Things looking brighter

Maybe the small caps and micro caps are starting to move? Last week was encouraging at least.

We went 9 up, 3 down and 1 even last week. Our model portfolio year-to-date gain, moved up 2.7% to 14.5%. DWCH continued as our biggest dog followed by, MIVA, LINN.ob and PDLI. Since the start of the year we are 11 up, 4 down and 1 even. News on AVSO.ob and IYXI.ob last week.

The model portfolio assumes $10,000 invested in each stock, less $10 commission each way (TD Ameritrade rate).

SPNC-(Buy price $10.65, Valuation $18-$20). Price continued up to $11.70, up $.03 last week. Now up 10%. Short interest dropped a bit last month, but not by much. HOLD

CAW-(Buy price $9.45, Valuation $18.40). Closed down $.18 at $9.65. Yield about 3%. A group called Costa Brava Partnership offerred to buy the Class A stock at a “substantial premium”. The company has rejected this offer. CB owns 7.9% of the stock. I expect earnings this quarter to look very good compared to last year. Up 2% so far. BUY.

QADI-(Buy price $6.93, Valuation $13.73 (was $11.86). Closed at $8.08, up $.08. Yield about 1.2%. Trading at only 59% of valuation. Has $1.30 in cash also. Up 17% so far. HOLD.

PDLI-(Buy price $19.31, Valuation > $30)–Closed at $19.20, up $.44. Annoying action in this stock. Up, down, up, down. Now down 1%. HOLD.

MIVA-(Buy price $3.80, Valuation $7.38 (was $9.10)). MIVA closed at $3.30, up $.15. Now down 13% to date. HOLD until we see their full earnings results for the quarter and update our valuation.

DWCH-(Buy price $3.66, Valuation $7.63 (was $9.31)). Closed at $2.56, down $.12, still a loser–down 30%. HOLD.

INFT-(Buy price $4.11, Valuation $6.86 (was $7.32)). Down $.06 last week to $4.13. Still has $2.52 per share in cash. Price objective $5.50. Now up about 1%. BUY.

OB-abies

ARIS.ob-(Buy price $2.06, Valuation $5.21). Closed at $2.10, up $.10 last week. Up 2% so far. BUY if you can find some shares. Huge valuation gap. More good customer news last week.

Linn.ob-(Buy price $.36, Valuation $.66 (was $.79)). Closed at $.35, up $.04 last week. Still trading at only 53% of our current valuation. Down 3% YTD. HOLD until we get some revenue growth and stop losing money.

OPTO.ob-(Buy price $1.25, Valuation $2.54 (was 2.88)). Closed at $1.25, up $.04. Now back to even. BUY.

AVSO.ob-(Buy price $1.19, NEW Valuation $3.36 (was $3.81)). Stock closed at $1.80, up $.11. Now up 51%. Earnigns were a mixed bag last week. Lost $84,000 on $9.9 million in sales. They closed their acquistion in May and only had 1 month contribution from it. Pro-forma sales including the acquisition were $49 million (actual year sales were $40 million) with $3.6 million of net income. They are projecting $55-$60 million in sales next year. Our new valuation is based on their pro-forma results for the year. Their shares outstanding are tough to figure out from their 10K. I have never seen a relatively simple capital structure so poorly explained. I think that they will have about 23 million fully-diluted shares outstanding next yeat, but this may be high by a couple of million. If they hit their $60 million in sales number next year the valuation should move to over $4 a share. Still only trading at only 54% of our new valuation. BUY.

CTIG.ob-(Buy price $.27 ask, Valuation $1.05 (Was $.82)). Ask price stayed at $.32. Closed at $.315. Cash is $.28 per share. Up 19% so far (based on asked price). If you own this HOLD. If you don’t-BUY.

IYXI.ob-(Buy price $1.91, Valuation–over $3.00). Closed up $.02 at $2.52, up 32% They announced ANOTHER acquisition last week. This one is a U.K. pharmaceutical services provider with expected 2006 sales of about $13 million and $2.7 million of EBITDA. They paid about $17 million for it. They expect it to do $18 million in sales in 2007 and about $4 million of EBITDA. The most encouraging thing to me about this announcement is that some bank is still willing to lend them money for acquisitions. This is still very risky, but could be a real barnburner is they do what they say they are going to do. HOLD.

