THE SMALL-CAP BEAT

A GEISER CAPITAL CORPORATION WEEKLY PUBLICATION

In this Issue Week of June 19, 2009

• A BREATHER – JUST WHAT THE DOCTOR ORDERED!

• EARNINGS SURPRISES & CHANGING GUIDANCES
• STARS & DOGS….AND ACTIONS
• ON THE PRIVATE FRONT – TO WATCH FOR
• LOOKING AHEAD…

A BREATHER – JUST WHAT THE DOCTOR ORDERED!

Last week began on a sour note just like the prior Friday. Markets dove heavily on Monday, but it
all happened on light volumes as if buyers took the day off leaving sellers in the driver seat. At the
closing of the bells, the Dow had lost 2.1%, the S&P 2.4% and the NASDAQ 2.3%. That set the
tone for the remaining of the week with markets recovering toward the end on continued
indications that economic recovery was well underway.

At the end of the week. nine of the 10 S&P sectors finished lower, the exception being healthcare stocks
(+2.1%) reputed for their defensive nature. Market declines were led by Energy stocks (-6.5%) on falling
commodity prices, and Materials (-6.4%) and Industrials stocks (-5.6%) with industrial production still
lagging. But with markets up a very healthy 40% since mid-March for larger caps, and nearly 50% for the
small-caps, a breather may just be what the doctor ordered.
WEEKLY MARKET WRAP-UP
52 W Range 52 W % Chg
Close Chg % Low High Low High
Russell 2000 526.83 -2.7% 342.59 764.38 49.7% -32.9%
S&P Small-Cap 280.09 -2.5% 181.32 402.07 48.7% -32.9%

Geiser Top 20 163.92 0.4% 65.97 283.41 126.3% -47.3%

S&P 500 940.09 -2.6% 666.79 1404.46 38.2% -34.4%

NASDAQ 1849.42 -1.7% 1265.52 2549.94 44.4% -28.3%
Dow 8763.12 -2.9% 6440.02 12750.8 32.6% -33.0%

On Tuesday markets attempted a rebound but that was cut short by numbers on Industrial
Production which came in at -1.1% for May, slightly lower than expectations, while April was revised
downward from -0.5% to -0.7%. Capacity utilization felt to 68.3% in May, a new record and a second
consecutive monthly low. The previous record dated back to 1967, a very long time ago. Needless to say,
the latter more than offset better-then-expected data on Housing as well as with Building Permits, both
pointing toward a long expected recovery. As important, fears of inflation stimulated by recent overnments
spending to boost the recovery were subdued with the PPI for May coming in much lower than expected.

In fact the above should have set the tone for a strong Wednesday, more so with the release of the PPI
which also posted a modest increase of 0.2% in May compared to expectations of 0.6%, but that was all
derailed with FedEx (FDX) ($51.45) coming with gloomy expectations for the next 6 months. This on top of
Standard & Poor cutting its ratings on banks citing expected volatility in revenue and the likeliness of a
tighter regulatory environment was more than enough to again pull markets downward, but only mildly and
essentially led by financial stocks.
The Economic Snap-Shot
Date Economic Release For Actual Expected Prior Revised from
15-Jun NY Manuf. Index Jun -9.41 -4.6 -4.55
16-Jun Housing Starts May 532K 485K 454K 458K
16-Jun Building Permits May 518K 508K 494K 498K
16-Jun PPI May 0.20% 0.60% 0.30% --
16-Jun Core PPI May -0.10% 0.10% 0.10% --
16-Jun Capacity Utilization May 68.30% 68.40% 69.00% 69.10%
16-Jun Industrial Production May -1.10% -1.00% -0.70% -0.50%
17-Jun CPI May 0.10% 0.30% 0.00% --
17-Jun Core CPI May 0.10% 0.10% 0.30% --
17-Jun Crude Inventories 06-Dec -3.87M NA -4.38M
18-Jun Initial Claims Jun-13 608K 604K 605K 601K
18-Jun Leading Indicators May 1.20% 1.00% 1.10% 1.00%

