Cheap Stocks, 4/26/2008 Update

The markets managed to stay above water last week, with all the major indices up less than 1%. We continued our comeback, up 3.75% last week.

SPNC earnings out last week and were good, CLZR were out also–not good, but not as bad as we thought they could be.

NASDAQ was up .8% last week, the DOW was up .3% and the S+P 500 was up .5%.

Last week we went 7 stocks up, 5 down and 1 even.

For last week, 2008 year-to-date, and since we started this Blog in January 2006, our model portfolio is +3.75%,-22.1 and +13.4% respectively. Since inception we are now 22 stocks up and 10 down.

So far in 2008 the DOW is down 2.8%, NASDAQ is down 8.7% and the S+P 500 is down 4.8%. The NASDAQ is still down a 15.3% since October 31, 2007.

The Russell 3000 and the Wilshire 5000 are both down just about 5% this 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)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR +19%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)

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 19 stocks that we closed out in 2006, 2007 and 2008 the average gain was 23%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $9.40 (was $10.65 before double up), Valuation $20-$22
Up $1.55 to $10.51.
Earnings were out last week and were good. Revenues were up 37% and they lost a penny on the bottom line. They also reaffirmed their 2008 guidance of 25-33% revenue growth and $1-$5 million of pre-tax income, which seemed to comfort investors and maybe scare the shorts a bit. The company has $53.4 million in cash ($1.69 per share), and is trading at about 2.5 times 2008 revenues (net of cash)and is growing about 30% a year.
Now up 12%. HOLD.

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 $3.81, down $.22 DWCH is now trading at 42% of our valuation.
Earnings out Tuesday, 4/29 before the market opens.
Now up 21%. HOLD

Parlux Fragrances (PARL-Recommended 11/30/2006)
Buy price $4.14 (was $4.78 before $10,000 adder, $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 $3.22, up $.09.
Latest earnings were very good. Stock is down.
Now trading at 29% 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 22%. 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 $8.45 down $.48.
No news, just lack of interest.
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 30%. HOLD

Celebrate Express (BDAY-recommended 4/17/2007)
Buy Price $6.15 (was $8.38 before $10,000 adder and $8.82 before double-up), Valuation $7.82 (Was 415.51, $17.85 $18.18)
Down $.18 to $4.10.
BDAY pulled their earnings announcement two weeks ago as they apparently received interest from someone on a buy-out. Were it not for this, we would pack up the truck and sell this one as their struggles are more than we thought (and they thought too).
Trading at 52% of our valuation.
Hold for a while until this “take-over” thing flushes out. We are hoping it happens, but $9 a share looks like the most they could get.
Down 33%. HOLD.

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up) Valuation $10.28 (was $13.32, $12.89, $13.40)
Up $.29 at $6.12.
Cannell Capital filed a 13D on February 19th, disclosing a 12.9% ownership stake. Most of this was purchased from Penninsula Capital at $7.03 a share. Cannell is pushing MEDW management to sell the company. Meanwhile, Constellation Software, a Canadian public company that has been on an acquisition binge filed a 13D in April, disclosing a 6.1% ownership in MEDW (499,000 shares). Constellation has $243 million in revenues and is profitable. Looks like something is going to happen here. Buy some more–new average Buy price wil be $6.33.
Down 3%. HOLD

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $7.26, NEW Valuation $9.90 (was $8.69, $11.51)
Down $.56 to $2.52
This really stinks.
Losses out last week. Sales actually went up 1/2%, and they only lost $2 million due to almost $4 million in legal expenses. Our valuation actually rose to $9.90 and they have $1.69 in cash. At this price, and even with the Palomar lawsuit, we are going to double up. New Buy price will be $3.74.
Down 65%. 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 $6.84 (was $7.58, $7.59)
Up $.01 to $1.71.
For 2008 they are projecting revenue of $145-$150 million and EBITDA breakeven. But it sounds like this will not happen until the second half of 2008. If they can turn this around-a double or triple from here is possible.
If they can do what they say in 2008, a valuation of close to $8 is possible.
Trading at 25% of our latest valuation
Down 28%. BUY

Datalink. (DTLK-Recommended 10/31/2007)
Buy Price $4.28, Valuation $9.97 (Was, $10.66, $9.39)
Up $.10 to $4.52.
No news.
Trading at 45% of our valuation.
Up 6%. 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 4.5% on average, compared to 23% for the stocks above. At least so far. As proven by OPTIO, patience is necessary with these stocks.

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 $5.61 (was $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.44, down $.11.
Earnings were great, stock goes down. 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 down 11%. BUY. Still a Huge valuation gap here.

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 $.85, up $.07.
Earnings were 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.
AVSO is presenting at an analyst conference next Tuesday!! We have to take this as a sign that the business is doing fine, otherwise, why would they want to go tell anyone? They could just stay at home and be ignored like they have been for the last 2 years.
Now down 9%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask, Valuation $1.31 (Was $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price unchanged at $.28. Closed at $.22.
Earnings out at the end of March. Not bad at all. Q4 revenues were $4.8 million, gross margin was 72%, and excluding a $200,000 impairment charge, CTI actually made about $77k of income. Net cash (net of debt) grew by $350,000.
Our valuation went up to $1.31 per share.
Maybe these guys will wake up and create some shareholder value in 2008.
This is still trading at only 21% of our latest valuation.
UP 4%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up) New Valuation-$2.28 (Was $2.08)
Closed at $1.07, up $.08.
LTUS got up to $1.17 on Friday, but fell back a bit at the close.
This is still a BUY.
Up 28%.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s