proving to be the best of the worst. The
Geiser Top 20 came in the middle of the pack, better than the Russell 2000 and the S&P Small-
Cap, but in-line with other major indices.

WEEKLY MARKET WRAP-UP

52 W Range 52 W % Chg
Close Chg % Low High Low High
Russell 2000 480.98 -3.3% 342.59 764.38 45.1% -35.0%
S&P Small-Cap 256.36 -2.6% 181.32 401.07 45.1% -34.4%

Geiser Top 20 163.14 -2.0% 65.97 283.41 134.3% -36.0%

S&P 500 879.13 -1.9% 666.79 1313.15 34.4% -31.7%

NASDAQ 1756.03 -2.3% 1265.52 1473.2 42.0% 21.9%
Dow 8146.52 -1.6% 6440.02 11933.5 28.6% -30.6%

Mondays’ session started on the footsteps of last week losses and weakness in overseas
markets and, despite a positive contribution early on from a slightly better-than-expected ISM
index reading for June at 47, up from 44 the prior month, that was insufficient and stocks felt
during the day to their lowest levels in more than a month. After spending most of the trading
session in the red, a late rally enabled the Dow and the S&P 500 to close marginally higher, while
the NASDAQ and the Russell 2000 ended slightly lower. Again volume was marginal.

The Economic Snap-Shot

Revised
Date Economic Release For Actual Expected Prior from
Jun 47 46 44
06-Jul ISM Services
08-Jul Consumer Credit May -$3.2B -$7.5B -$16.5B -$15.7B

09-Jul Initial Claims 07-Apr 565K 603K 617K 614K

09-Jul Wholesale Inventories May -0.80% -1.00% -1.30% -1.40%

10-Jul Export Prices ex-ag. Jun 0.80% NA 0.30%

10-Jul Import Prices ex-oil Jun 0.20% NA 0.20%

10-Jul Mich Sentiment-Prel Jul 64.6 71 70.8

Tuesday was a day to forget. In the absence of news, buyers decided to skip the day and losses
were significant with stocks finishing near the session lows with the S&P 500 closing below its
200-day moving average, only a third in the past 26 sessions.. Losses were significant, ranging
from high of -2.0% for the S&P 500 and the Russell 2000 to a low of -2.4% for the NASDAQ.
The downward trend was very broad-based as all 10 major sectors in the S&P 500 finished lower.
Industrials stocks suffered the most losing alone -3.3% for the day.

In the absence of news again on Wednesday, although markets began in positive grounds, it did
not take long for sellers to send stocks lower. But with U.S. Treasuries being bought out eagerly
in mid-session sending yield lower to 3.3% for the first time since May, stock buyers came back
into equity markets. While sellers attempted to drive markets further down in the afternoon, stocks
were able to hold and pass their lows to rebound prior to the closing. Defensive stocks fared best
with retailers advancing 2.0% on the trail of Family Dollar's (FDO) ($30.18; +7.9%) posting
better-than-expected earnings results to contribute to gather support for the sector. That was
counter balanced by commodity related stocks taking a beating again. Volume was itself at its
highest level in the last two weeks with 1.4 B shares traded on the NYSE.

Thursday was a shifty day but in the end, markets managed to close marginally higher. The
trading day started with Alcoa (AA) ($9.34; -5.2%), the first big name of the second quarter
season, reporting better-than-expected earnings, but still posting a loss despite a 2% increase in
revenue and the company announcing that a major corporate goal was to cut capital expenditures
by 50% in 2010 on top of a 50% reduction for 2009….Houston, we have a problem! Not
surprisingly, after an initial uptick, AA finished to day lower. That was followed by a very positively
surprising numbers for Initial Jobless Claims which felt for the first time in a very time below
600,000, the actual number being 565,000 but questionable according to some analysts. Despite
relatively disappointing same-store sales reports for June released by retailers, most stocks in the
sector spent the day trading in-line with the broader market.

