In case you haven’t had a chance to read the stock updates from each of the weekly Small-Cap All Stars articles, I have aggregated them all below for your convenience.

Value Portfolio

Brocade Communications (Nasdaq: BRCD). After guiding down second-quarter results on May 1^st, the computer company reported second-quarter results slightly better than the preliminary guidance ($0.17 EPS vs. $0.15-$0.16 EPS guidance). However, in the conference call management subsequently offered third-quarter guidance below analyst estimates due to storage area network (SAN) weakness. The good news is that the fiscal third quarter should be the SAN revenue trough and growth should resume thereafter:

Our OEM partners are expecting a return to growth in storage during the second half of calendar 2013, and we believe our SAN business will see the benefit of this but it will be outside of our fiscal Q3.  

ISI Group upgraded the stock to a buy with a $7.50 price target, stating that there are “catalysts on the horizon.” Specifically: (1)  higher earnings per share after a $100 million cost-reduction program is put into effect; and (2) the likelihood that the company will start paying a dividend.

The stock fell for seven consecutive days in reaction to news on June 17^th that Tom Ellery, Vice President of sales for the Americas, was leaving “to pursue other career interests.” But all was forgotten on June 26^th when Brocade’s stock jumped 6.2% after news broke that David Goulden, the CFO of EMC, was quoted in London saying that he sees “early signs of recovery in information technology spending.”  

Buckle (NYSE: BKE). First-quarter financial results were slightly disappointing, with earnings per share down and revenues up only a bit, missing analyst estimates on both measures for the first time in almost two years. In the conference call, CEO Dennis Nelson blamed the earnings miss on a change in manufacturers of its private-label denim clothes, that caused the new styles to arrive in stores later than expected and consequently some potential sales were forfeited during the spring selling season. That inventory problem has been corrected, so the second quarter should look much better. We already have evidence of an improvement, with May same-store-sales rising 4.1 percent, which was much better than analyst estimates of only a 3.3 percent increase.

I’m not worried about the earnings miss because the last time the company missed earnings was in August 2011 and Buckle’s stock price has outperformed the S&P 500 ever since. In fact, the stock recently hit an all-time high and has made Daniel Hirschfeld — the company’s reclusive chairman of the board — a billionaire. According to brokerage firm Imperial Capital, which raised its price target on the stock after the earnings miss:

The Buckle remains one of the best operators in the specialty retail industry, in our view, with robust free cash flow, a differentiated product assortment, shareholder- friendly management, and long-term square footage growth opportunities.

A recent Seeking Alpha article is very positive on Buckle’s future, stating: “Buckle holds substantial long-term growth potential.” Furthermore, the author projects Buckle’s strong cash flow will enable it to pay up to a 6.6% dividend yield by 2015 (based on the current stock price).

Carbo Ceramics (NYSE: CRR) has published a new investor relations presentation that is very impressive. Bottom line: the company is the largest ceramic proppant company in the world and produces the highest-quality proppant in the world. Slide no. 7 discusses a “breakthrough innovation” in proppant for deepwater wells in the Gulf of Mexico. Slide no. 9 discusses the company’s entrance into the lower-end sand proppant business with a higher-quality resin-coated sand (RCS). Purveyors of lower-quality sand proppant like US Silica (SLCA) and Hi-Crush Partners (HCLP) better watch their back because Carbo Ceramics is gaining on them! Slide no. 38 demonstrates Carbo’s commitment to returning cash to shareholders with 12 consecutive years of dividend increases.

Lastly, a June 3^rd article on Seeking Alpha is very positive on Carbo Ceramics because of its superior product, strong balance sheet, and low valuation. Institutional investors are bullish on the stock, with net purchases over the past quarter equaling more than 6.5% of the company’s equity float.

Future Fuel (NYSE: FF) released excellent first-quarter financials with earnings per share up 94% and revenues up 8 percent, both of which beat analyst estimates. In the conference call, then-CFO Christopher Schmitt was optimistic biodiesel prices would remain “firm” throughout 2013:

The market is speaking right now that, and it’s forecasting good prices for biodiesel. Right now, the market seems to be saying that prices are firm and hopefully will remain so going forward.

