Dow Jones 10932.62 +67.80 12:13 pm PST, February 1, 2006  NASDAQ 2306.43 +0.61 For info, visit access.smallcapnetwork.com S & P 500 1281.35 +1.27 Change your subscription status here Russell 2000 735.04 +1.84 VOLUME 06: ISSUE 9  Features: Digging Deep into CDW. New Digest Additions. There seems to be some controversy surrounding mid-cap hardware and software seller/solutions company CDW Corp (NASDAQ: CDWC). Seems there's a group of investors who want to talk this one down. Stats show that there is a whopping 7 percent short position of the 80 million shares outstanding. Call us contrarians, but why? Short term I smell a squeeze. Long-term it looks a winner; let's dig deeper. CDW Corporation and its subsidiaries engage in the direct marketing of multi-brand computers, and related technology products and services in the United States. CDW is a principal source of technology from top name brands such as Adobe, APC, Apple, Cisco, HP, IBM, Lenovo, Microsoft, Sony, Symantec, Toshiba and ViewSonic. CDW has almost $575 million in cash and no debt. Sales for 2005 were $6.29 billion ($5.7 billion for 2004) against a market cap of $4.5 billion. The p/e against 2005 earnings of $3.29 against a share price of $56 is 17 times. For 2006 and 2007 the projected numbers are $3.24 and $3.47 respectively for p/e's of 17 times and 16 times. The company bought back $258 million of its own shares in 2005 and paid out $35 million in dividends. Other than a slight decline in sales for 2006--which is fairly common--not seeing the problem so far. For the reasons above and below, investors should use the current price weakness in CDW to accumulate shares for the long-term. Maybe the technical picture is crappy: Apparently not. While we wouldn't be surprised to see CDW pullback to the $50 area and blow out the weaklings before it steams into a serious up move, the chart looks constructive enough that one could buy here and on dips. Our technical target settles out at around $85-$90, so a couple of bucks here or there is likely irrelevant.  The market for computers and peripherals is roughly $100 billion a year and growing. While CDW ain't no Google from a momentum perspective--thankfully--revenues and earnings have been increasing nicely; growth has been consistent and frankly quite impressive over the last few years.  Sexy? Mais non. Even the dozen or so analysts that follow the company are firmly on the fence with a wussy buy rating of 2.5 out of 5. Curious. And, as an aside, I've ordered stuff in the past from CDW. Smooth. Fast. Good prices. I, and dare I say the majority of consumers, don't need much more. The financial ratios are also really good. Price to sales is less than 1 at around .72. You don't see that very often. Microsoft has a p/s ratio of over 7.  As well, CDW's PEG ratio is a solid 1 which gives virtually no value to any future growth surprises/expansion. We think that's a mistake.  Microsoft's PEG is 1.62.  The CDW story is surprisingly simple. It sells computers, software and electronics stuff. And over the last few years it has sold more and more. Our interest in the stock is two-fold. First, we believe that the current market price does not reflect the growth to date and investors appear needlessly worried that revenues will slow. Second, the future growth appears robust as the company opens new sales channels and obviously builds its brand as a premier site to get the latest and greatest products worldwide. And for those reasons, investors should own the shares long-term. Doesn't get more complicated than that. By the way, for the more aggressive traders among us, CDW is optionable. Have a look at the expiries and strike prices and see if either suits your time horizon and risk profile. And, if you haven't already noticed, check out our new sidenotes column for up-to-date market calls, alerts and more. Stay tuned.     We Value Your Feedback Got comments, questions or suggestions? Send 'em on over: Editor@smallcapnetwork.com If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC 4653 Carmel Mtn Rd Suite 308 #402  San Diego, CA 92130 Option Alert: INTC On January 18th, we looked at Intel (NASDAQ: INTC) and suggested the 06April 22.50 calls if they could be snagged for under $1. Currently they are 55 cents a contract and the 06April20 calls are $1.90 good value with the shares at $21.43. Might want to check out longer expiries if April seems too soon. Once the brouhaha regarding the overreaction to the last numbers release cools, there is likely a nice bounce coming. Straight option purchases are for aggressive investors only.   Making Sense Sense Holdings (OTCBB: SEHO) looking perky as volumes increase and the shares look like they want to break 30 cents. Company recently announced further measures to ramp up development of the handheld explosives/narcotics/biological threat detection device. Obviously landing on more investors' radar screens. Will keep readers informed as developments warrant. Getting extremely interesting.   Profit Alert: MRK We noted on the SCBLOG that we're taking profits on Merck (NYSE: MRK) as it has moved up to $34.50 from our call in August 05 at under $26. The intelligentsia got scared off due to Vioxx concerns, but our work showed the price then already reflected that concern and the technical picture looked good. Now it's approaching the old high and even if it takes that out we see a sell-off coming. Any entries here should have tight stops.   