On Thursday, with initial jobless claims largely in-line with expectations, but as a strong indication
that the current recession is now fading away, the Conference Board indicated that its index of
leading indicators had jumped 1.2% in May - its biggest monthly gain since March 2004 – and it
took no more for markets to begin rebounding. For good reasons, Seven of the Conference Board
index's 10 components grew in May, including money supply, building permits, consumer
expectations, stock prices and vendors' deliveries of supplies to companies, but employment
factors -- claims for jobless aid and weekly manufacturing hours – still weighed down on the
index. Financial stocks which had been under pressure as a result of anxiety over increased
regulations for the sector in response to the credit crisis led the way on the upside along with
healthcare stocks again. Gains were overall only marginal, but still much better than the early part
of the week.

On a day generally lacking economic releases, Friday ended up to be a mixed session with most
of the actions resulting from the expiration of quarterly options and futures. While volume was
rather heavy, gains were only modest as a sell off in late afternoon brought investors back to
reality leaving all major indexes with their first weekly loss since early May. Tech, financial and
retail stocks were among the winners allowing the NASDAQ to rebound 1.1% for the day, while
utilities and energy stocks were lower to keep the Dow slightly under water.

With the economy continuing to improve, and still so much money remaining on the sideline with
retail investors having barely participated in the recent upswing achieved by markets, it is more
than likely that the much expected correction in stock prices may well remain more subdued that
generally anticipated. At least, this is our stance.

EARNING SURPRISES & CHANGING GUIDANCES

Only a few major companies reported last week and for those reporting, despite results coming
essentially better-than-expected, markets appeared to focus more on the lower guidance issued
by FedEx (FDX) ($51.45) which nevertheless managed to post better-than-expected results
($0.64 Act. vs $0.51 Cons.). Best Buy ( BBY) ($34.38) was another well known name that
surpassed expectations ($0.42 Act. vs $0.34 Cons.), while ADOBE (ADBE) ($29.33) and
Research in Motion (RIMM) ($72.78) were in essence in-line with expectations.

In the small-cap world, although the number of companies reporting was rather limited, most
results came in as expected. Companies reporting significantly above or below expectations 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

15-Jun La-Z-Boy LZB 0.07a -0.11 0.02 -22.7% $4.03 10.1% $207.4M

17-Jun Actuant ATU 0.20 0.10 0.56 -34.8% $15.21 7.6% $863.2M
ON THE NEGATIGE SIDE
Yr Yr/Yr W% MKT
Date Companies Sym Actual Cons Ago Rev Close Chg Cap

15-Jun Casey's Gen CASY 0.31b 0.36 0.28 -26.7% $26.44 4.0% $1.33B

16-Jun A Power Ener APWR 0.04 0.12 0.11 -3.4% $8.50 -34.0% $284.9M
(a) Excluding non-recurring items; (b) May not be comparable to consensus.

Of the companies that issued new guidances last week, two caught our attention particularly.
For one, Stec Inc. (STEC) ($24.20), a manufacturer of memory chip, declared Tuesday that
sales and earnings would likely surpass current expectations. Based on a revised outlook,
STEC’s management indicated that it was probable that it would achieve adjusted EPS of
between $0.32 and $0.36, compared with a previous forecast of $0.20 to $0.22. STEC also
boosted its revenue forecast from $70 M to $82 M. Following the announcement, STEC
shares rose $5.44, or 30%, to $23.46. The highest target price by analysts following STEC is
$32.00. This would allow a return of 33% from STEC’s current price.

Another one that got us blinking was Actuant Corp (ATU) ($15.21), a maker of motion
control systems and hydraulic and electrical tools and supplies. On Wednesday, ATU
indicated that as a result of a more stable revenue outlook in several of its key markets, the
company was expecting to achieve EPS of between $0.12 and $0.20, compared to a current
EPS consensus of $0.12. Based on the highest target price for ATU on the Street, this is a
stock that could provide a return of 51% from current price.