On June 1^st, Schmitt was replaced as CFO by Rose Sparks, but I’m not worried because Schmitt is staying within the FutureFuel family, moving over to work at Apex Oil, an affiliated company of FutureFuel Chairman Paul Novelly.

In the conference call’s Q&A, an analyst asked about the effect the “Diamond Green Diesel” processing plant in Louisiana – scheduled to commence operations by the end of June – will have on FutureFuel’s feedstock costs. DGD is a joint venture between Darling International (DAR) and Valero Energy (VLO) that plans to consume 11% of the country’s animal fat waste in its biodiesel production. Analysts are concerned that DGD’s consumption will reduce FutureFuel’s feedstock supply and consequently increase its production costs, thus cutting into the company’s profit margins. President Lee Mickles admitted that DGD was a “concern,” but said that FutureFuel can easily switch from animal fats to corn and palm oils as its feedstock:

We’ve demonstrated an ability to define the feedstock. We can use a wide range of them. This is one of the great advantages we have at our site is having the tankage to take the feedstock at what I’ll call add opportune times for the producers and be able to store that feedstock in the finished product as well.

So, I think we have some significant advantages vis-à-vis some of the other producers in the biodiesel side if, in fact, you get a tightness in that [animal fats] market.

The 2008 Farm Bill – which established several subsidies for renewable energy production (including biodiesel) — expired on September 30, 2012, but the American Taxpayer Relief Act of 2012 extended all 2008 farm bill provisions for one additional year until September 30, 2013. Among the extended provisions included biodiesel credits. Still, the extension is a stop-gap measure and a new multi-year Farm Bill is needed. Bills floating through Congress right now are Senate Bill 954 and House Bill 1947. Of the two, S.954 – which passed the Senate on June 10^th — is more biodiesel friendly because it contains mandatory funding of subsidies (pp. 126-27), whereas H.R. 1947 – when was voted down on June 20^th — provided only loan guarantees and “discretionary” funding (subject to sequestration). Needless to say, FutureFuel would prefer that the Senate bill become law. If the House can’t get a farm bill passed, however, another stop-gap extension of renewable-energy subsidies will be needed come September.

Gentex (Nasdaq: GNTX). According to a recent Barron’s Magazine article, Baird auto analyst David Leiker believes that manufacturers of auto components should experience significant price appreciation over the coming year because the average U.S. car last year was more than 11 years old, a record high. Old cars will either get replaced by new cars or be updated with new auto parts. Either way, auto components will be in high demand:

To find bargain stocks, check under the hood of the U.S. auto recovery. Shares of component makers could jump 30% over the next year on 20% to 25% growth in profits and a rise in valuations.

Graftech International (NYSE: GTI) dropped 4.7% on June 27th in sympathy with news from German competitor SGL Carbon SE (SGLFF) that it is cutting its full-year 2013 guidance for EBITDA on account of weak business conditions. Previously, SGL forecast a 20-25% decline in EBITDA, but now it has revised the EBITDA forecast to down 50-60%. The reason:

The weak business environment, which had already negatively impacted the first quarter of fiscal year 2013, has continued in the first two months of the second quarter 2013. Additionally, in particular over the last weeks, competitive pressure from Asia has significantly increased, intensified by the devaluation of the Japanese Yen. Consequently, the anticipated business recovery will not occur either in the second quarter or in the second half of 2013, particularly in our businesses relating to graphite electrodes.

Although Graftech is susceptible to weak global steel demand and cheap Japanese competition, I think SGL Carbon’s troubles are somewhat company specific and Europe-centered (45% of sales vs. GTI’s 35%). Graftech’s stock did not deserve the drubbing it received. The fact remains that Graftech insiders purchased 54,000 shares of company stock in March and they haven’t sold any of it. SGL Carbon’s loss of sales could be Graftech’s gain because Graftech’s graphite electrodes are simply better quality.

One recent bright spot is an uptick in the price of OCTG steel used in the energy industry (OCTG = oil country tubular goods). In June, the steel price rose for the first time in 15 months.