Despite a rather surprisingly better-than-expected May Trade Balance report which went almost
unnoticed, market participants preferring apparently to focus on the worst-than-expected
preliminary July Michigan Sentiment data which came in at 64.6, compared to 70.8 in the prior
month, Fridays’ session was largely uneventful While stocks traded for most of the day in
negative territory, the Dow and the S&P 500 managed to close only marginally lower with the
NASDAQ posting a modest gain on the strength of techie stocks such as Apple (APPL)
($138.52; -1.1%) and Google (GOOG) ($414.40; +1.5%), both finishing the week on a positive
note.

Contrary to the last few weeks, the upcoming week will be more than packed with news, both
from the corporate world with major names to set to report second quarter results and still plenty
of economic releases. Investors will have more than fair share to digest for sure, most likely
bringing back buyers to work. For those on long side, news will be hopefully sufficiently positive to
trigger a rebound from recent weaknesses. If not, markets may well be at the mercy of the bears
and the bulls are likely to find the summer very long.

EARNING SURPRISES & CHANGING GUIDANCES

As in the last few weeks, only a number of small-cap companies were set to report last week. The
trend for results was either in-line with expectations or above expectations, but last week was not
the best time to report as investors appeared to have their own issues. Results that caught our
attention included;

SIGNIFICANT EARNINGS SURPRISES

ON THE POSITIVE SIDE
Yr Yr/Yr W% MKT
Date Companies Sym Actual Cons Ago Rev Close Chg Cap

07-Jul Greenbrier GBX 0.03a -0.05 0.49 -36.0% $6.08 -15.1% $102.5M

07-Jul Intl Speedway ISCA 0.35a 0.31 0.54 -12.9% $24.07 -4.7% $1.17B

07-Jul Ruby Tuesday RT 0.28 0.19 0.27 -7.1% $7.12 5.6% $375.9M

09-Jul FCStone FCSX 0.02a -0.09 0.42 -31.2% $3.95 -5.7% $110.3M

09-Jul Helen of Troy HELE 0.47 0.35 0.42 -0.8% $19.59 12.9% $584.10

ON THE NEGATIGE SIDE

Yr Yr/Yr W% MKT
Date Companies Sym Actual Cons Ago Rev Close Chg Cap

10-Jul PriceSmart PSMT 0.30 0.33 8.0% $16.25 -1.3% $480.7M

(a) Excluding non-recurring items; (b) May not be comparable to consensus.

Contrary to what had been the case for the previous two months, stock prices movements
appeared not to the triggered by results coming in above expectations, but more so this week by
changing guidance on the positive side by company’s management.

CHANGING GUIDANCES
POSITIVE
Date Company Symbol Period Est Guidance Close W% MKT
Chg Cap

07-Jul Littelfuse LFUS Q2 $0.00 $0.08-$0.10 $22.63 13.2% $491.6M

Ruby
07-Jul Tuesday RT FY10 $0.50-0.65 $7.12 5.6% $375.9M
08-Jul Websense WBSN Q2 $0.30 $0.30-0.32 $15.59 -9.1% $690.2M
08-Jul Deluxe DLX Q2 $0.45 $0.54-0.56 $14.63 15.9% $747.7M
09-Jul Gymboree GYMB Q2 $0.16 $0.19-0.24 $35.49
3.5% $1.05B

NEGATIVE

low end of
09-Jul bebe stores BEBE Q4 $0.05 $0.02-0.10 $5.90 -8.7% $511.2M

09-Jul Hot Topic HOTT Q2 -$0.05 ($0.09)-(0.07) $7.10 0.4% $312.5M

 Lawson
09-Jul Software LWSN Q1 $0.08 $0.05 $5.24 -25.9% $855.7M

FROM BROKERS’ DESKS

With investors not in a mood to kid around, it was not necessarily the most opportune timing for
brokers to issue positive recommendations on small-caps stocks last week. This is well illustrated
below.

