TDSC’s products enable three-dimensional objects to be produced through traditional ink-jet printing technology. The company sells consumable materials for use in all of its systems similar to ink-jet printer cartridges, giving the company a steady revenue stream. TDSC has a very strong management team, a clean balance sheet, and a good line up of new products. The company recently introduced a new 3-D desktop printer which is of higher quality and speed than similarly priced printers. The issues which have weakened performance - product line disruptions, the move to a new headquarters and the switch to a new ERP system - are short term in nature.

Reinsurance stocks tend to be strong second half performers, even in the face of storms. After Katrina, the industry tightened risk controls, raised prices but still kept retention levels high. The stock trades at a below average price to book value.

Cree is a leading manufacturer of high-performance light-emitting diode (LED) chips. Nearly ubiquitous in mobile handset keypads and displays, LEDs are nearing the cusp of penetrating applications in larger-size displays such as laptop monitors. LEDs offer long operating lives, low power consumption, and superior color replication compared to their fluorescent counterparts. In the near-term, pricing pressure in the commoditized, blue LED market will lower Cree’s volumes because the company has ceded market share to protect profitability. To offset the decline in the low-end market, the company is investing heavily in new equipment and retooling to improve wafer yields and lower the cost of manufacturing. The market has priced in most, if not all of the recent disappointments. The stock is trading at the low end of its historical price/book and price/sales valuation ranges. In addition, the company has a clean balance sheet with over $4.50 per share in cash and investments.

Wal-Mart is the largest retailer in the world, with approximately 5,000 stores around the globe. Despite its size, the company has still managed to grow at over 10% a year for the last five years. Wal-Mart still has considerable room to grow, particularly in international markets. In the past two years, international sales provided 27% of Wal-Mart's overall revenue growth, but they are still only 20% of total revenue. Historically, WMT was expensive. However, the stock is trading at the lowest Price/Earnings and Price/Sales multiples in 20 years. In addition to the attractive valuation, the company is steadily increasing its dividend and buying back stock.

Aside from needing a name change (get your mind out of the gutter), BJ Services (BJS) is a very high quality pressure pumping services company that focuses mostly on the completion of natural gas wells. The stock is hated after missing earnings because of production problems and rising costs in Canada. Despite the fact that natural gas production continues to fall year over year for every major oil company, investors have been focusing on the near term warmer winter and resultant high natural gas inventory numbers. However, over time, natural gas has become harder and harder to find. Over the long term, this will benefit BJS because they are one of the best natural gas services companies.

Apollo Group provides higher education to working adults. The company offers associate degrees in business, criminal justice, general studies, health administration, and information technology. The stock has been beaten down for several reasons, namely lower revenues per student and higher than expected marketing expenses. These problems stem from poorly integrating Axia College, an acquisition APOL made two years ago. The strong economy and Iraq war haven't helped APOL either, since students have either found jobs or gone into the Army instead of returning to school. However, this makes APOL an interesting counter-cyclical play if you expect economic weakness. Apollo Group is still one of the highest quality companies in the post-secondary education market. The company’s earnings quality has been excellent in the past five years. Free cash flows have been positive and growing in-line with earnings. In addition: Apollo is immensely profitable -- Operating margins have risen every year since 1993, reaching 31.2% in 2004 (excluding the impact of the noncash charge related to the conversion of UOPX shares) and 31.7% in 2005. Regulatory Moat - From a regulatory standpoint, Apollo has fewer relationships to manage than many of its for-profit counterparts with portfolios of schools. This, along with the roughly 80 lobbyists on its payroll, potentially helps Apollo in a heightened regulatory environment. Regional accreditation is hard to achieve and sought after by students, because it permits them to transfer credits to other schools. Many jobs with formal education requirements also demand regionally accredited degrees. The Higher Learning Commission reaffirmed UOP's regional accreditation in 2002 for 10 years. This removed one of the largest risk factors facing UOP. Extension of Campuses – APOL has opened six new University of Phoenix campuses year to date, bringing the total number of campuses to 62. Buying Stock - Apollo Group had spent an average of $220 million per quarter on share repurchases. The company’s cash and marketable securities balance increased $149.0 million sequentially to $582.0 million, or $3.34 per share. The stock is trading at the bottom of the range on its historic Price to Earnings and Price to Sales metrics. In addition, the recent acquisition of Laureat Education (LAUR) also shows how undervalued APOL is currently. If a private equity firm were to pay the same EBITDA mulitple it paid for LAUR, APOL would be bought out at around $80 per share.

Plexus is one of the smaller firms in the Electronic Manufacturing Services (EMS) industry. Plexus' strategy is in contrast to other EMS firms who generally compete on volume production instead of design capabilities. While Plexus' focus may have lower sales volumes, this model enables it to earn some of the industry's highest returns on invested capital (ROIC). During the boom years in the late 1990s, Plexus' ROIC averaged 20.5%. The company had a lousy quarter because of general industry slowdowns and inventory drawdowns. However, that has given investors a chance to buy a high quality company at a very reasonable price. The stock is trading at the low end of its historical P/E and P/B ratios. In addition, the stock seems to bottom out around 1.5x book which is around $16. The company’s balance sheet is solid with $125 mln in cash and investments. The last two years, PLXS generated FCF of $70 mln and $50 mln. Risks for Plexus related to top customer Juniper Network’s intention to shift some production to low-cost China-based ODM-s, including the timing of such transition and the extent to which it could impact Juniper’s business with Plexus in particular. However, Juniper is a good customer to have - the demand for optical networks should remain robust. Per Juniper's CEO in their latest conference call: "YouTube is currently generating more network traffic than the entire Internet in the year 2000." Finally, another risk is that Plexus' working-capital management has been lackluster. Plexus' slow cash cycle allows excess inventory to accumulate on PLXS' balance sheet. Nevertheless, at $16.50 the stock price discounts many of these risks.

Pacer International, Inc. (PACR) is a light-asset based transportation company specializing in railroad shipments. PACR should continue to benefit from a healthy demand environment driven by international trade and the influx of containerized ocean cargo from Asia. Recent import trends and higher fuel prices have spurred demand for railroad services with rail being an easy, cost-effective method to transit containerized shipments from coastal ports to inland locations throughout the country. Despite being a steady performer and producing some of the most consistent returns over the last three years, PACR continues to trade at the low end of its peer group and its own historical valuation multiples. At recent share prices, PACR’s free cash flow yields are the highest of peer logistics providers.