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

16-Jun STEC Inc STEC Q2 $0.21 $0.32-0.36 $24.20 29.2% $1.17B

18-Jun Actuant ATU Q4 $0.16 $0.12-0.20 $15.21 7.6% $863.2M

FY09 $0.84 $0.87-0.95

NEGATVE
MKT
Date Company Symbol Period Est Guidance Close W % Chg Cap

17-Jun Progress Soft PRGS Q3 $0.42 $0.38-0.41 $22.03 -4.8% $878.8M

17-Jun CLARCOR CLC FY09 $1.56 $1.40-1.60 $31.67 5.1% $1.61B

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.

The Geiser Top 20 edged up only 0.4% last week but that was again a much better performance
than the Russell 2000 (-2.7%), the S&P Small-Cap (-2.5%), the NASDAQ (-1.7%), the S&P 500 (-
2.6%) or the Dow (-2.9%), all of whom lost significant ground last week.

The past week was a considerable trading week for the Geiser Top 20. As mentioned last week,
Bare Escentuals (BARE) ($8.85) which had reached Geisers’ stop-loss was disposed with a gain
of 64%. On Tuesday with markets weakening a number of trades were undertaken. First, Geiser’s
exposure to Youbet.com (UBET) ($3.06) was reduced by about 50% to cash in a gain of 66% on
shares sold. For different reasons, Clean Energy Fuels Corp (CLNE) ($8.86) (+6.3%),
Euroseas (ESEA) ( $5.14) (+8.3%), Corporate Executive Board (EXBD) ($20.45) (+23.0%),
Lance (LNCE) ($21.69) (-3.5%) and SkillSoft (SKIL) ($7.80) (-3.2%) were all disposed of.

These stocks were immediately replaced in Geiser’s Top 20 by China Medical Technologies
(CMED) ($22.76), Healthways (HWAY) ($13.00), 99 Cents Only Stores (NDN) ($13.00), Pep
Boys (PBY) ($9.10), Rentrak Corporation (RENT) ($14.20) and Shuffle Master (SHFL) ($5.40).

Among Geiser’s Top 20, the two best performers last week were ChinaCast Education (CAST)
($7.03) (+11.1%) and Youbet.com (UBET) ($3.06) (+10.5%). The Dog of the Week was JA
Solar (JASO) ($4.98) (-12.1%), but that was following gains of 10% and 21% in the prior two
weeks.
GEISER TOP 3 HOLDING
Company Sym Price % Total Target
Holding
ChinaCast Education CAST $7.03 8.8% $10.00
Affymetrix AFFX $6.06 6.1% $11.25
JA Solar JASO $4.98 5.2% $8.00

ON THE PRIVATE FRONT – TO WATCH FOR

A private stock that we follow closely is Nanometrix, a promising company that has could soon
become public. Last week, Nanometrix announced that a patent application on a ‘’Method and
Apparatus for Two Dimensional Assembly of Particles’’ had been examined by the United States
Patent and Trademark Office (USPTO) and had been accepted for issuance as a patent.

For Nanometrix, this is a major recognition toward the Company’s platform technology – the first
to develop linear coating as a manufacturing process enabling the fabrication of ultra precise
coatings with unprecedented thickness control, molecular orientation and functionality with
thickness starting at one nanometre, one billion’s of a meter and at production scales and rates of
meters per minutes.

Nanometrix current technology development includes the design and construction of an Industrial
Linear Coating Tool (LCT 1000) for flexible and rigid substrates. The LCT1000 is provided with
fully automated monolayer production system based on a driven monolayer assembly method
(DMA). Future applications are numerous but Nanometrix current focus is mainly on solar
efficiency enhancement by coating an engineered monolayer to improve light trapping capabilities
of current solar cells and special surface treatments for Flat Panel Displays (FPD) and Flexible
Electronics. Nanometrix is certainly a stock to watch for.

