Last week we went 5 up, 9 down and 1 even. DWCH is still our biggest dog followed by LINN.ob,PARL, MOBI, INFT, SPNC and ARIS.ob. For the week, 2007 year-to-date, and since we started this Blog in January 2006 our model portfolio is -1.2%,-2.4% and +12.8% respectively.
Since we started last year we have recommended 19 stocks. We have sold 4 for an average gain of 28% and are holding 15 remaining stocks, 8 of which are up and 7 down. Over the past year CCA Industries had a takeover offer that it is still mulling over (we sold for a 21% gain on this “take-under”) and INYX (IYXI.ob) is in the process of a management buy-out. With a lot of private equity funds loaded with cash (and borrowing capacity) and the pool of attractively priced stocks getting smaller we are expecting a few more of our stocks to get offers in 2007. We have been actively screening stocks to find new recommendation but are not finding any that are as attractively priced as the ones we have right now (we are always thinking about a few though). We have missed a few that we were watching (TBV-AMEX for one–up almost 100%), but we would rather miss a few than take on too much risk.
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). Down $.45 to $10.29 last week. Shorts continue to control the vertical on this stock. Prospects are really great for this company. No news. Now down 3% so far. BUY.
QADI-(Buy price $6.93, Valuation $13.69 (was $13.73 and $11.86). Closed at $8.10, down $.02. Trading at only 59% of valuation. Earnings due March 15th. No news. Has $1.03 in cash also. Up 17% so far. HOLD.
PDLI-(Buy price $19.31, Valuation > $30)–Closed at $20.93, down $.82. No news. This remains a very volatile stock. Now up 8%. HOLD.
MIVA-(Buy price $3.80, Valuation $7.52 (was $7.38 and $9.10)). MIVA closed at $4.17, up $.08. Now up 10%. HOLD.
DWCH-(Buy price $3.66, Valuation $7.50 (was $7.63, $9.31)). Closed at $2.67, up $.16 for the week, now down 27%. Earnings due on January 30th. HOLD.
INFT-(Buy price $4.11, Valuation $6.95 (was $6.86)). Up $.20 to $3.84. Still has $2.52 per share in cash. On January 22, 2007 Royce Associates filed a 13G with the SEC disclosing holding of 1,090,600 shares or 9.16%. This is up from 596,000 shares held as of their previous filing in May 2006. Loeb Partners filed a 13Da on January 12, 2007 disclosing holding of 533,157 shares (4.46%) down from previous holding of 671,597 shares (5.49%). The Loeb reports are a bit confusing because the current 13D indicates that they have been buying INFT, not selling. Anyway, the holding indicate that these value investors see upside here. Also, given the size of their holdings and the low average daily trading volume of the stock, they are expecting an event that will allow them to move this kind of volume at a profit–like a take-over. Price objective $5.50. Earnings due on January 31st. Now down 7%. BUY.
MOBI-(Buy price $6.68 (averaged down from $7.08), New Valuation $12.82, was $12.69). Down $.30 to $6.28. Earnings came out last week and our valuation went up a tad to $12.82. Sales and earnings were up slightly from last year and they gave no stellar guidance. So we are now trading below 50% of our valuation and cash is 42% of the market cap. Time to officially double up on this one. Down 11%. BUY.
RITT-(Buy price $1.00, Valuation $2.69). Closed down $.02 at $1.25 last week. Earnings report scheduled for February 1st. Up 25%. HOLD.
PARL-(Buy price $6.65, Valuation $13.77). PARL closed at $5.75, down $.12 last week. The action continues to heat up. Now Parlux management is suing Nusdorf and Quality King to stop their current move to oust the Board and management. We will vote with Nussdorf. There seems to be too many catalysts for this to stay down for long. Down 14%. This remains a BUY.
ARIS.ob-(Buy price $2.06, Valuation $5.28 (was $5.28, $5.21)). Closed at $2.02, up $.02 last week. News last week! Maybe these guys are starting to wake up and try to increase shareholder value. They announced an aquisition last week. From their press release: “OC-Net provides website development and hosting services to the Power Sports market, which includes motorcycles, All Terrain Vehicles (ATV’s), snowmobiles, and personal watercraft. OC-Net is profitable with approximately $1.3 million in annual revenues. Terms of the transaction were not disclosed”. This should add almost 10% to ARI’s annual sales. Not earth shattering, but a move in the right direction. This stock is still illiquid, so price moves are fairly meaningless at this point. Now down 2% so far. BUY if you can find some shares. Huge valuation gap.
Linn.ob-(Buy price $.36, Valuation $.62 (was $.66 and before that-$.79)). Closed at $.28, unchanged last week. Still trading at only 45% of our current valuation. Down 22%. HOLD until we get some revenue growth and stop losing money (same story as last quarter).
OPTO.ob-(Buy price $1.25, Valuation $2.89 (was $2.54 and 2.88)). Closed at $1.49, up $.02. Has $.44 in cash per share also. Share volume has remained healthy, at least by previous standards. Value Fund Advisors have apparently upped their stake in OPTIO to 2,918,026 this month from 2,510,559 previously, by buying a bunch of shares at $1.45-$1.46. Looks like their holdings are around 13% of the company now. Hopefully with this buying and the share buy-back plan, the selling overhang is being depleted. Maybe we will see north of $2.00 this year. 19% gain so far. HOLD.
AVSO.ob-(Buy price $1.19, Valuation $2.69 (was $3.36, $3.81)). Stock closed at $1.46, down $.04. Now up 23%. No significant news last week. HOLD.
CTIG.ob-(Buy price $.27 ask, Valuation $1.13 (Was $1.05, $.82)). Ask price was down $.005 at $.295. Closed at $.30. Cash is (was) $.24 per share. Five weeks ago CTI announced the purchase of Ryder Systems LTD. an international provider of electronic and on-line billing solutions and developer of VoIP business applications. Four weeks ago they filed an 8-K, with details of the financing they got to fund the $11 million purchase–but still no details of what they bought. Now up 9% so far (based on ask price). HOLD until we see what we just bought.
IYXI.ob-(Buy price $1.91, Valuation–over $3.00). Closed down $.18 at $2.28, up 17% to date. INYX issued an update on the buy-out last week. The most important statement was “the group now intends to present “an attractive cash buyout- offer” in February”. Hopefully it will be attractive by our standards and be at least $3 per share–so we can book at least a 50% gain on this one. Bank debt is now scheduled for repayment by March 31, 2007 and they have arranged financing for their latest acquisition. HOLD.