SELECTED BUYING IDEAS FROM BROKERS

Exp. Close W% MKT
Company Sym Broker Ratings Chg Target Retrn Chg Cap

SonicWALL SNWL Lazard

Capital Mkts Hold » Buy $8 33.6% $5.99 8.5% $322.2M

FormFactor FORM Oppenheimer Perform » $22 »

Outperform $30 50.9% $19.88 6.7% $980.9M
Art Technology ARTG MKM $4 »
Partners Buy $5 32.6% $3.77 -0.5% $477.2M

Clean Energy CLNE Lazard $10 »

Fuels Capital Mkts Buy $12 43.9% $8.34 -1.5% $418.9M
Trex TWP Stifel Nicolaus Hold » Buy $20 67.9% $11.91 -3.6% $183.5M
Epicor
Software EPIC B. Riley & Co Buy $5.48 -0.7% $333.9M

DryShips DRYS Credit Suisse Underperform $5 »

» Outperform $8 51.8% $5.27 -3.1% $810.8M
Photronics PLAB UBS Neutral » Buy $4.41 10.0% $185.2M
California Pizza CPKI B. Riley & Co Neutral » Buy $14.76 9.7% $355.1M

KB Home KBH Credit Suisse Neutral »

Outperform $12.36 -4.4% $942.1M
Volcano VOLC Leerink
Swann Outperform $14.77 11.4% $713.5M

Perry Ellis PERY Ladenburg

Thalmann Buy $10 49.5% $6.69 -4.2% $103.8M
Supertex SUPX Merriman Buy $26.15 3.0% $337.0M
Gymboree GYMB Wedbush $48 »
Morgan Buy $49 38.1% $35.49 3.5% $1.05B
Caris & $45 » 32.4%
Company Buy $47
Helen of Troy HELE Wedbush $22 »
Morgan Buy $24 22.5% $19.59 12.9% $584.4M

Commvault CVLT RBC Capital Outperform $13 »

Systems Mkts $18 13.7% $15.83 -2.9% $658.8M

Intl Speedway ISCA Ladenburg $25 »

Thalmann Buy $32 32.8% $24.09 -4.6% $1.17B

Dana Holding DAN Barclays Equal Weight

Capital » Overweight $1.73 23.6% $173.2M
Emulex ELX Needham Hold » Buy $11.50 28.5% $8.95 -5.4% $739.4M

PHH Corp PHH FBR Capital Mkt Perform » $13 »

Outperform $23 39.2% $16.52 -2.5% $898.5M

Jo-Ann Stores JAS Boenning &

Scattergood Outperform $23 $19.70 -3.1% $521.1M
 KongZhong KONG Brean Murray Buy $12 19.4% $10.05 -4.5% $355.7M

Janney
Internet Capital ICGE Mntgmy Scott Buy $6.74 2.7% $247.5M

Yet, there were a few brokers’ calls that are worth mentioning, including Barclays change of
stance on Dana Holding (DAN) from Equal Weight to Overweight which triggered a significant
upward movement for DAN (+23.6%) on Friday on volume about 4X more than usual. Current
median target price for DAN is $3.50, while P&F charting suggests $7.88.

Another one would be the change in target price for Helen of Troy (HELE) issued by Wedbush
Morgan, but the price move in the stock (+12.9%) may have been more directly caused by better-
than-expected earnings reported by HELE this week. Current target price for HELE ranges from a
high of $24 to a low of $19, but P&F charting is bearish on HELE.

Finally, the call by UBS on Photronics (PLAB) which went from Neutral to a Buy and the stock
got noticed with PLAB jumping 10% last week. The median target price of PLAB is $5.50, in-line
with P&F charting.

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.

