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Three Small Cap Stocks on Summer Clearance Sale - FBMI, EXFO and PACR

Don’t let the correction ahead give you jitters; it happens every year.

 

Listening to an S&P economist Monday, he was talking about the bears moving in for a week or so before the bulls lay claim to a firm, sustained rally. For once, I agree with a forecaster that I generally doubt. As October has always been the month for wild swings up and down, the beginning of the third quarter has always, by my own experience, been a time when institutions re-arrange portfolios, sell-off the losers and put away a little cash for the annual autumn upswing. Don't get nervous. The run-ups in the indices in the first quarter stabilize in the second and then everyone takes a step back and a deep breath.

A lot of 'black box' (computerized trading programs) sells are already being priced by institutions that add to the overall effect, but this isn't a wholesale market plunge. Even with the numbers of 'puts' growing and short-sellers expanding, investors are simply shedding a few non-performers, putting some buying dollars to the side and overall, it's something of a Wall Street psychological check-up. If you own something you like, think twice before letting it go or perhaps even; aggregate on the dips.

The correction isn't a science; sometimes it's slight, sometimes drastic and sometimes it doesn't happen until August, but it happens. Like a matchstick in a woodpile, something will get the fire started: bad unemployment numbers (like today), a quick rise in oil prices or a geo-political scare.  

The same economist said that Small Cap stocks would lead the big caps into the autumn rally and once again, I agree with a forecaster that I generally doubt. Here are some Small Caps movers today.

Firstbank Corp., (FBMI) http://www.firstbankmi.com/ jumped out of the gate this morning picking up more than 12% to place it in the mid-$7 range on the Nasdaq. FBMI has an average daily trading volume of 6,542 shares and easily passed that in early trading and the new buyers into the stock moved the FBMI market cap to $58 million.

In May, FBMI reported its Quarterly numbers for the period that ended 03-31-09 and in the five prime categories, posted sizeable upswings from the previous quarter that end 12-31-08. Up over the previous quarter at FBMI were total revenues, gross profits, operating income  (from a minus in Dec to a plus in March) and net income (from a minus in Dec to a plus in March) with net income to common shares moving also moving from minus territory to a plus. Good news. Really good news.

FBMI is a full service commercial bank with 53 branches in hard-hit Michigan. If the Company is strong now, it will be strong when Michigan economically turns around. FBMI has been in business since 1894.

In the mid-$7 range, FBMI is below its 52-week high of $12.97 set on 07-21-08 and above its 52-week low of $4.38 set on 03-11-09. In the mid-$7 range, FBMI is at its 50-day moving average and above its 200-day moving average on trailing twelve month revenues of $42 million. Its shares versus float is at parity.

A THREE MONTH CHART ON FBMI

And speaking of rebounds, and flipping the old axiom of 'buy' on the rumor and 'sell' on the news on its head, are the following two Small Caps now poised to regain lost ground?

EXFO Electro Optical Engineering (EXFO) http://www.exfo.com/ recently posted a wider-than-expected third-quarter loss, hurt by a goodwill impairment charge and foreign exchange losses, and forecast a weak fourth quarter. "The fourth-quarter should be the worst. I would suspect that would be their bottom quarter and should improve after that," said one analyst at National Bank Financial.

Thomas Weisel brokerage obviously thinks along similar lines giving EXFO an upgrade today from 'market weight' to 'overweight'. On that news, EXFO jumped out of the gate this morning picking up 11% in value to place it in the $3 trading range on Nasdaq and boosting its market cap to $180 million. Shares traded this morning tripled EXFO's average 3-Month daily trading volume of 24,900 shares.

EXFO designs, manufactures, and markets various test and monitoring solutions for network service providers and equipment manufacturers in the telecommunications industry worldwide. It operates in two divisions, Telecom, and Life Sciences and Industrial. The Telecom division offers integrated test solutions and network monitoring systems to network service providers, cable television operators, system vendors, and component manufacturers. The Life Sciences and Industrial division provides solutions in medical-device and opto-electronics assembly, fluorescence microscopy, and other life sciences sectors.

In the $3 range, EXFO is below its 52-week high of $4.82 set on 08-04-08 and above its 52-week low of $1.99 set on 11-21-08. At $3 flat, it is below both its 50-day and 200-day moving averages and its shares out versus float ratio is at parity.

A THREE MONTH CHART ON EXFO

On news that it has successfully entered into a First Amendment and Waiver of its 2007 Credit Agreement with its syndicate of financial institutions led by Bank of America (NYSE:BAC), Pacer International (PACR) http://www.pacer-international.com/ trading on the Nasdaq in the $2 range started the day with a 9% gain in value, boosting its market cap to $89 million.

"We are pleased that our syndicate of lenders supported us with this amendment and waiver," said Brian Kane, Chief Financial Officer of Pacer. On the news, buyers came out and PACR's average daily trading volume of 656,714 shares was easily eclipsed. 

PACR operates as a non-asset based third-party logistics provider in North America. The company operates in two segments, Intermodal and Logistics. The Intermodal segment provides stacktrain, rail brokerage, and local cartage services principally to intermodal marketing companies, truck brokers, truckload carriers, automotive intermediaries, and international shipping companies. This segment also offers ramp-to-ramp and door-to-door services. As of December 26, 2008, the company's equipment fleet consisted of 1,849 double-stack railcars, 28,681 containers, and 29,904 chassis.

At $2, PACR is far below its 52-week high of $25.21 set on 07-23-08 and above its 52-week low of $1.57 set on 03-09-09. At $2, PACR is below both its 50-day and 200-day moving averages on trailing twelve month revenues of $1.94 billion. That's billion. Its shares out versus float is at parity.

A THREE MONTH CHART ON PACR

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