ILOG–SOLD!

As announced yesterday, IBM made an offer of 10 Euros per share yesterday. This is worth about $15.75. 33% below our valuation–but still a 26% gain for us. In this market, we will take it gladly. ILOG was halted on the Paris stock exchange yesterday and in the U.S. In Paris today the stock was trading about 9.72 Euro–or $15.30.

Sell at $15.25 or better. High likelyhood that this deal will close since it is pocket change for IBM, but anything can happen these days.

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Cheap Stocks, 7/25/2008 Update

Good week for us. Up 5.8% last week.

The DOW was down 1.1%, NASDAQ was up 1.2% and the S+P 500 was down .2%.

We went 9 stocks up, 4 down and 1 even.

We sold DTLK last week for a 40% gain. This is our 3rd profitable trip on DTLK (gains of 41%, 25% and 40%)

For last week, 2008 year-to-date, and since we started this Blog in January 2006, our model portfolio is +5.8%,-32.5 and +3.0% respectively. Since inception we are now 21 stocks up and 12 down and 1 even, with 3 of them being down 10% or less.

So far in 2008 the DOW is down 14.3%, NASDAQ is down 12.9% and the S+P 500 is down 14.3%. The NASDAQ is still down a 19.2% since October 31, 2007.

The Russell 3000 and the Wilshire 5000 are both down just about 13.4% 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)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40%

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 21 stocks that we closed out in 2006, 2007 and 2008 the average gain was 21%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $9.40 (was $10.65 before double up), Valuation $20-$22
Up $.26 to $10.60.
Hackers continue to play this stock.
Earnings due out this Tuesday, before the market open.
The company has $43.4 million in cash ($1.37 per share), and is trading at about 2.5 times 2008 revenues (net of cash)and is growing about 30% a year.
Now up 13%. BUY.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $3.02 (was $3.21 added $10,000, averaged down from $3.66), Valuation $8.47 (was $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed at $2.52, down $.07.
Our valuation is $8.47, so we are trading at 30% of our valuation.
Earnings out Tuesday, July 29th, before the open.
Now down 17%. BUY

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 $12.40 (Was $11.24, $10.80 $9.20, $8.63, $13.77)
PARL closed at $5.67, up $.12.
Parl announced FY 2008 earnings in early June. Sales were $154 million, gross margin was 50%, they have $1 per share in cash and made $.24 a share for the year-fully taxed. Q4 EPS was like $.13. Our valuation moved up to $12.40 per share.
Now trading at 46% of our valuation—still cheap.
The new management has 2.0 million reasons to make this stock go up. Glenn Nussdorf paid $6 for his shares.
Up 37%. 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 $24.06 (was $24.67, $20.51, $23.22, $20.99, $20.52)
Closed at $11.52 up $1.52.
Despite minimal trading on NASDAQ–ILOG has been trading a fair amount on the Paris exchange. You can get Paris quotes and volumes on Euronext.com. Same ILOG symbol.
ILOG revised their 2008 guidance down from 20% sales growth and $1-6 million in operating income to double digit sales growth and breakeven operating income. ILOG’s market cap, minus cash is $80 million. This is less than 50% of annual sales, for a software company with 70%+ gross margins.
Cash is $3.84 a share (33% of market cap).
ILOG is trading at 48% of our valuation.
A buy-out is a decent possibility here.
Down 5%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up) NEW Valuation $10.99 (was $10.28, $13.32, $12.89, $13.40)
Down $.34 at $5.71.
Cannell Capital filed a 13D on February 19th, disclosing a 12.9% ownership stake. 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.
In early May, Constellation increased its bank credit line to $105 million from $50 million.
On May 21 Constellation purchased another 586,000 shares of MEDW at prices from $5.43to $5.70 (most at $5.70). So Constellation now owns 1,056,000 shares–13.9%.
Looks like something is going to happen here–but when?
Down 10%. BUY

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $9.90 (was $8.69, $11.51)
Up $.09 to $2.55
No news
Down 32%. HOLD

MIVA. (MIVA-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up), Valuation $6.42 (was $6.84, $7.58, $7.59)
Down $.02 to $.93.
MIVA announced big growth in their toolbar product and Spill.com site. At least this got the stock back from alow of $.62 .
Even a “Seeking Alpha” blog article touting MIVA as a buy-out candidate at “3 or 4 times the current price” has done nothing for the stock.
If they can do what they say in 2008, a valuation of close to $8 is possible.
Trading at 15% of our latest valuation
Down 43%. BUY

Datalink. (DTLK-Recommended 10/31/2007)
Buy Price $4.28, NEW Valuation $10.49 (Was, $9.97, $10.66, $9.39)
Up $.83 to $6.00.
Sold for a 40% gain.

