United Online, Inc. (UNTD) provides consumer Internet and media services primarily in the United States. It operates in two segments, Communications and Classmates Media. It is the latter which is really propelling the company forward these days.

The company said first-quarter revenue in its Classmates Media business — which includes the Classmates.com and MyPoints Web sites — rose to $51.9 million from $42.4 million, helped by the addition of 322,000 pay accounts during the quarter.

In a client note, Jefferies & Co. analyst Youssef Squali kept his “Buy” rating and $15 price target for the stock. The analyst said the company’s Classmates Media business “continued to show solid growth,” though its increase in paid subscribers was offset by weakness in the communications business.

Clearly its dialup business is dying, but it is hardly time to write off the company as a whole. There is the potential that Classmates Media will become an IPO, which would unlock significant shareholder value.

The Correct Call believes this stock is undervalued. It is currently trading around 13.7x current-year estimates. Those estimates have increased a nickel over the past 90 days. An additional treat for shareholders is the juicy 6.7% dividend yield. We see this stock at $14 in a year.

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Last week Green was as good as Gold as Alternative Energy Stocks basked in the sunlight out producing the S&P 500 by more 9% for the week. The Correct Call subscribers have shared in the warmth as we highlighted Solarfun last Friday as one of our stocks to trade on earnings. SOLF blew away estimates this morning and the stock is on the march.

The rest of the top performing sectors look like this:

We looked under the hood of the top performing sectors to see if we could find companies worthy of our readers’ consideration. The Correct Call identified a Computer & Office Equipment stock that should increase your cash flow.

TNS, Inc. (TNS) provides networking, data communications, and value added services to retailers, banks, and payment processors worldwide. It also offers secure data and voice network services to the financial services industry. The company provides point-of-sale/point-of-service that provides data communications services to payment processors.

The company is benefiting from the secular trend shift to electronic transactions and financial market connectivity. It exceeded estimates by 37% in its first quarter, while revenues grew 16%. Growth was fueled by its International Services Division (ISD) which grew 32%.

Another positive was that long-term debt is decreasing due to increasing free cash flow. This is a healthy sign for any company. Free cash flow is expected to grow throughout the year, which will further strengthen the balance sheet. Gross margins also grew over 500 basis points to 51.60%.

The analyst community is also quite bullish on the stock judging by their earnings estimates. Over the past month, this year’s estimates have increased over 10% to $1.19 per share. Earnings are expected to jump another 18.6% next year. The company has a nice history of exceeding estimates. The past four quarters have seen an average surprise of 43.7%. The stock is attractive at 17.6x next year’s estimates. We see the stock at $30 this year.

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Solarfun is open and trading in the 28.50 cent range. With the amount of stock sold short, it could go higher. Traders should remember the saying, bulls & bears make money, but pigs get slaughtered.

You never lose money taking a profit.

Both of this week’s Trading Earnings picks for the week managed to SMOKE past estimates handily.

Intuit earned 6 cents more than expected and told investors and analysts to look forward to better earnings than expected for the remainder of the year. In After-Market Trading, INTU shares were up about $1.50.

Solarfun nearly doubled the consensus estimate of 15 cents coming in at 32 cents per share. Our subscribers who acted on SOLF should be happy as the stock is trading up nearly $5 at $30 in the pre-market.

Our subscribers will find another new feature. Once logged in, they will find a new navigation bar for The Correct Call Perfect 10 under $10. The Perfect 10 under $10 is a carefully managed portfolio of 10 stocks under $10 that we believe will outperform the market during the next 3-to-6 months.

TransAct Technologies (TACT) Incorporated engages in the design, development, assembly, and marketing of transaction printers and printer-related services, supplies, and spare parts. It offers transaction printers under the Epic and Ithaca brand names.

We are bullish on this microcap stock for several reasons. The company just settled a patent litigation lawsuit with FutureLogic, which should remove some uncertainty that was hanging over the stock. FutureLogic will now license TACT’s technology for slot machine printers. Expect estimates to rise on this news.

Additionally, in April the company won default status with a subsidiary of International Game Technology which means TACT’s Epic 950(r) printer is the default Ticket-In Ticket-Out printer for all new IGT games. This is a big deal as IGT is a major player in the slot machine business.

The company reported a profit of six cents per share in the first quarter while the lone analyst covering the stock expected a break-even result. Revenues for the first quarter of 2008 were $14.3 million, compared to $11.5 million in the same period a year ago.

Remember that this is a microcap stock and only suitable for aggressive investors. That being said, many factors are in place to push this stock higher. It is attractively valued at 16.4x next year’s estimates. This is well below its long-term growth rate of 30%. The Correct Call sees this stock above $12 in a year.

Disclosure:none

Houston Wire & Cable Company (HWCC), through its subsidiaries, distributes specialty wire and cable products in the United States. It offers continuous and interlocked armor cables, control and power cables, electronic wire and cables, flexible and portable cords, instrumentation and thermocouple cables, lead and high temperature cables, medium voltage cables, and premise and category wire and cables.

