Here’s a roundup of important news on our portfolio holdings:

Express

U.S. retail sales fell in March by 0.3% after being unchanged in February. Investors sold Express and most other apparel retailers as they feared consumer demand would dry up. Based on Express’s strong fiscal Q4 2015 results we think this is unlikely.

Express’ strategy of shifting focus away from teens and towards young professionals seems almost prophetic in hindsight of the bankruptcy filing of Aeropostale, which targeted teens exclusively. Express’ share price closed at $17.81 on May 3, the same level as our initial recommendation for the stock on March 3.

Ethan Allen

Back in January Ethan Allen announced its collaboration with Disney’s consumer products division to create Disney inspired furniture aimed at young families. With Jungle Book taking the box office win for the second week in a row it looks like a smart move by Ethan Allen. Management expects the Disney line to be launched by year end.

Gentex

After a sluggish start to the year, analysts are forecasting a 5% rise in U.S. light-vehicle sales in April. This should help Gentex jumpstart revenue as it is the dominant supplier of rearview mirrors with built-in camera displays.

Integrated Device Technology

Strong results for the fiscal year ending March 2016 boosted IDTI’s share price nearly 5% on May 5, even as the Dow Jones Industrial Average fell 140 points.

Revenue grew 20% to $189 million, $2 million higher than forecasts. Earnings of $.36 were a few cents higher than estimates. Most importantly management was unquestionably bullish about prospects for recently acquired ZMDI. Cross-selling of Integrated’s chips into automotive customers is off to a very strong start and customer response has been overwhelmingly positive.

Infotainment and wireless charging applications in automobiles should drive robust growth for these chips and helps diversify Integrated’s revenue away from communications customers, whose orders can be lumpy.

Guidance for the June quarter is for $.36, up 16% and higher than $.34 estimates. We think estimates for only mid-single-digit earnings growth in 2016 and 2017 are too conservative. We reiterate our $45 target.

Supreme Industries

Back the truck up for shares of this commercial vehicle manufacturer. Supreme Industries Inc. is reaping the benefits from investments in production facilities and a spunky new sales team. Quick turnaround times for custom designed box trucks and increased exposure to national customers are driving revenue and profits up.

Earnings grew more than 50% in 2015, partly due to easy comparisons with 2014 when a disruption in parts availability crunched profits. Investors suspected the growth may be more sustainable when the company announced a doubling of earnings for the first quarter of 2016 late last month.

Strong secular growth in small commercial trucks (classes 3-7) and an increase in demand for more profitable retail trucks from national customers should propel earnings another 25% this year.

Despite the stock skyrocketing 80% year to date, our target of $23 is 70% higher than current prices.

Just the Box Please

Supreme’s product is pretty simple. It makes commercialized truck bodies. The engines and cabs for the completed truck are made by companies like GMC and Ford. Supreme assembles the engine, the cab and the truck body for delivery to leasing companies, distributors or directly to retailers or shipping companies.

Supreme’s focus on just the truck body or box, allows it to customize these parts for customer needs. Refrigerated truck boxes, honeycombed walls and fiberglass walls all fulfill customer needs for special delivery, storage and energy efficiency.

Smaller is Better

One of the secular trends benefiting Supreme is an industry shift to smaller trucks. Commercial trucks are categorized in size from class 1-12. Supreme focuses only on class 3-7 trucks. A class 3 truck is similar in size to a Fedex walk in truck and a class 7 can be as large as a garbage truck.  

Several secular forces are driving demand for these smaller truck bodies. An explosion in home delivery from e-commerce retailers, a shift in outsourcing delivery logistics to national leasing companies and onerous regulations for large class-8 truck operators create fertile ground for Supreme.

On the Road to Accelerated Profits

Supreme initiated a corporate restructuring in 2011 which involved hiring a new CFO, reconfiguring its sales force into regional teams and administering pricing discipline to sales. Since that time revenue is up 10% but profits have more than quadrupled.

After a 52% explosion in earnings in 2015, Supreme is shifting into a lower but immensely profitable gear. Revenue growth of 10% in its first quarter drove a doubling of earnings. Expectations for a 25% jump in earnings to $.95 in 2016 and another 19% to $1.13 in 2017 should keep this stock in the fast lane for foreseeable future.

Target: $23

Weyco Group

The shoemaker struggled in first-quarter 2016 with the strong dollar and weakness in Bogs continuing to bite into profits. Sales increased to $78.9 million, up 1% from same quarter 2015 sales of $78.1 million. However, earnings per share were down 8 cents, or 24%, to 25 cents compared to 33 cents a year prior.

Stacy Adam’s sales were up 12% as the brand continues to deliver fashionable designs and Florsheim sales were up 7% as it succeeds as a mid-tier priced brand.  BOGS sales were down 17% due to this year’s mild winter and management warned that sales would not pick up until the fourth quarter. Although the company has introduced less insulated styles which should sell well in Spring and Fall, these styles have yet to gain traction.Estimates for $1.70 for the year ending December are possible but Weyco will need to grow earnings at least 7% for the balance of the year to make those numbers.

The stock is still not at a level that presents good value to investors. We keep our hold rating on the stock and wait for growth to resume.