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.82 (was $2.02 before $10,000 added and $2.15 before double up), Valuation $5.96
Up $.08 to $1.42.
No news.
Trading at 24% of our valuation.
Down 22%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.90 (Was $2.07 before another $10,000 added and $2.15 before double up), Valuation $4.09
Up $.09 to $1.90.
With $1.09 per share in cash (57% of market cap), we feel that this has little additional downside.
No news.
Even. BUY

OB-abies (Bulletin Board Listed Stocks)

Our OB-abies have held up better than the “higher-quality” stocks so far this year. They are down about 12.0% on average, compared to 17% 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 $5.63 (was $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.55, up $.05.
Earnings announced in June were impressive. $.06 per share in earnings (untaxed)for the quarter and $.14 per share for the first three quarters. Our valuation moved up to $5.63 per share. This is still way too cheap.
They announced a small aquisition in early July. Will add $1 million in revenue and be profitable. This is the stuff that will help get some attention for ARI.
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 4%. 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), NEW Valuation $4.00 (was $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.80, down $.03.
Earnings out in early May. Sales weak, but earning were great.
Sales dropped from $14.6 million to $12.8 million. But, net income was $1.005 million compared to a $224,000 loss last year. EPS was $.05 versus a loss of $.02 last year. For the 9 months ended March 31, earnings per share were $.12 (untaxed).
Now down 14%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask, Valuation $1.38 (Was $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price unchanged at $.28. Closed at $.28.
CTI announced earnings in early May. Sales were good, but they had another loss. Sales were up to $5.339 million from $5.054 million. They managed to reduce their loss to $180,000 from $587,000 last year. Their VOIP business continues to struggle and lose money–$729,000 in the current quarter. Gross margin % rose to 75% from 72%. Still an “undercover” company and stock.
Maybe these guys will wake up and create some shareholder value in 2008.
This is still trading at only 20% 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) Valuation-$2.28 (Was $2.08)
Closed at $.65, up $.03.
After announcing earnings in mid-May, it took LTUS another week or so to come out and reaffirm that they expect to make at least $13.1 million in earnings this year. On approximately 50 million shares outstanding this is $.26 per share earnings. So we are trading at a little less than 3 times 2008 EPS. 3 new drugs expected to be introduced this year also.
Investors seem to have woken up to the unusual legal structure of Lotus. There is risk here, no doubt, but not until year 2016. PE here is 3–pretty big discount for something 7.5 years out.
Down 22%. BUY

Cheap Stocks, 7/18/2008 Update

Apparently the world is not ending!

We were up 3.6%, last week.

The DOW was up 3.6%, NASDAQ was up 2.0% and the S+P 500 was up 1.7%.

We went 7 stocks up, 4 down and 3 even.

For last week, 2008 year-to-date, and since we started this Blog in January 2006, our model portfolio is +3.6%,-38.2 and -2.7% respectively. Since inception we are now 21 stocks up and 13 down, with 3 of them being down 10% or less.

So far in 2008 the DOW is down 13.3%, NASDAQ is down 13.9% and the S+P 500 is down 14.1%. The NASDAQ is still down a 20.2% since October 31, 2007.