In what was a very forgettable week, the Russell 2000 shed -3.3%, the S&P Small-Cap doing
slightly better but still losing -2.6%, all pretty much in-line with the NASDAQ which dropped -
2.3%, the S&P 500 losing -1.9%, a tad worst than the Dow which managed a lost of -1.6% for the
week. Not surprisingly, with crude oil prices dropping like a rock, energy stocks (-3.8%) were
major laggards. The Geiser Top 20 came in the middle of the pack, better than the Russell 2000
and the S&P Small-Cap, but in-line with other major indices.

In the case of the Geiser Top 20, a number of stocks were forced out as they attained pre-set
sell benchmark. That was the case for Affymetrix (AFFX) sold at $5.50 with a gain of 52%,
Black Box (BBOX) disposed at $32 with a gain of 9.4% in a month or so, China Medical
Technologies (CMED) sold $19.30 at a lost 17.9%, JA Solar (JASO) sold at $4.25 for a net gain
of 15.3% after six weeks and LDK Solar (LDK) disposed at $10.25 for a net gain of 21.9%, also
after six weeks.

The percentage of stocks currently above their 50-day moving averages in the S&P 500 has now
dropped below 25%. There are currently zero stocks in the Energy and Telecom sectors that are
trading above their 50-days. Industrials are the third worst at 3%, followed by Financials at 6%
and Materials at 7%. Yet, Utilities, Consumer Staples, and Health Care are all above 60%, so
there has been quite a bit of rotation during the recent market pullback. The last time the overall
numbers were this weak, all sectors were down in the dumps and that was just prior to the major
run that began in mid- March. What’s needed and what investors sitting on the sidelines have
been desperately looking for in the last few weeks is a trigger, but no avail thus far. But this may
well change next week.
Needless to say, to find stocks meeting the Geiser Top 20 stringent criteria has become
increasingly more difficult as many potential candidates are not simply passing the basic test of
trading above their 50-day moving average, all in an upward trend. But with over 200 stocks
closely monitored, gaps were quickly filled.

LOOKING AHEAD…
Investors are expected to have a lot to digest this coming week and by Friday, we should have a
very good idea of how second quarter results will turn out to be. This is likely to set a strong trend
in markets direction for the remaining of the summer.

While the number of corporate reports to be released next week will not be most important, there
are big names that will be reporting and those will certainly be very indicative of what investors
will discover in coming weeks. Among those set to report this week, the list includes major
financial institutions such as Goldman Sachs (GS) (FC $3.48) on Tuesday, JP Morgan Chase
(JPM) (FC $0.04 vs $0.54 LY) on Thursday and Bank of America (BAC) (FC $0.25 vs $0.72 LY)
and Citigroup (C) (FC -$0.31 vs -$0.49 LY) both on Friday. Other market mover names that will
be reporting this week include on Tuesday Johnson & Johnson (JNJ) (FC $1.11 vs $1.18 LY),
Intel (INTC) (FC $0.08 vs $0.28 LY) and YUM Brands (YUM) (FC $0.43 vs $0.45 LY), followed
on Wednesday by Abbott (ABT) (FC $0.89 vs $0.84 LY) and Xilinx (XLNX) (FC $0.19 vs $0.30
LY), and on Thursday Baxter (BAX) (FC $0.94 vs $0.85 LY), Google (GOOG) (FC $5.06 vs
$4.63 LY) and IBM (IBM) (FC $2.02 vs $1.98 LY) to finish with General Electric (GE) (FC $0.23
vs $0.54 LY) on Friday.

In the Small-Cap world, as indicated below, it will also be a much busier week. Yet, when looking
at weekly change in prices for a number of companies set to report, it appears that investors are
not necessarily expecting much. Results in-line or generally above expectations may well bring
forth a rebound for small-caps stocks which, as the market in general, have gone nowhere in
recent weeks but with a downward bias.