LOOKING AHEAD…
The highlight of the week will likely be the FOMC Meeting. Markets will certainly examine the
wording related to what may be clues on the tools the Fed may use, or those it may stop using, to
promote the economic recovery further. Participants will be looking for a confirmation that federal
funds rate should remain at an exceptionally low level into the foreseeable future. Again markets
are expected to react to movements in commodities and the US dollars.

On the economic front, although there will not be tons of releases, reports on existing and new
home sales as well as durable goods orders and personal income and spending will be of
particular interest.

Looking Forward On The Economy

Date Economic Release For Expected Prior
23-Jun Existing Home Sales May 4.83M 4.68M
24-Jun Durable Orders May -0.90% 1.90%
24-Jun Durable Orders, Ex- May -0.50% 0.80%
Trans
24-Jun New Home Sales May 360K 352K
24-Jun Crude Inventories Jun-20 -3.87M
25-Jun Q1 GDP - Final Q1 -5.70% -5.70%
26-Jun Personal Income May 0.20% 0.50%
26-Jun Personal Spending May 0.40% -0.10%

On the corporate front, there are some widely-held names that are set to report their latest
quarterly results, including Walgreen (WAG) (Cons $0.36 vs $0.58 Last Year) on Monday,
followed on Tuesday by Oracle (ORCL) (Cons. $0.44 vs $0.47 Last Year) and on Wednesday
Monsanto (MON) (Cons. $1.18 vs $1.45 Last Year) and Nike (NKE) (Cons $0.96 vs $0.98 Last
Year) to finish on Thursday with Palm (PALM) (Cons. -$0.64 vs -.$0.22).

In the Small-Cap world, it should be a fairly busy week with a number of companies set to report.
Those that have caught our attention include;

Small-Caps To Watch For

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

22-Jun America's Car-Mart CRMT $0.38 $0.47 3.3% $17.85 -1.5% $210.3M

23-Jun Steelcase SCS -$0.14 $0.16 -27.3% $5.06 -9.5% $675.4M

23-Jun AeroVironment AVAV $0.26 $0.30 7.6% $28.10 3.0% $599.3M

23-Jun Apogee Enterpr APOG $0.27 $0.36 -17.1% $12.73 -10.5% $353.6M

23-Jun Jabil Circuit JBL $0.02 $0.26 -5.6% $6.85 -9.3% $1.46B

23-Jun Sonic SONC $0.20 $0.28 -3.2% $8.90 0.7% $540.4M

23-Jun The9 Ltd NCTY $0.33 $0.46 -4.4% $10.02 -9.6% $268.7M
 Prior Q
Yr/Yr W% MKT
Date Companies Symbol Expt. Yr Ago Rev Close Chg Cap

24-Jun American Greetings AM $0.20 $0.27 -14.3% $6.65 -10.7% $262.2M

24-Jun Rite Aid RAD -$0.13 -$0.20 -1.7% $1.29 -16.2% $1.14B

24-Jun Xyratex XRTX -$0.28 $0.15 -15.3% $3.85 -11.9% $113.4M

25-Jun Lennar LEN -$0.63 -$0.76 -44.2% $7.79 -2.4% $1.25B

25-Jun Schawk SGK -$0.06 $0.15 -22.2% $8.08 0.2% $201.5M

25-Jun TIBCO Software TIBX $0.09 $0.07 -9.3% $6.13 -6.1% $1.08B

26-Jun AZZ Inc. AZZ $0.66 $0.82 30.9% $34.62 -5.0% $420.4M

26-Jun KB Home KBH -$0.64 -$3.30 -61.3% $13.41 -4.8% $1.02B

With the markets still very much expecting a sizeable correction, unless the unexpected occurs,
we expect markets to trade sideways again this week as potential negative news should be
outweighed the release of positive announcements. After all, the significant correction that
everyone is sort of expecting may never occur, but a pause after recent markets’ strength may
just be well deserved.

On this note, have all a good investing week!

Stephane Solis
Editor
The Small-Cap Beat

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