Back to the dismal 2008 markets again last week. We managed to finally avoid the plunge and post a 3.9% gain last week on the strenght of CLZR (+30%) and MIVA (+19%). We have not seen some of these type of valuations since 2002. The sky was falling then too. But it didn’t fall. Stock prices rose. If we were not so heavily weighted in DWCH, PARL, ILOG, BDAY and MIVA, we would add more in these also.
All of the major averages have lost all their 2007 gains and then some from 12/31/2006. And we have too.
We were up 3.9% last week, bringing our YTD 2008 loss to 27.9%. NASDAQ was down 1.4%, the DOW was down .9% and the S+P 500 was down 1.7%. There are lots of cheap stocks around now, but we keep coming back to the ones we already own as being the best values.
Last week we went 8 stocks up, 6 down and 1 even.
For last week, 2008 year-to-date, and since we started this Blog in January 2006, our model portfolio is +3.9%,-27.9 and +6.2% respectively. Since inception we are now 18 stocks up, 13 down and 1 even.
So far in 2008 the DOW is down 7.5%, NASDAQ is down 14.4% and the S+P 500 is down 9.4%. The NASDAQ is now down a whopping 21% since October 31, 2007.
The Russell 3000 and the Wilshire 5000 are both down just about 9.2% this year.
Since inception we have closed out the following positions:
2006-ONXS +11% (Buyout offer)
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-DTLK +25% (2 weeks)
2007-PDLI + 3% (Waited too long to sell)
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
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 17 stocks that we closed out in 2006, 2007 and 2008 the average gain was 22%.
Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $10.65, Valuation $20-$22
Up $.58 to $9.00.
SPNC seems to have stabilized after last weeks disaster. Some insider buying has helped it appears. A stock but-back would solidify this, we think.
The company has $54.4 million in cash ($1.73 per share–21% of the current share price), and is trading at about 2 times 2008 revenues (net of cash).
Now down 4%. BUY.
DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $3.21 (averaged down from $3.66), Valuation $9.03 (was $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed at $3.45, down $.16.
DWCH is now trading at 38% of our valuation.
Now up 10%. 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 $11.24 (Was $10.80 $9.20, $8.63, $13.77)
PARL closed at $3.38, down $.19.
Latest earnings were very good. Stock is down. The market in general is anticipating that the bottom will fall out of everything.
Now trading at 30% of our valuation.
The new management has 2.0 million reasons to make this stock go up. Glenn Nussdorf paid $6 for his shares.
Down 29%. BUY.
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 $24.67 (was $20.51, $23.22, $20.99, $20.52)
Closed at $9.84 up $.50.
Our valuation moved back up to over $24 per share.
For FY2008 (this year) they are STILL projecting another 20% increase in sales but revised their earnings projections down. They still have $3.39 a share in cash.
A buy-out is a decent possibility here.
Down 19%. HOLD
Celebrate Express (BDAY-recommended 4/17/2007)
Buy Price $8.38 (was $8.82 before double-up), Valuation $15.51 (Was $17.85 $18.18)
Down $.10 to $5.13.
There will be no more birthdays or halloween. BDAY is not burning it up, but this is stupid.
Trading at 33% of our valuation.
The “turnaround” is not yet done.
Down 39%. BUY.
Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.52, (was $6.67 ($10,000 added), $6.98 after double up) Valuation $10.28 (was $13.32, $12.89, $13.40)
Down $.30 to $6.12.
Cannell Capital filed a 13D on February 19th, disclosing a 12.9% ownership stake. Most of this was purchased from Penninsula at $7.03 a share. Cannell is pushing MEDW management to sell the company. It seems the only was any stock can go up these days is on a buy-out.
About 45,000 shares purchased by insiders last week at $6.15. Always a good sign.
Down 6%. HOLD
Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $7.26, Valuation $8.69 (was $11.51)
Up $1.05 to $4.52
No news, but apparently there are “industry consolidation” rumors.
Down 38%. HOLD
MIVA. (MIVA-Recommended 10/21/2007)
Buy Price $2.38 (Was $2.62 before another $10,000 and was $3.00 before double up), Valuation $7.58 (was $7.59)
Up $.34 to $2.10 in late Friday feeding frenzy.
Trading at 23% of our valuation
Down 12%. BUY
PDL Biopharma. (PDLI-Recommended 10/21/2007)
Buy Price $16.53 (was $20.04 before double-up), Valuation $24.00 to $30.00
Up $.23 to $15.98.
PDLI announced the sale of their manufacturing assets in February for $240 million.
So total cash deals are $525 million (about $5.25 per share). They are still trying to sell their royalty stream.
We guess their royalty stream just based on the current marketed products is worth at least $1.5 billion, so this, plus the sales above, are more that the current market cap. Their pipeline, know-how, and remaining assets just add to this.
No matter, they are still trying to sell the company.
Down 3%. HOLD
Datalink. (DTLK-Recommended 10/31/2007)
Buy Price $4.28, Valuation $10.66 (Was, $9.39)
Up $.08 to $4.06.
Trading at only 38% of our valuation.
Down 5%. BUY
OB-abies (Bulletin Board Listed Stocks)
Interestingly, our OB-abies have held up better than the “higher-quality” stocks so far this year. They are down about 8.6% on average, compared to almost 14% for the stocks above. At least so far.
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 $5.71 (was $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.78, down $.07.
Earnings announced in January were great. Sales up 21% and they made money. This market just stinks for mini/micro caps, and ARI does little to get any investor attention. Wake up management–you have a great little company here worth 3X what it is selling for.
Now up 10%. BUY. Still a Huge valuation gap here.
OPTIO Software Inc. (OPTO.ob-Recommended 3/22/2006)
Buy price $1.25, Valuation $2.74 (was $2.34, $2.28, $2.89, $2.89, $2.54 and 2.88)
Closed at $1.25, up $.07.
OPTIO has cash of $.41 per share–33% of the market cap.
In June 2007, OPTIO announced they had hired an investment banker to help them review the “Strategic Alternatives” related to their Healthcare software division.
It has been over 8 months now since their announcement–with no announcement. We have to assume there will be no deal here. Management is derelict in making no announcement.
Still hoping we will see north of $2.00–but may not happen now unless next quarter rebounds with some decent profit numbers.
Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.93 (Was $.99 and $1.19 before adding $10,000-twice), Valuation $3.41 (was $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.88, up $.05.
Earnings out in early February. Sales up only 4%, but earnings up 69%!. EPS was $.04 compared to $.02 last year. Pre-tax earnings were up over 100%. Our valuation rose to $3.41. Stock goes down. Who can figure.
Now down 6%. BUY.
CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask, Valuation $1.17 (Was $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price down $.01 at $.33. Closed at $.28.
Maybe these guys will wake up and create some shareholder value in 2008.
This is still trading at only 28% of our latest valuation.
Up 22% based on the ASK price. BUY
Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.95 (Was $1.08 before double-up) Valuation $2.08
Closed at $.81, unchanged.
LTUS announced a $5 million private placement of stock last week. 5,547,000 shares and warrants to purchase another 2.9 million shares at $1.20. Also in the agreement, the current big holders have to put up a chunk of their personal stock in escrow, which will be released on hitting certain earnings target. The target for 2007 is $8.5 million. For the 9 months ended September 30, they made $6.1 million. So this should make $2.4 million Q4 earnings a slam dunk–$.05 per share. Target for 2008 is $13.8 million (about $.28 a share) and 2009–$17.5 million or about $.35 per share. This is still a BUY.