Small-Caps To Watch For

Prior Q
Yr/Yr W% MKT
Date Companies Symbol Expt. Yr Ago Rev Close Chg Cap

13-Jul Novellus NVLS -$0.38 $0.06 -20.7% $17.99 2.0% $1.76B

14-Jul AAR Corp AIR $0.46 $0.52 -10.0% $14.62 -6.7% $565.7M

14-Jul ADTRAN ADTN $0.28 $0.34 -7.9% $20.85 -9.3% $1.3B

15-Jul Gannett GCI $0.36 $1.01 -8.4% $3.19 -3.3% $745.5M

Knight Capital
15-Jul Group NITE $0.38 $0.32 26.7% $16.88 -0.5% $1.57B

15-Jul Lufkin Industries LUFK $0.41 $1.42 8.6% $39.03 -3.6% $579.0M

15-Jul Texas Industries TXI -$0.05 $0.92 -22.5% $30.17 -0.7% $835.8M

15-Jul Wolverine WWW $0.26 $0.33 2.6% $21.25 -1.3% $1.05B

15-Jul Worthington WOR $0.03 $0.72 -30.9% $11.30 -9.4% $892.0M

16-Jul Cypress Semi CY -$0.10 $0.28 -17.3% $8.88 -2.8% $1.27B

16-Jul Fairchild Semi FCS -$0.11 $0.17 0.9% $7.09 -0.4% $877.9M

16-Jul Knoll KNL $0.21 $0.49 8.0% $7.38 -0.8% $347.0M

 16-Jul Polaris Inds PII $0.47 $0.72 -20.2% $31.36 0.5% $1.02B

16-Jul Popular Inc BPOP -$0.37 $0.06 -46.6% $1.37 -30.5% $386.4M

16-Jul Sensient SXT $0.51 $0.53 0.0% $22.55 2.0% $1.1B

16-Jul USA Truck USAK $0.01 $0.21 -26.5% $13.38 -1.0% $139.4M

16-Jul Watsco WSO $0.62 $0.94 -23.4% $44.56 -5.7% $1.27B

16-Jul Cytec CYT $0.01 $1.20 -37.1% $18.59 0.5% $877.4M

16-Jul Evergreen Solar ESLR -$0.08 -$0.08 $1.99 -16.7% $328.3M

17-Jul Amcol ACO $0.29 $0.58 -14.2% $20.17 -1.9% $617.0M

17-Jul Badger Meter BMI $0.54 $0.48 -4.5% $38.48 -8.8% $569.9M

Even if investors are expected to have a lot on their plate from corporate reports, there will also a
good amount of economic releases to digest staring on Tuesday with the PPI and retail sales for
June, followed on Wednesday by the CPI, business inventories and data on Industrial Production,
as usual on Thursday, Initial jobless claims will be released and, finally on Friday, it will be
building permits and housing starts. Certainly a well packed week of news for investors

Looking Forward On The Economy

Date Economic Release For Expected Prior

13-Jul Treasury Budget Jun -$77.5B $33.5B

14-Jul Core PPI Jun 0.10% -0.10%

14-Jul PPI Jun 0.80% 0.20%

14-Jul Retail Sales Jun 0.50% 0.50%

14-Jul Retail Sales ex-auto Jun 0.50% 0.50%

14-Jul Business Inventories May -1.00% -1.10%

15-Jul Core CPI Jun 0.10% 0.10%

15-Jul CPI Jun 0.60% 0.10%

15-Jul Capacity Utilization Jun 67.90% 68.30%

15-Jul Industrial Production Jun -0.60% -1.10%

16-Jul Initial Claims 07-Nov 565K

17-Jul Building Permits Jun 523K 518K

17-Jul Housing Starts Jun 530K 532K

Contrary to the last few weeks when worthwhile news did become a scarce commodity only to
allow the bears to roar back easily to drive markets in a downward trend, the coming week will be
very different with investors having a lot to chew on. Hopefully for the bulls, news to be released
will be sufficiently positive for buyers to come back to work. If not, markets may be in for a very
long summer. Stay tuned, this week is likely to be a do or break for investors on the long side, at
least for this summer.

On this note, have all a good investing week!

Stephane Solis
Editor
The Small-Cap Beat

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