United Therapeutics (Nasdaq: UTHR). Two positive articles on the biotech company’s future prospects have been published on Seeking Alpha recently, one on May 24^th and another on June 4^th. The gist of the bullishness on United Therapeutics involves: (1) market-leading treprostinil drug treatments (subcutaneous Remodulin and inhalable Tyvaso) for pulmonary arterial hypertension (PAH) that are just starting to enter the high-growth Asian markets; (2) likely approval of improved (i.e., less frequent) dosing versions of Remodulin and Tyvaso, not to mention the still-possible oral form of treprostinil; and (3) a strong drug pipeline of treatments for neurological disorders, cancer, and viruses.

Momentum Portfolio

CommVault Systems (Nasdaq: CVLT) posted fabulous fourth-quarter financial results that saw record revenues and earnings, both of which easily beat analyst estimates. The stock shot up 13% intraday to a new all-time high before reversing to finish down 1.9% on the day. Why the wild roller-coaster ride? The good news is that during the conference call CEO Robert Hammer was extremely optimistic about the long-term future, partly because of the megatrend known as “big data”:

There has been high market demand for big data software solutions to solve problems related to data growth, complexity and cost reduction. We had an outstanding Q4 and fiscal 2013, achieving record revenues and earnings. We have established a firm foundation for fiscal ’14 despite the lingering macroeconomic concerns. Simpana 10 was successfully brought to the market with the most comprehensive launch in our history.

We enter FY 2014 in a much stronger competitive position than ever before in our company’s history. We are well on track in establishing the product distribution services and support and marketing foundations to enable us to achieve our $1 billion planned revenue objectives, as well as to achieve our mid-20s operating margin objectives over the next few years.

In the short term, however, Hammer sounded cautious due to increased operating expenses, macroeconomic weakness in Europe, and an industry-wide slowdown in tech spending:

While we had a strong Q4, I would like to add the following words of caution regarding our future outlook. We are entering our fiscal ’14 with increased risk tied to the apparent near-term slowdown in tech spending in addition to our normal Q1 challenges due to seasonality. In broad scope, our outlook for FY ’14 includes earnings risks related to the macroeconomic environment and our increasing investment in operating expenses across all segments of the business. As a consequence, there could be a significant negative impact to our earnings if we miss our revenue targets.

Bottom line: CommVault remains one of my favorite ways to play “big data.” Higher operating expenses could crimp profit margins, but investors will look past this issue if they are convinced that the expenses will boost profits down the road. The new all-time high the stock hit on May 7^th signals to me that more new highs are in the offing later this year after the first-quarter seasonal weakness is in investors’ rear-view mirror. On June 18^th, Pacific Crest Securities upgraded the stock to outperform and set a price target of $92, stating that CommVault is “gaining market share and should benefit from a new product cycle.”

G-III Apparel (Nasdaq: GIII) announced an excellent first-quarter financial report, exceeding analyst expectations for both earnings and revenues, and the company increased its earnings guidance for full-year 2013. Sales grew 19% and the company experienced its first profit during a fiscal first quarter in at least the past 15 years! On June 4^th, the stock skyrocketed 18% on the news. Unusually cool weather in the January through March period helped boost full-price sales of coats, which typically need to be marked down significantly as clearance items in anticipation of spring. As a result, gross profit margin rose by four percentage points. The strong performance was also helped by the company’s diversification efforts outside of coats – Calvin Klein dresses, handbags, and sportswear combined with Vilebrequin swimwear and Wilson’s leather goods to produce stellar double-digit growth. In the conference call, CEO Morris Goldfarb described his optimism about the state of the business this way:

This was a very solid quarter with strength in our business across the board. We saw sales increases in nearly every major category. We shipped well, sold through well, built our order book and pushed forward on our growth initiatives. As a result, we remain confident in our plan, both operational and financial, for the full year.    

With the introduction of an Ivanka Trump line of dresses next fall, the company’s growth momentum should continue. Technically, the 1.9 million shares traded on June 4^th were the most in more than a year (Dec. 2011). The volume spike combined with the 18% price rise sending the stock to a record high makes the chart look very bullish for continued price gains. A recent Seeking Alpha article argues that G-III Apparel is a “definite buy” with great growth prospects.