The Russell 3000 and the Wilshire 5000 are both down just about 13.3% 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)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)

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 20 stocks that we closed out in 2006, 2007 and 2008 the average gain was 20%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $9.40 (was $10.65 before double up), Valuation $20-$22
Up $.16 to $10.34.
Hackers continue to play this stock.
Earnings should be due out soon, but nothing has been announced. Likely due to getting the recent acquisition numbers done, but we can always hope that something good and “material” is going on.
The company has $43.4 million in cash ($1.37 per share), and is trading at about 2.5 times 2008 revenues (net of cash)and is growing about 30% a year.
Now up 10%. BUY.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $3.02 (was $3.21 added $10,000, averaged down from $3.66), Valuation $8.47 (was $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed at $2.59, unchanged.
Our valuation is $8.47, so we are trading at 31% of our valuation.
Earnings out Tuesday, July 29th, before the open.
Now down 14%. BUY

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 $12.40 (Was $11.24, $10.80 $9.20, $8.63, $13.77)
PARL closed at $5.55, up $.36.
Parl announced FY 2008 earnings in early June. Sales were $154 million, gross margin was 50%, they have $1 per share in cash and made $.24 a share for the year-fully taxed. Q4 EPS was like $.13. Our valuation moved up to $12.40 per share.
Now trading at 45% of our valuation—still cheap.
The new management has 2.0 million reasons to make this stock go up. Glenn Nussdorf paid $6 for his shares.
Up 34%. 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 $24.06 (was $24.67, $20.51, $23.22, $20.99, $20.52)
Closed at $10.00 down $.34.
ILOG revised their 2008 guidance down from 20% sales growth and $1-6 million in operating income to double digit sales growth and breakeven operating income. ILOG’s market cap, minus cash is $80 million. This is less than 50% of annual sales, for a software company with 70%+ gross margins.
Cash is $3.84 a share (38% of market cap).
ILOG is trading at 42% of our valuation.
A buy-out is a decent possibility here.
Down 14%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up) NEW Valuation $10.99 (was $10.28, $13.32, $12.89, $13.40)
Up $.25 at $6.05.
Cannell Capital filed a 13D on February 19th, disclosing a 12.9% ownership stake. 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.
In early May, Constellation increased its bank credit line to $105 million from $50 million.
On May 21 Constellation purchased another 586,000 shares of MEDW at prices from $5.43to $5.70 (most at $5.70). So Constellation now owns 1,056,000 shares–13.9%.
Looks like something is going to happen here.
Down 5%. BUY

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $9.90 (was $8.69, $11.51)
Up $.18 to $2.46
No news
Down 34%. HOLD

MIVA. (MIVA-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up), Valuation $6.42 (was $6.84, $7.58, $7.59)
Down $.02 to $.95.
MIVA announced big growth in their toolbar product and Spill.com site. At least this got the stock back from $.62 on Tuesday.
Even a “Seeking Alpha” blog article touting MIVA as a buy-out candidate at “3 or 4 times the current price” has done nothing for the stock.
If they can do what they say in 2008, a valuation of close to $8 is possible.
Trading at 15% of our latest valuation
Down 42%. BUY

Datalink. (DTLK-Recommended 10/31/2007)
Buy Price $4.28, NEW Valuation $10.49 (Was, $9.97, $10.66, $9.39)
Up $.54 to $5.17.
Good earnings in a good market week let this stock rise.
CEO selling done until August.
Trading at 46% of our valuation.
Up 21%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.82 (was $2.02 before $10,000 added and $2.15 before double up), Valuation $5.96
Down $.18 to $1.34.
No news.
Trading at 22% of our valuation.
Down 26%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.90 (Was $2.07 before another $10,000 added and $2.15 before double up), Valuation $4.09
Up $.18 to $1.81.
With $1.09 per share in cash (60% of market cap), we feel that this has little additional downside.
No news.
Down 5%. BUY

OB-abies (Bulletin Board Listed Stocks)