INFA Takeout Target? Kind of the same scenario with Informatica (NASDAQ: INFA) also noted on the SCBLOG. As the shares crossed $15 and earnings were skookum, it may still get taken out, but a tight stop to protect profits or on new purchases would be wise. We have been on this one since $7.50, so taking at least a bit off the table would be prudent. Or at least protect a large slug of profit. Subscribe Information is power and timely information is profitable. Become informed and profit from SmallCapDigest Profiles and Trading Alerts by becoming a Preferred Member today. There is no cost associated with your email subscription. Add your email address below and make sure to check your email inbox and confirm your opt-in request to start receiving the SmallCapDigest Email Newsletter on a regular basis. To ensure newsletter delivery, you can add any additional email addresses you may have to the SmallCapDigest Member List. Receiving the SmallCapDigest Newsletter in multiple locations is the best way of making sure you don't miss the next investing or trading opportunity! For web based email addresses, the SmallCapDigest recommends @yahoo.com or @aol.com for timely and reliable email newsletter delivery. Subscribe Here Note: Your email address will be kept strictly confidential, and will not be shared with any other entity for any purpose at any time. If you no longer wish to receive the SmallCapDigest, simply follow the instructions located at the bottom of every SmallCapDigest Newsletter Edition. Unsubscribe Here D I S C L A I M E R: The SmallCap Digest is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. SmallCap Digest is not a licensed investment professional or broker-dealer. All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward  maximizing the upside potential for investors while minimizing the downside risk, whenever possible.  Moreover, as detailed below, this publication accepts compensation from third party consultants and/or companies which it features for the publication and circulation of the SmallCap Digest or representation on SmallCapNetwork.net.  Likewise, this newsletter is owned by TGR Group, LLC.  To the degrees enumerated herein,  this newsletter should not be regarded as an independent publication. Visit Here to view our compensation on every company we have ever covered, or visit the following web address:  http://access.smallcapnetwork.com/compensation_disclosure.html for our full compensation disclosure and http://access.smallcapnetwork.com/short_term_alerts.html for Trading Alerts compensation and disclosure. All statements and expressions are the sole  opinions of the editors and are subject to change without notice. A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities  mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. From time to time TGR Group LLC sells shares in the open market it receives as compensation for coverage of client companies. Since the shares are received as compensation for services as previously disclosed, and not for investment purposes, the editors do not view the sale of the shares as contradictory to any advice delivered in the content. This should be viewed as a conflict of interest by shareholders or prospective shareholders of the client companies. The editor, members of the editor's family, and/or entities with  which the editor is affiliated aside from TGR Group LLC itself, are forbidden by company policy to own, buy, sell or otherwise trade stock for their own benefit in the companies who appear in the publication unless specifically disclosed in the newsletter. The profiles, critiques, and other editorial content of the SmallCap Digest and SmallCapNetwork.net may contain statements that appear forward as it relates to the expected capabilities of the companies mentioned herein. Some of the companies featured in the SmallCap Digest Newsletter pay an ESP (Electronic Service Provider) fee of $2,500 per month to an affiliated Technology Company for electronic delivery of this newsletter and other web related technology services. THE READER SHOULD VERIFY ALL CLAIMS AND DO THEIR OWN DUE DILIGENCE BEFORE INVESTING IN ANY SECURITIES MENTIONED. INVESTING IN  SECURITIES IS SPECULATIVE AND CARRIES A HIGH DEGREE OF RISK. THE INFORMATION FOUND IN THIS PROFILE IS PROTECTED BY THE COPYRIGHT LAWS OF THE UNITED STATES AND MAY NOT BE COPIED, OR REPRODUCED IN ANY WAY WITHOUT THE EXPRESSED, WRITTEN  CONSENT OF THE EDITORS OF SMALLCAPNETWORK.NET. We encourage our readers to invest carefully and read the investor information available at the web sites of  the Securities and Exchange Commission ("SEC") at http://www.sec.gov and/or the National Association of Securities Dealers ("NASD") at http://www.nasd.com. We also strongly recommend that you read the SEC advisory to investors concerning Internet Stock Fraud, which can be found at  http://www.sec.gov/consumer/cyberfr.htm . Readers can review all public filings by companies at the SEC's EDGAR page. The NASD has published information on how to invest carefully at its web site.