Congratulations to All Who Bought: SMCI, APAC, CNTF

Trends, Observations, and Exclusive Opinion

Three SmallCaps That Produce Earnings

SMCI: Server-Selling Co has a Tremendous Q4; Wow-

APAC: Co Will Use Cash on Hand to Buy-Back 5m Shares

CNTF: Co Posts Y-O-Y Q2 Net Revenue Increase of 31.5%

First up this morning we have Super Micro Computer Inc., (SMCI) http://www.supermicro.com/ currently trading in the $9.43 range on a 3-Month average daily trading volume of 315,146 shares. SMCI has a 52-week high of $19.55 set on 04-26-10 with current trailing twelve month revenues of $721+ million and a positive, corresponding diluted EPS of +$0.65. I really like those earnings. SMCI primarily sells a range of server options with single, dual, and quad CPU capability supporting Intel Pentium and Xeon multi-core architectures in 1U, 2U, 3U, 4U, tower, and blade form factors; and server systems for AMD dual and quad Opteron in 1U, 2U, 4U, and blade form factors. As of June 30, 2009, the company offered approximately 750 different server systems. It also provides approximately 3,000 stock keeping units. Earlier this month SMCI posted its Q4 and FY-end numbers. Net income for the fourth quarter of fiscal year 2010 was $7.7 million or $0.18 per diluted share, an increase of 227.2% from the net income of $2.4 million, or $0.06 per diluted share in the same period a year ago. A Giant Gain. Net sales for the fourth quarter ended June 30, 2010 totaled $201.7 million, up 63.4% from $123.5 million in the fourth quarter of fiscal year 2009. Another Giant Gain. No customer accounted for more than 10% of net sales during the quarter. You’ve got to like that diversity. SMCI at $10 off its 52-week high is a ‘Buy on the Dips’ consideration for me.

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Next up this morning we have APAC Customer Services Inc., (APAC) http://www.apaccustomerservices.com/ currently trading in the $4.91 range on a 3-Month average daily trading volume of 198,991 shares. APAC has a 52-week high of $7.02 set on 10-15-09 with current trailing twelve month revenues of $316+ million and a positive, corresponding diluted EPS of +$0.95. I really like those earnings as well. APAC provides customer service support for various medical plans, including pharmacy, medical, dental, vision, and Medicare Part D to plan members and healthcare plan providers. APAC also provides services for the publishing industry; reservation booking for general and corporate travel and assists customers with card activation, credit inquiries, billing issue resolution, account maintenance, balance increases and transfers, and balance inquiries for financial services industry. As of January 3, 2010, APAC operated nine customer care centers in the United States, four off-shore customer care centers in the Philippines, and 1 near-shore customer care center in the Dominican Republic. Yesterday APAC announced that its Board of Directors has authorized the repurchase of up to an aggregate of five million shares of its common stock. The repurchase program is expected to continue over the next 12 months unless extended or shortened by the Board of Directors. The company will use cash on hand to fund any purchases. The company is not obligated to acquire any particular amount of common stock as a result of the plan, which may be suspended at any time at the company’s discretion. Last week APAC posted its Q2 numbers. Revenue for the 2010 second quarter rose 17.2% to $77.4 million from $66.0 million in the 2009 second quarter. APAC reported net income of $5.3 million, or $0.10 per diluted share, compared to net income of $7.7 million, or $0.14 per diluted share, in the prior-year quarter. At $2 and change off its 52-week high, APAC is also a ‘Buy on the Dips’ consideration for me.

Finally this morning we have China Techfaith Wireless Communication Technology Ltd., (CNTF) http://www.techfaithwireless.com/ currently trading in the $3.34 range on a 3-Month average daily trading volume of 215,369 shares. CNTF has a 52-week high of $3.93 set on 12-02-09 with current trailing twelve month revenues of $223+ million and a positive, corresponding diluted EPS of +$0.22. Again, I like those earnings. CNTF operates as an original developed products provider that is focused on the original design and development of handsets, and sale of finished products in China and internationally. CNTF sells smart phones, wireless modules, and other electronic components, which include data cards, printed circuit board assemblies, and wireless software and applications; and mobile handset design services based on existing platforms and new platforms, as well as successor model design. CNTF has a joint venture with QUALCOMM to develop application software for wireless devices. Earlier this week CNTF posted its Q2 numbers. Net revenue was $65.5 million, a 7.6% increase compared to the first quarter of 2010 and a 31.5% increase compared to $49.8 million in Q2 ’09. Even at near its high, CNTF is so embedded in China, its position and earnings make it very attractive. CNTF would be a short-term (6 Mo) ‘Buy’ consideration for me.  

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