HMS Holdings (Nasdaq: HMSY) announced that the Centers for Medicare & Medicaid Services (CMS) had changed its mind and will not give HMS the Medicare Coordination of Benefits (COB) contract that it was initially awarded in September 2012. The incumbent COB servicer had appealed the September award to HMS and the appeal was victorious.

This news is disappointing because HMS management had been confident that the September award would be upheld. The COB contract involved helping CMS identify the 4 million people on Medicare that also have another form of health insurance that should pay claims instead of Medicare. It represented $60-$65 million of potential revenue in 2014 and about $0.05 per share in EPS. In other words, removing the contract wipes out 9% of revenue and 4% of EPS.

According to analysts at Wells Fargo Securities, however, the loss of the COB contract isn’t too serious because it was a “cost-plus” contract with low profit margins. In contrast, the Medicare Recovery Audit Contractor (RAC) contract offers HMS high profit margins because the work requires sophisticated data analysis to uncover fraudulent Medicare claims – an HMS specialty. It is very likely that HMS will be re-appointed as a RAC administrator in the re-procurement process because HMS is an incumbent that has done an excellent job for CMS (50% more productive on average and charges the lowest fees). CMS is scheduled to announce the RAC re-procurement awards for the 2014-18 contractual period in either July or August.

Lastly, Jefferies lists HMS as a “compelling buy” with a $30 price target.

HomeAway (Nasdaq: AWAY) issued a new investor presentation that is very impressive and bullish about the future. When you combine 36% annual revenue growth with 20% annual listings growth, a 75% subscriber renewal rate, strong free-cash-flow generation, and market-leading network effects, it’s hard not to be enthusiastic about investing in HomeAway. 

Pricesmart (Nasdaq: PSMT) announced that May same-store sales were up 9.8%, which significantly beat analyst forecasts of only an 8.2% gain. Total May sales were up 14.8%, much higher than April’s sales gain of only 10.7%.  The stock shot up 4.3% on the good news, as investors are optimistic that the Latin American warehouse club is experiencing a resumption of strong growth after a prolonged lull.

On May 3^rd, Pricesmart opened its third warehouse in Colombia, bringing its company total to 31. Columbia is a much-larger country in terms of population than any other Latin American country that the company has entered to date, so successful penetration of Columbia could be the game changer needed to bring Pricesmart to the next level. According to a recent Seeking Alpha article, success in Columbia is the key to Pricesmart’s continued strong growth:

If PSMT can demonstrate success in Colombia, it should be able to sustain strong growth for a very long period of time. Colombia would expand its target market by approximately 80%. Furthermore, Colombia is a wealthier country on average than the rest of the PSMT markets combined.

SolarWinds (NYSE: SWI) is listed as a “compelling buy” with a $59 price target — according to Jefferies.

U.S. Physical Therapy (Nasdaq: USPH) reported that first-quarter earnings fell 18.4% year-over-year. Analysts were expecting an earnings-per-share decline, but the actual result was worse than expected by two cents. So why has the stock skyrocketed 19.9% in value since the May 9^th report? Forward guidance, of course! Management projects full-year earnings of between $1.51 and $1.56 per share, which is better than the $1.51 analysts were expecting – especially given the weaker-then-expected first-quarter number.

Furthermore, the weak first quarter was caused by the reduction in Medicare reimbursements and one-time negatives: “multiple storm systems that battered the East and Midwest earlier this year and a worse than normal flu season.” Business was bad in January and February, but improved markedly during March, the last month of the quarter. Earnings per share in March were $0.14, double the EPS in January!

Lastly, the company continues to grow through acquisition with two large purchases so far in 2013 — the most recent on May 28^th  involving a five-clinic practice that sees approximately 36,000 patients per year and produces total revenue of $3.8 million. In the conference call, CEO Christopher Reading said that although the regulatory environment for healthcare is “getting more difficult and more complicated,” a silver lining to the increased regulatory complexity is that it “will serve as a catalyst for some of these privately-held physical therapy companies to look to us to partner with them to assist them with their growth.”