The company posted a 5.7% surprise in its latest quarter as it made 37 cents per share, two cents better than the consensus. Sales rose 9.4% to $89.4 million. Houston Wire also estimated that sales from its five major growth initiatives, including Emission Controls, Engineering and Construction, Selected Industrials, LifeGuard and other private branded products, and Utility Power Generation, increased about 20 to 25% over the first quarter of 2007.

We think the stock is inexpensive and has strong upside. It is trading at less than 11x next year’s estimates of $1.87 per share. This is well below its long-term growth rate of 16%. That works out to a PEG ratio of 0.69. The stock should be trading at higher multiples, especially with the fundamentals improving.

Over the past week, this year’s earnings estimates have increased a nickel to $1.68 per share. It also has an outstanding ROE of 36%, more than twice its industry average. Given these factors, we see the stock hitting $25 in a year.

Disclosure: none

LookSmart, Ltd. (LOOK) operates as an online advertising and technology solutions company. It develops, markets, and sells advertising products to text and display advertisers and advertising agencies.

It reported a strong first quarter in which revenues grew 47% to $17.5 million. LOOK’s strategy of focusing on the LookSmart online ad network is paying dividends. Paid clicks grew over 60%, which drove gross margins as well.

Management is showing some serious skill as well. Cash per share is almost $2 per share, which is almost half of its stock price. This makes the stock even better value than it appears. Management has slowed down its cash burn rate, which should lift its valuation going forward.

Obviously, this is a recommendation for more aggressive investors out there. It is not suitable for more conservative portfolios. This microcap has no debt and is trading at a price/book ratio of 1.69. This stock has the potential to hit $6-$7 over the next year, which would be a return of more than 50%.

Disclosure:none

The market has put in a solid rebound from its lows reached in March, but the economic news hasn’t been getting much better. In fact, some can make the argument that it has gotten worse. For example, The University of Michigan Consumer Sentiment Index hit a 28-year low in May. GDP growth is barely above 0, the unemployment rate is ticking higher, housing remains in the dumps and commodities keep going through the roof.

Many people make the mistake of assuming that the economy and stock market go in lockstep at exactly the same time. Does this mean that the market is showing a bout of ”irrational exuberance?” No, and here is why.

The stock market is a discounting mechanism, which means it is forward looking by approximately six to nine months. Obviously stocks are forecasting better times ahead for the economy as evidenced by its recent rebound.

This also explains why our market direction models have largely produced “Buy Signals” and continue to do so. Last week The Correct Call saw a major improvement in the internal health of the NYSE and S&P 500 as the number of new highs dwarfed the number of new lows.

In addition to a stronger heartbeat, we saw the NYSE move above its 10 month moving average for the first time since early January. The NASDAQ is right on its 10 month average and the S&P 500 and DOW are both one strong up day away from crossing the line as well. When the indexes are trading above their 10 month averages, it’s generally considered to be one off the hallmarks of a Bull Market.

If all four of the main indexes can achieve this key milestone in succession, this is known as confirmation. A four way confirmation of this major Technical Analysis “buy signal” should act as a signpost pointing the way to higher stock prices in the immediate future.

Just remember that when the economic news does eventually get better, it may already be priced in. So when the unemployment rate ticks lower and oil starts to drop, stocks might not advance as much as you expect or hope because it might be already been priced into the market.

The market has always been and probably always will be a better predictor of economic activity than any talking head you see on the squawk box.

Congratulations to all The Correct Call Calendar subscribers who acted early Friday on our SOLF recommendation. Solarfun opened trading at $19 per share and soared more than 20% to close the day at $22.84.

The Correct Call Perfect 10 portfolio got off to a good start as well. It produced a gain of 2.34% in its first 3 days.

* $10,000 invested in each of the 10 stocks at the open on May 14, 2008
** $100,000 invested in the S&P 500 on the May 14, 2008 opening of 1405.65

So far we have made The Correct Call on 70 % (59 of 84) of our recommendations, with 27 of our picks up more than 10% in less than 3 months.

Our subscribers should be on the lookout for an additional portfolio we call “The Perfect 10 under $10.” We expect to launch this exciting new portfolio sometime in the next week.

Sybase, Inc. (SY) provides enterprise and mobile software solutions for information management, development, and integration worldwide. Its Infrastructure Platform Group segment offers Adaptive Server Enterprise, a relational data management platform for mission-critical transactions.

The company pulled a “beat and raise” for its first quarter as strong mobile messaging contributed to a 60% rise in profits. Earnings per share came in at 35 cents, much better than the 28 cents that analysts expected. Revenue rose 13%, to $260.1 million, from $230 million last year.

Sybase also raised its guidance for the year, and now expects to report profit between $1.51 and $1.56 per share, or adjusted earnings between $1.94 and $1.99 per share. Revenue will likely be “toward the high end” of its previous forecast, between $1.08 billion and $1.09 billion, the company said.

We think the company is being conservative with its guidance. Due to the strength in its messaging segment, earnings could be well over $2 per share. If so the stock has much more to go on the upside. Over the past month, already three of the four covering analysts have raised their estimates. The stock is already trading at a new 52-week high just above $30 and we believe this could be a $35 stock in a year.

Disclosure: None