ZAGG Inc. appears on the preliminary list as being ADDED to the Russell MicroCap Reshuffle. You may see a temporary spike in ZAGG’s share price only to recover around July 1st to current levels. ZAGG is also a buy at these levels as you may have noticed that the CEO recently bought shares as posted in an Edgar filing. The Company has stated that “A large retailer is currently test marketing ZAGGbuds and ZAGGsparc.” Only time will tell if they have similar success as the popular ZAGG invisibleSHIELDs. The other growth vehicle is a new, large cellular carrier’s company-owned stores. This would be a big add if and when it occurs. Management has reaffirmed their 30% top line growth target and their 19% – 21% operating margin.

Looks pretty undervalued if either one or the other above can occur.

PC Mall appears on the preliminary list as being DELETED from the Russell 3000. Unless there is a dramatic rise in market cap between now and the end of June, expect some exaggerated drop in share price only to recover on July 1st 2010. Opening buy orders below the market may in fact be the best means to lock in a great share price on an otherwise absolutely peculiar stock print as the re-shuffle occurs. No guarantees and we believe the stock is a steal at these levels but, hey, if you can get a lower cost basis you should.

Why should you buy PC MALL at these levels or lower?

1) Trading below book value.
2) Macro tailwind in the IT replenishment space
3) Largest Apple reseller
4) Improving top and bottom line margins

By the way, if you read the release on the most recent acquisition, it includes a Software as a Service component, (i.e. remote hosting), with $800K monthly recurring revenues that can be sold to many of the thousands of existing PC Mall customer base…and yes, that is at a much higher margin than the core business.

An annual occurrence is the reshuffling of the Russell Indexes, Microcap, Global & 3000.  This is a market cap weighted index where you can see MASSIVE price swings.  The stocks added to these indexes can jump 30-50 percent in a day or, if removed from the list, can fall 30-50 percent.  The stocks typically start July 1, within one quarter point of where they ended on June 29, but the swings in between can be wild.

One strategy for buying and selling within a market cap weighted index is to put in open sell orders, significantly above the market, before being added. Similarly, put in buy orders for those that are being deleted from the index.  I have had luck in past years buying and selling this way, but only if you really want to own a position or sell one.  This is a very short term strategy, that happens annually. Below is a link to all of the names being added and deleted. Keep your eye on it, as it will be updated daily.

http://www.russell.com/indexes/membership/Reconstitution/Reconstitution_changes.aspx

-Budd

Last week I attended the Craig Hallum conference in Minneapolis with two clients in town. It was a completely different forum than the traditional conferences of the brokerage community. Over 220 investors attended and met with managements of 81 companies. CH reserved several large ballrooms with 40ish companies in each space at small group tables.

Investors got 30 minutes of speed story telling / investing and moved on to the next company of interest. Each presenting company did a breakout room for approximately 30 minutes for investors who needed more, but not a traditional presentation. It ran like a Swiss clock and at the end of the day over 1000 one-on-ones had occurred and the conference was complete. Compare that to the cost of renting and pulling out beds in hotel rooms, lavish dinners and luncheon speakers. The managements, investors, and Craig Hallum partners all got what they were bargaining for, a no nonsense day to either catch up with an existing holding or get a speed intro to a new potential holding. Hats off to the Craig Hallum team.

-Budd