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Market back to Stumbling along

Last week started out good, then the markets went back to the pattern of the last few months and crapped out on Thursday and Friday.

We went 7 up, 5 down and 1 even this past week–again. But our model portfolio year-to-date gain, inched up (.8%) to 11.8%. DWCH took the honors as our biggest dog after MIVA’s pre-announcement last week, followed by, LINN.ob., OPTO.ob, ARIS.ob and PDLI. These last 3 are down less than 5%. Since the start of the year we are 10 up and 6 down. PDLI dropped back into the red again last week.

The model portfolio assumes $10,000 invested in each stock, less $10 commission each way (TD Ameritrade rate).

SPNC-(Buy price $10.65, Valuation $18-$20). Price continued up to $11.67, up $.42 last week. Now up 10%. SPNC presented at the AG Edwards conference on September 20th at 10 am EST. Not much reaction to it in the stock price. HOLD

CAW-(Buy price $9.45, Valuation $18.40). Closed up $.03 at $9.83. Yield about 3%. A group called Costa Brava Partnership offerred to buy the Class A stock at a “substantial premium”. The company has rejected this offer. CB owns 7.9% of the stock. I expect earnings this quarter to look very good compared to last year. Up 4% so far. HOLD.

QADI-(Buy price $6.93, Valuation $13.73 (was $11.86). Closed at $8.00, up $.58. QADI announced an acquisition last week. Not a lot of money and no financial info on it. But at least they are starting to do something and get a little attention. Yield about 1.2%. Trading at only 58% of valuation. Has $1.30 in cash also. Up 15% so far. HOLD.

PDLI-(Buy price $19.31, Valuation > $30)–Closed at $18.76, down $.60. Annoying action in this stock. Up, down, up, down. Now down 3%. HOLD.

MIVA-(Buy price $3.80, Valuation $7.38 (was $9.10)). MIVA closed at $3.15, up $.35. See our previous post about their good news last week. Now down 17% to date. HOLD until we see their full earnings results for the quarter and update our valuation.

DWCH-(Buy price $3.66, Valuation $7.63 (was $9.31)). Closed at $2.68, down $.11, still a loser–down 27%. HOLD.

INFT-(Buy price $4.11, Valuation $6.86 (was $7.32)). Up $.05 last week to $4.19. Still has $2.52 per share in cash. Price objective $5.50. Now up about 2%. HOLD.

OB-abies

ARIS.ob-(Buy price $2.06, Valuation $5.21). Closed at $2.00, down $.05 last week. Down 3% so far. BUY if you can find some shares. Huge valuation gap.

Linn.ob-(Buy price $.36, Valuation $.66 (was $.79)). Closed at $.31, even for the week. Still trading at less than 50% of our current valuation. Announced some new customer wins last week and hopefully we will see their financial results start turning around soon. Down 14% YTD. HOLD until we get some revenue growth and stop losing money.

OPTO.ob-(Buy price $1.25, Valuation $2.54 (was 2.88)). Closed at $1.21, up $.01. Now down 3% to date. Got up to $1.30 last week, until Friday afternoon–then swooned. HOLD.

AVSO.ob-(Buy price $1.19, Valuation $3.81). Stock closed at $1.69, up $.04. Now up 42%. Year-end earnings are out on Sept. 28th. Could be burdened with some acquisition and capital raising charges, but we expect to see some good operating results. Still only trading at less than 50% of our valuation. BUY.

CTIG.ob-(Buy price $.27 ask, Valuation $1.05 (Was $.82)). Ask price dropped $.03 to $.32. Closed at $.31. Cash is $.28 per share. Up 19% so far (based on asked price). If you own this HOLD. If you don’t-BUY.

IYXI.ob-(Buy price $1.91, Valuation–over $3.00). Closed down $.04 at $2.50, still up 31% so far. HOLD.

MIVA Pre-annouces

MIVA announced today that revenue for the current quarter will exceed the high end of their previous guidance of $40 million. Stock jumped to $3.26, still 14% below our buy-price of $3.80, but enough to have MIVA hand off our biggest dog ranking to Datawatch (DWCH) at 26% loss.
There is hope that we will make some money here.

A Better Week. Spectranetics

Last week was the best in several weeks.

