8/25/2007 Update

Last week we went 10 up, 4 down and 1 even. Our biggest DOGS are: LINN.ob, BDR, PARL, AVSO,ob, ILOG, ARIS.ob and CIMT. For the week, 2007 year-to-date, and since we started this Blog in January 2006, our model portfolio is +3.2%,+12.4% and +29.7% respectively. Since inception we are now 18 stocks up and 7 down (3 of which are down less than 10%).

We were up 3.2% this past week and are now up 12.40% so far in 2007. The DOW, NASDAQ and the S+P 500 were all up, with gains ranging from 2.3% (DOW) to 2.9% (NASDAQ) last week, and are all now up from 4.3% (S+P 500) to 7.4% (DOW) for the year.

Our OB-abies contine to lag. BDR and LINN.ob are the weakest companies fundamentally and we are looking for an economic exit on these two. The rest of our stocks are looking good, in our opinion.

We are now up about 1.7 times the DOW, 1.9 times the NASDAQ and 3 times the S+P 500 averages in 2007. The Russell 3000 and the Wilshire 5000 are both up between 4 and 4.5% for the year.

Since inception we have closed out the following positions:

2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007 DTLK +25% (2 weeks)

The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).

For the 10 stocks that we have closed out in 2006 and 2007 the average gain was 35%. We are tired of watching our stocks go up–and then down. So we are planning to take profits a bit sooner than in 2006. We have already closed out 6 positions in 2007 compared to 4 in all of 2006.

Earnings on QADI last week.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $10.65, Valuation $18-$20
Up $.51 to $14.43 last week.
Short Interest was 5.7 million at July 13th.
Looks like Montgomery upped their price target to $17 and Citigroup upped theirs to $19. Momentum is building while the shorts continue to sell into all this upward force.
We still think $18-$20 is in the cards for this year.
Guidance has not been updated yet for the TURBO Booster. If this market didn’t stink so bad, helping to bail the shorts out, I think we would be North of $15 (and we were for a little while at least).
Now up 36% so far. HOLD.

QAD Inc. (QADI-Recommended 6/14/2006)
Buy price $6.93, NEW Valuation $12.84 (was $11.27, $15.92, $13.69, $13.73 and $11.86)
Closed at $8.16, down $.31.
QAD announced earnings on Thursday. Pretty good in our opinion. Our valuation moved up to $12.84 from $11.27 (+14%) and was a hair off from rising to $14.80. Sales were up 10%, but apparently they missed their “earnings target”, so some people were disappointed. Not us.
Up 18% so far. BUY.

PDL BioPharma Inc. (PDLI-Recommended 5/21/2006)
Buy price $19.31, Valuation > $30
Closed at $23.87, up $2.71 last week.
Over the long haul (years) we like this stock, but right now the play is a sale of the company due to Third Points involvement.
Activist investment firm Third Point LLC, owns 11.2 million shares or 9.7% of the company and has more than $200 million invested. They continue to exert pressure on PDL to improve shareholder value.
If this reaches $30 in 2007, without a buy-out, we would sell.
Now up 24%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $3.21 (averaged down from $3.66), Valuation $9.28 (was $9.20, $8.32, $7.50, $7.63, $9.31)
Closed at $4.76, down $.26 for the week.
DWCH is now trading at 51% of our valuation. We will look to buy some more of this next week.
Now up 48%. BUY.

Parlux Fragrances (PARL-Recommended 11/30/2006)
Buy price $4.78 (was $6.12 before another $10,000 added, $6.65 before double up), Valuation $9.20 (Was $8.63, $13.77)
PARL closed at $3.61, up $.25 last week.
Starting to see some insider buying here at $3.40 to $3.50, which is a good sign that maybe we are on the way up.
New management needs to keep moving this company is the right direction.
The new management has 2.2 million reasons to make this stock go up. Glenn Nussdorf paid $6 for his shares.
No news.
Down 25%. BUY.

