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TWST: Would you describe your coverage and tell us how your stocks have performed?

Mr. Crooks: Our universe consists of specialty chemical and materials companies, primarily in the mid- to small cap range, where we find better growth opportunities, some secular growth trends and, at this point, some good valuations. At the top of our market cap range is Engelhard (EC), which has a market cap of about $3 billion. A sister company to that would be OM Group (OMG), a company in the specialty metals and materials industry that produces automobile catalytic converter catalysts, battery grade chemicals and various niche metal-based applications. Other names include Cambrex (CBM) in pharmaceutical outsourcing. There’s a bunch of niche companies in the electronics/chemicals area, including Arch Chemicals (ARJ), MacDermid (NYSE:MRD) and Rogers Corp. (ROG). So basically, we’re looking for niche players with established market share and characteristics that will allow them to grow in excess of the industry average and, hopefully, in excess of the S&P.

TWST: What are you seeing at this time in the export markets?

Mr. Crooks: Some pickup is being noticed in the last few months. Generally, Asia has been the strongest sector if you cut across the June quarter results. Asia has been showing some very strong growth, as noted by MacDermid, Rogers, Cytec, Engelhard and OM Group. Some of the larger cap companies that we track have noticed the same kinds of trends. Europe is probably number two in terms of growth. They’re generally stable, but not showing really that much growth, and North America is really the laggard. So exports have been up, generally, to Asia, the NAFTA region, Mexico and Canada. Mexico has actually seen some decent growth out of the group and Canada is probably tracking closer to the US with not as much growth. Latin America is suffering a little because of the difficulties there; the collapse of the real and problems in Argentina have caused somewhat of a backup in terms of export growth. But in general, I think Asia really has been carrying the day in the June quarter.

TWST: You have told us about some exciting smaller cap niche companies you’re recommending today. Are there any small caps that you may not be recommending right now but are stocks to watch over the next 12-18 months when there could be a surprise, some event that could act as a catalyst?

Mr. Crooks: Well, I think if you try to connect the dots to those companies involved in just general electronics, if that starts to spark up again in the next couple of years (we think that it will), once recovery does take hold, a company like MacDermid should see some very strong growth. They have already, in this last couple of quarters, been beating estimates. About a third of their business is related to the electronics industry, which has been suffering except in Asia, but once that starts to pick up, I think they’ll see a bigger spike in their business. Their operating leverage is huge. They’re a major cash flow generator in terms of free cash flow and their capital expenditures for a $700 million company are less than $20 million, so it’s just a huge advantage that they have in terms of the operating leverage on the upside. So I think they’ll be a major beneficiary but may take a bit longer to play out.