We went 7 up, 5 down and 1 even this past week. But our model portfolio year-to-date gain fell a tad (.1%) to 11.0%. MIVA is still our biggest dog, followed by DWCH, LINN.ob.
OPTO.ob and ARIS.ob keep fluctuating between a small loss and a small gain. Since the start of the year we are 11 up and 5 down. OPTO.ob dropped back into the red on earnings but SPNC roared back into the plus column.

The model portfolio assumes $10,000 invested in each stock, less $10 commission each way (TD Ameritrade rate).

SPNC-(Buy price $10.65, Valuation $18-$20). Price jumped to $11.26, up $1.18 last week. Now up 6%. SPNC presents at a AG Edwards conference on September 20th at 10 am EST. Hopefully they will do good and we will get some buying interest and send the shorts running. HOLD

CAW-(Buy price $9.45, Valuation $18.40). Closed down $.16 at $9.80. Yield about 3%. A group called Costa Brava Partnership offerred to buy the Class A stock at a “substantial premium”. The company has rejected this offer. CB owns 7.9% of the stock. CAW announced a $25 million credit line recently–so either some shares are going to get bought back or maybe an acquisition in the works? Up 4% so far. HOLD.

QADI-(Buy price $6.93, Valuation $13.73 (was $11.86). Closed at $7.42, up $.08. Yield about 1.4%. Trading at only 54% of valuation. Has $1.30 in cash also. Up 7% so far. BUY.

PDLI-(Buy price $19.31, Valuation > $30)–Closed at $19.36, up $.14. Now up .3%. HOLD.

MIVA-(Buy price $3.80, Valuation $7.38 (was $9.10)). MIVA closed up at $2.80. Now down 26% on this one. No news. BUY.

DWCH-(Buy price $3.66, Valuation $7.63 (was $9.31)). Closed at $2.79, up $.01, still a loser–down 24%. HOLD.

INFT-(Buy price $4.11, Valuation $6.86 (was $7.32)). Down $.17 to $4.14. Still has $2.52 per share in cash. Price objective $5.50. Now up about 1%. HOLD.

OB-abies

ARIS.ob-(Buy price $2.06, Valuation $5.21). Closed at $2.05, up $.05. Down .5% so far. BUY if you can find some shares. Huge valuation gap.

Linn.ob-(Buy price $.36, Valuation $.66 (was $.79)). Closed at $.31, even for the week. Still trading at less than 50% of our current valuation. Down 14% YTD. HOLD until we get some revenue growth and stop losing money.

OPTO.ob-(Buy price $1.25, Valuation $2.54 (was 2.88)). Closed at $1.20, down $.13. OPTO released earnings last week. Not what we hoped for, but not a disaster either. Sales were down 8%, due to some delayed sales (so they say) and they lost $450,000. They have cash of $.35 per share, 74% gross margins and a new valuation of $2.54 a share. We don’t like when our vluations fall, but there is still enough of a discount on this one to continue holding. Also, on the same day as earnings, they announced a sale to Ingersoll Rand. Now down 4% to date. HOLD.

AVSO.ob-(Buy price $1.19, Valuation $3.81). Stock closed at $1.65, down $.05. Now only up 39%. Still waiting on year-end results for AVSO. Could be burdened with some acquisition and capital raising charges, but we expect to see some good operating results. Still only trading at less than 50% of our valuation. BUY.

CTIG.ob-(Buy price $.27 ask, Valuation $1.05 (Was $.82)). Ask price stayed at $.35. Closed at $.33. Cash is $.28 per share. Up 30% (based on asked price). If you own this HOLD. If you don’t-BUY.

IYXI.ob-(Buy price $1.91, Valuation–over $3.00). Closed up $.04 at $2.54, still up 33% so far. HOLD.

Relentless

This cappy market is relentless.

We went 2 up, 9 down and 2 even this past week. Our model portfolio year-to-date gain dropped 3.1% to a 11.1% gain. MIVA is still our biggest dog, followed by DWCH, LINN.ob. Since the start of the year we are 10 up and 6 down, which stinks for us. PDLI dropped back into the red as did our latest recommedation SPNC last week.

The model portfolio assumes $10,000 invested in each stock, less $10 commission each way (TD Ameritrade rate).