Blonder Tongue Laboratories (BDR-Recommended 3/4/2007)
Buy price $1.83, Valuation $4.31 (was $4.01, $5.12, $5.88).
Closed at $1.30 up $.03 for the week.
BDR is still cheap in our opinion, but they need a decent quarter to get this stock moving up. As we mentioned above, we are looking to get back to even on this one and get out, even though the valuation is compelling.
Trading at 30% of our valuation.
Down 29%. HOLD

ILOG SA (ILOG-recommended 3/26/2007)
Buy price $12.08 (was $12.92 before another $10,000 added, $13.60 before double-up), Valuation $23.22 (was $20.99, $20.52)
Closed at $11.14 up $.44 for the week.
No news.
For FY2008 they are projecting another 20% increase in sales and a tripling of operating income. They still have $2.95 a share in cash.
Down 8%. BUY

Celebrate Express (BDAY-recommended 4/17/2007
Buy Price $8.82, Valuation $17.85 (Was $18.18)
Up $.23 to $9.23 last week.
Stephen Roseman (Director) now has 627,728 shares or 7.9% of the company after steady buying all this year.
With the insider buying and discount to our valuation, we like this stock alot.
Up 5%. BUY on dips below $9.00

Mediware (MEDW-Recommended 6/4/2007
Buy Price $6.98, (was $6.98 after double up ($10,000 added) Valuation $13.40
Up $.43 to $6.80 last week.
Earnings due out Wednesday Sept. 5th before the market opens.
Penninsula Capital owns 1.67 million shares or over 20% of MEDW. Not sure how they liguidate there stake profitably without a takeover
Up 2%. BUY

Cimatron (CIMT-Recommended 8/12/2007
Buy Price $2.12, Valuation $7.53
Up $.09 to $2.11 last week.
No news.
Down .5%. BUY

OB-abies (Bulletin Board Listed Stocks)

Nobody is liking our OB-abies lately (except maybe OPTIO). Just not their “time” yet. Patience.

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up), Valuation $5.34 (was $5.03, $5.28, $5.28, $5.21)
Closed at $1.50, up $.09 last week.
No news
Now down 7%. BUY. Still a Huge valuation gap here.

Lion Inc. (LINN.ob-Recommended 4/15/2006)
Buy price $.23 (was $.36 before double-up on investment), Valuation $.29 (was $.49, $.57, $.62, $.66 and before that $.79)
Closed at $.10, down another $.02 last week.
LINN continues to decline. Our valuation has dropped to $.29 as there business continues to deteriorate. They need to sell this thing quickly if they can.
This “stinker” has chopped over 10% off our 2007 performance all by itself.
Lion management has announced the formation of a “Strategic Review Committee” to explore the sale of the company or parts of the company. They said that they has received “preliminary” and “conditional” indications of interest from parties interested in acquiring “portions of the company”. Hopefully something will happen here.
Down 57%. Hold.

OPTIO Software Inc. (OPTO.ob-Recommended 3/22/2006)
Buy price $1.25, Valuation $2.28 (was $2.89, $2.89, $2.54 and 2.88)
Closed at $1.61, up $.04 last week.
Has cash of $.44 per share–27% of the market cap.
In late June, OPTIO announced they had hired an investment banker to help them review the “Strategic Alternatives” related to their Healthcare software division. In other words, a “for sale” sign has gone up. Having been through their SEC filings, there appears to be no disclosure on the sales or operating results for this “division”, so there is no way for us to determine what this could mean from a valuation standpoint.
Still hoping we will see north of $2.00 this year–but may not happen now unless next quarter rebounds with some decent numbers, or they get a good deal on the Healthcare “division”.
No news.
Up 29% so far. HOLD.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.99 (was $1.19 before double up ($10,000 added),Valuation $3.25 (was $3.29 $2.69, $3.36, $3.81)
Stock closed at $.80, down $.05 last week.
AVSO announced a restructuring last month that is expected to save more than $2.5 million annually. They also narrowed their revenue guidance to between $50 and $51 million for 2007. They expect to lose money in Q4 (partly due to $500k in severance charges), but are projecting “significantly” better margins over recent results. They do not expect to lose money in FY 2008. We will wait to see this quarters results and any impact on our valuation.
Trading at 25% of our valuation. Just too CHEAP.
Now down 19%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask, Valuation $1.38 (Was $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price was unchanged at $.36. Closed at $.35.
This is still trading at only 26% of our latest valuation, but we still have to until the VOIP business stops losing money, we are not buyers–yet.
Up 33% based on the ASK price. HOLD


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