CAPITULATION-MINI

So we got the "capitulation-mini", and we got a very impressive reversal. Now what? In the near term, I believe a rally will be likely as indicated by today's future market. This could last for a while until Fed speaks at the end of June, then it becomes more mucky. Second quarter reports will likely be decent, but how much the market will discount the rear mirror view?

As for specific stocks, LAKE announced its Q1/07 results and it missed by 2 pennies, and also lower its full year guidance to its lower end (8% revenues and 12% EPS). While slightly disappointing, it remains very cheap (about 12X of its 07EPS). However, I believe this business is way to difficult for LAKE, which is the smallest player, very little pricing power, no control whatsoever of its input costs, and limited growth opportunities, international growth notwithstanding. It has to constantly cut its costs. All in all, it is just not a compelling story. Remember, cheap for reasons and cheap could get cheaper.

On the other hand, CDV had a great quarter, strong revenue and earning growth, exceeding expectation, strong backlog, raise its guidance and increase its margin expectation. It is on its way to make at least 0.40 this year, which makes 10X of multiple. The stock still cheap, despite the recent runs. I may add a bit more here this morning.