As a side note, when tech related takeovers are announced, we test our valuation method against the take-0ver offer pricing. Last week EMBT had a takeover announced. We ran our valuation and came up with $8.11 a share. The takeover offer was $8.38. EMBT was trading at about $6.40 a share before the takeover or a 30% discount to the offer. Not enough of a discount for us to recommend this stock, but good validation that our method does work.

SPNC-(Buy price $10.65, Valuation $18-$20). The shorts continue to rule by constantly offering 100 share lots at lower and lower prices. Most of the time the same market makers are on the bid too–at lower and lower prices. Price fell to $10.08, down $.57 last week. Down 5%. SPNC presents at a AG Edwards conference on September 20th at 10 am EST. Hopefully they will do good and we will get some buying interest to knock off these 100 share trades. BUY

CAW-(Buy price $9.45, Valuation $18.40). Closed down $.03 at $9.96. Yield about 3%. A group called Costa Brava Partnership offerred to buy the Class A stock at a “substantial premium”. The company has rejected this offer. CB owns 7.9% of the stock. CAW announced a $25 million credit line last week–so either some shares are going to get bought back or maybe an acquisition in the works? Up 5% so far. HOLD.

QADI-(Buy price $6.93, Valuation $13.73 (was $11.86). Closed at $7.34, down $.26. Yield about 1.4%. Trading at only 53% of valuation. Has $1.30 in cash also. Declared their quartely $.025 dividend last week. Up 6% so far. BUY.

PDLI-(Buy price $19.31, Valuation > $30)–Closed at $19.22, down $.62. Now down .5%. HOLD.
MIVA-(Buy price $3.80, Valuation $7.38 (was $9.10)). MIVA closed at $2.60, up $.06. Now down 32% on this one. No news. BUY.

DWCH-(Buy price $3.66, Valuation $7.63 (was $9.31)). Closed at $2.78, down $.15, still a loser–down 24%. HOLD.

INFT-(Buy price $4.11, Valuation $6.86 (was $7.32)). Up $.16 to $4.31. Still has $2.52 per share in cash. Price objective $5.50. Now up 5%. HOLD.

OB-abies

ARIS.ob-(Buy price $2.06, Valuation $5.21). Closed at $2.00, down $.05. Down 3% so far. BUY if you can find some shares. Huge valuation gap.

Linn.ob-(Buy price $.36, Valuation $.66 (was $.79)). Closed at $.31, down $.01. Still trading at less than 50% of our current valuation. Down 14% YTD. HOLD until we get some revenue growth and stop losing money.

OPTO.ob-(Buy price $1.25, Valuation $2.88). Closed at $1.33, down $.07. Now up 6% to date. HOLD.

AVSO.ob-(Buy price $1.19, Valuation $3.81). Stock closed at $1.70, down $.01. Now only up 43%. Still waiting on year-end results for AVSO. Could be burdened with some acquisition and capital raising charges, but we expect to see some good operating results. Still only trading at less than 50% of our valuation. BUY.

CTIG.ob-(Buy price $.27 ask, Valuation $1.05 (Was $.82)). Ask price fell $.02 to $.35. Closed at $.34. Cash is $.28 per share. Up 30% (based on asked price). If you own this HOLD. If you don’t-BUY.

IYXI.ob-(Buy price $1.91, Valuation–over $3.00). Closed unchanged at $2.50, still up 31% so far. HOLD.

Spectranetics (SPNC)-BUY @ $10.65

SPNC is a medical company that sells laser equipment that helps clear blocked heart arteries, remove pacemaker leads and now can perform procedures to clear blocked leg arteries below the knee.

This last procedure has been helping people that formerly could only look forward to amputation and is what has been fueling SPNC’s recent sales growth.

SPNC has about $1.80 in cash, no debt, is growing sales at a 50% rate and is slightly profitable. Sales this year are expected to reach over $60 million and to be profiable on a non-GAAP basis. Gross margins are in the 70%+ range.

This one defies our normal valuation method as the market value (less cash) is at about 4.5 times revenues which is high–but not for a medical device maker with these margins and propects.

SPNC is also working to get approval to work on arteries above the knee (like Foxhollow-FOXH) which hopefully will come next year. Analysts are guessing at $80 million of revenue next year.

