That said, Gander Mountain is still struggling in this difficult retail environment, but we think the company is taking the appropriate steps for a softer consumer spending environment. Those steps include scaling back store expansion plans, improving store-level productivity, and enhancing certain product lines. We maintain our Hold rating.

We are currently modeling that Gander Mountain will have a net loss during fiscal year 2008 and turn a small profit in fiscal year 2009. We note that Gander Mountain is trading at 0.5x book value and 0.1x sales. We think this depressed valuation prices in weak results in future quarters. As the company scales back its store expansion plans to focus on store operations, its topline growth will likely slow. But, this will enable the company to expand its profit margins. Our target price of $4 is about 15x our fiscal 2010 EPS estimate of $0.26.

Agnico-Eagle Stays Aground

Agnico-Eagle Mines Ltd. (AEM) reported second quarter EPS of $0.09, well below our estimate of $0.20 and down 67.9% year-over-year, primarily due to lower realized price for zinc and decline in zinc sales.

However, gold prices remain high and being an unhedged gold producer, Agnico-Eagle is exposed to high year-over-year gold prices, which impacts it favorably. We expect gold prices to remain at elevated levels amid strong demand conditions. In addition, the company also has a healthy pipeline of long-term projects to boost gold production.

For 2008, total cash costs per ounce are expected to be approximately $80, with the year-over-year difference in part attributable to higher production costs associated with gold sourced from new mines at the Goldex mine project and the Kittila mine project, which do not contain any by-product metals.

Meanwhile, Agnico-Eagle is moving ahead with its regional growth strategy at Lapa, the LaRonde mine extension, Goldex, and the Kittila mine. The Goldex mine (commenced operation in April 2008 and full production rate expected to be achieved by fourth quarter 2008) is expected to provide annual gold production of 175,000 ounces over a nine-year mine life.

Nonetheless, AEM is incurring heavy exploration costs due to these gold development projects, which will negatively impact the cash position this year. We reiterate our Hold rating on shares of AEM.

American Capital Misses

American Capital Strategies, Ltd's (ACAS) core 2Q08 operating results were four cents shy of our expectations.

Based on 2Q08 results and company guidance, we have adjusted our FY08 and FY09 earnings expectations to $2.90 per share and $2.95 per share, respectively, from $3.02 per share and $3.25 per share previously. At the current price level, the shares of ACAS trade at 0.77x its current NAV of $27.01 per share, which continues to remain below its 10-year historical range of 1.2 1.7x for the past several of quarters and now in-line with its current peer group level.

The company's business lines primarily consist of private companies. Therefore, it is very difficult to forecast ACAS earnings with significant precision. This earnings volatility has enhanced the current discounted view of this company as of late. However, we believe that ACAS earnings and dividend growth in late 2008 have the potential to benefit from current pipeline of new investment opportunities, as well as the containment of asset quality.

We think the high dividend yield if it remains intact should provide substantial downside protection and will be the major component of shareholder return over the next year.

Our new six-month price target of $21.15 per share, down from $33.50 per share, incorporates a 0.80x our estimated book value of $26.40 per share at December 31, 2008 which equates to a total return of 12.0%. Considering the pressure on earnings in 2008 and into 2009, we suspect that the sizable dividend yield could be in jeopardy of being reduced. Therefore, we are maintaining our rating on the shares of ACAS as a Hold.

j2 Global Fails to Make Ests

j2 Global Communications, Inc. (JCOM), a global provider of outsourced, value-added messaging and communications services, declared second quarter 2008 financial results below our estimates.

However, the company significantly improved its subscriber usage revenue. This is particularly important since credit-sensitive customers constitute a vast majority of JCOM's sales. Exploration of new business opportunities for both digital facsimile and voice services through recent acquisitions facilitated the company to solidify its position within the industry.

JCOM's unique integrated communications offerings have significant potential as the company already has an established presence in 44 different countries. On the other hand, ongoing macroeconomic uncertainties throughout the world may create earnings fluctuations in future reporting quarters. We maintain our Hold recommendation and the same valuation target.

The company is currently trading at 15.6x our fiscal 2008 earnings estimates. This is at a premium to the S&P 500 and the peer group averages. With respect to other selected valuation metrics, the stock is also trading well above its peers. We believe, this valuation premium reflects effective execution of the company's businesses by the management in a challenging economic environment.

However, after adjusting $3.04/diluted share of net cash & short-term investments, JCOM is trading at a more reasonable 13.6x our fiscal 2008 earnings estimates. Our six-month price target of $28 is based on a net of cash16.0x our fiscal 2008 earnings estimates plus $3.04/diluted share of net cash balance.

Arrow Elec Core Business Strains

Arrow Electronics, Inc. (ARW) reported revenues of $4.35 billion in Q2:08, above our estimate of $4.05 billion, while non-GAAP diluted EPS of $0.84 beat our consensus estimate of $0.77.

For the September quarter, ARW guided to revenue and EPS in the $4.1-4.4 billion and $0.73-0.78 ranges. We were expecting $4.05 billion and $0.75. Component sales are expected to be in the range of $2.85-3.05 billion. Computing sales are expected to be $1.25 billion -1.35 billion, slightly above our expectations on an absolute basis, but weaker on a q/q comparison. The company claims a change in business mix (from acquisitions) has introduced more pronounced seasonality, though our analysis of organic growth implies slightly worse-than-normal trends for the core business.

In the meantime, we are likely to see margins under pressure, as the core business continues to deteriorate and the need for successful acquisition integration becomes all the more acute. We are reiterating our Hold rating with a revised target price of $35.00 (10.5x our FY2008 earnings estimate).

We analyzed the ROE (return on equity) by splitting it into its three components net margin, asset turnover and equity multiplier. The TTM (trailing twelve-months) net margin has been relatively steady at around 2.5% for the last four quarters (2.3% in Q2:FY08). This may be the result of management's cost reduction efforts, which have been offsetting the negative impact of lower-margin acquired business lines.