For reference, Luminex, another company with a similar model (sell machines that consume disposable high margin products) had sales of $13.3 million in the last quarter compared to SPNC’s $16 million, has $48 million in cash versus SPNC’s $56 million, has margins in the high 50% range verus 70%, has analyst predicted sales of $70 million next year—sells at 10 times revenues (adjusted for cash on hand).

Lastly, short sellers have been gnawing at SPNC. The stock has been pushed down to the current level from over $13 just recently as short interest has climbed. We think that this could be a $18 stock in the next 6-8 months. We have been in this stock for a long time and think this is a good buying opportunity. BUY.

PDLI, OPTO.ob, IYXI.ob

Summer vacation last week.

We went 5 and 7 over the last 2 weeks. While the markets in general have been doing well over the last couple of weeks, this has not translated to our mini-cap stocks—yet. Our model portfolio year-to-date gain dropped .8% to a 14.2% gain–still better than all the indexes, but not where we want to be. MIVA is still our biggest dog, followed by DWCH, LINN.ob. Since the start of the year we are 11 up and 4 down.

The model portfolio assumes $10,000 invested in each stock, less $10 commission each way (TD Ameritrade rate).

ARIS-(Buy price $2.06, Valuation $5.21). Closed at $2.05, down $.01. Announced another expanded customer relationship and nothing happened. All these customer wins should translate into continued revenue and earnings improvements. At some point investors will take notice and this will take-off–we believe. Down .5% so far. BUY if you can find some shares.

CAW-(Buy price $9.45, Valuation $18.40). Closed down $.01 at $9.99. Yield about 3%. A group called Costa Brava Partnership is offering to buy the Class A stock at a “substantial premium”. The company has rejected this offer. The company is “in-play”. CB owns 7.9% of the stock. No news last week on anything. Up 6% so far. HOLD.

QADI-(Buy price $6.93, Valuation $13.73 (was $11.86). Closed at $7.60, down $.01. Trading at only 55% of valuation. Has $1.30 in cash also. Up 10% so far. BUY.

PDLI-(Buy price $19.31, Valuation > $30)–Closed at $19.84, up $1.45. Now up 3%. Nice to be in the plus column on this one finally. News last week that one drug partnership was canceled, but the stock went up. I think the expectation is that expenses will be reduced and profitability will increase. HOLD.

MIVA-(Buy price $3.80, Valuation $7.38 (was $9.10)). MIVA closed at $2.54, up $.19. Now down 33% on this one. No news. BUY.

Datawatch-(Buy price $3.66, Valuation $7.63 (was $9.31)). Closed at $2.93, up $.08, still a loser–down 20%. HOLD.

Inforte-(Buy price $4.11, Valuation $6.86 (was $7.32)). Down $.07 to $4.15. Still has $2.52 per share in cash and valuation only fell a little, but lowering our price objective to $5.50. Now up 1%. BUY.

OB-abies

Linn.ob-(Buy price $.36, Valuation $.66 (was $.79)). Closed at $.32, up $.01. Still trading at less than 50% of our current valuation. Down 11% YTD. Volume seems to be picking up and we are still seeing some sizable bids for 50,000–75,000 shares from time-to-time. HOLD until we get some revenue growth and stop losing money.

OPTO.ob-(Buy price $1.25, Valuation $2.88). Closed at $1.40, up $.20. Now up 12% to date. HOLD.

AVSO.ob-(Buy price $1.19, Valuation $3.81). Stock closed at $1.71), down $.09 from $1.80. Now only up 44%. Waiting on year-end results for AVSO. Could be burdened with some acquisition and capital raising charges, but we expect to see some good operating results. Still only trading at 50% of our valuation. BUY.

CTIG.ob-(Buy price $.27 ask, Valuation $1.05 (Was $.82)). Ask price stayed at $.37. Closed at $.34. Cash is $.28 per share. Up 37% (based on asked price). If you own this HOLD. If you don’t-BUY.

IYXI.ob-(Buy price $1.91, Valuation–over $3.00). Closed down $.10 at $2.50, still up 31% so far. IYXI released earnings last week. Another sizable loss-$9.8 million (it did have some special charges related to 2 pending acquisitions in there of about $3 million and non-cash stuff of another $2 million). Their bank debt is high and they have some issues there. Revenues were up 137% to $20.1 million. But if their predictions come true–profits in Q4 and $140 million in revenue next year this should soar. Risky because of the continued losses and debt load so HOLD.