Our OB-abies have held up better than the “higher-quality” stocks so far this year. They are down about 12.5% on average, compared to 20% 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 $5.63 (was $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.50, unchanged.
Earnings announced in June were impressive. $.06 per share in earnings (untaxed)for the quarter and $.14 per share for the first three quarters. Our valuation moved up to $5.63 per share. This is still way too cheap.
They announced a small aquisition in early July. Will add $1 million in revenue and be profitable. This is the stuff that will help get some attention for ARI.
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 7%. 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), NEW Valuation $4.00 (was $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.83, up $.10.
AVSO had its biggest volume trading day last week since February–147,000 shares.
Earnings out in early May. Sales weak, but earning were great.
Sales dropped from $14.6 million to $12.8 million. But, net income was $1.005 million compared to a $224,000 loss last year. EPS was $.05 versus a loss of $.02 last year. For the 9 months ended March 31, earnings per share were $.12 (untaxed).
Now down 11%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask, Valuation $1.38 (Was $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price unchanged at $.28. Closed at $.28.
CTI announced earnings in early May. Sales were good, but they had another loss. Sales were up to $5.339 million from $5.054 million. They managed to reduce their loss to $180,000 from $587,000 last year. Their VOIP business continues to struggle and lose money–$729,000 in the current quarter. Gross margin % rose to 75% from 72%. Still an “undercover” company and stock.
Maybe these guys will wake up and create some shareholder value in 2008.
This is still trading at only 20% 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) Valuation-$2.28 (Was $2.08)
Closed at $.62, down $.12.
After announcing earnings in mid-May, it took LTUS another week or so to come out and reaffirm that they expect to make at least $13.1 million in earnings this year. On approximately 50 million shares outstanding this is $.26 per share earnings. So we are trading at a little less than 3 times 2008 EPS. 3 new drugs expected to be introduced this year also.
Investors seem to have woken up to the unusual legal structure of Lotus. There is risk here, no doubt, but not until year 2016. PE here is 3–pretty big discount for something 7.5 years out.
Down 26%. BUY

Datalink Q2 Earnings

DTLK announced Q2 results last night. Looks like demand for data storage continues to be good. Q2 revenues were up 23% and they made $.10 per share (non-GAAP, but fully taxed) up from a essentially breakeven last year. Outlook for Q3 is good also-$49-$53 million in revenue and $.09-$.13 per share non-GAAP EPS.

Our valuation increased to $10.49 per share from $9.97. Cash of $28 million is $2.24 per share and was 45% of yesterdays closing stock price of $4.95. We are up 16% on DTLK. We like the stock, but if it should hit $6, we would sell for a 40% gain.

In this market, gains have been hard to come by.

Cheap Stocks, 7/11/2008 Update

The agony continues. The markets were all down last week–we managed to book a small gain.

We were up .6%, but it still didn’t make us feel much better.

The DOW was down 1.7%, NASDAQ was down .3% and the S+P 500 was down 1.9%.

We went 8 stocks up, 5 down and 1 even.

We are adding another $10,000 each to HPOL and IPAS next week.

For last week, 2008 year-to-date, and since we started this Blog in January 2006, our model portfolio is +.6%,-41.8 and -6.3% respectively. Since inception we are now 21 stocks up and 13 down, with 2 of them being down 10% or less.

So far in 2008 the DOW is down 16.3%, NASDAQ is down 15.6% and the S+P 500 is down 15.6%. The NASDAQ is still down a 21.7% since October 31, 2007.

The Russell 3000 and the Wilshire 5000 are both down just about 14.8% 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)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)

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 20 stocks that we closed out in 2006, 2007 and 2008 the average gain was 20%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $9.40 (was $10.65 before double up), Valuation $20-$22
Up $.36 to $10.18.
Hackers continue to play this stock.
The company has $43.4 million in cash ($1.37 per share), and is trading at about 2.5 times 2008 revenues (net of cash)and is growing about 30% a year.
Now up 8%. BUY.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $3.02 (was $3.21 added $10,000, averaged down from $3.66), Valuation $8.47 (was $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed at $2.59, up $.30.
Our valuation is $8.47, so we are trading at 31% of our valuation.
No news.
Now down 14%. BUY

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 $12.40 (Was $11.24, $10.80 $9.20, $8.63, $13.77)
PARL closed at $5.19, up $.38.
Parl announced FY 2008 earnings in early June. Sales were $154 million, gross margin was 50%, they have $1 per share in cash and made $.24 a share for the year-fully taxed. Q4 EPS was like $.13. Our valuation moved up to $12.40 per share.
Now trading at 42% of our valuation—still cheap.
The new management has 2.0 million reasons to make this stock go up. Glenn Nussdorf paid $6 for his shares.
Up 26%. 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 $24.06 (was $24.67, $20.51, $23.22, $20.99, $20.52)
Closed at $10.34 up $.91.
ILOG revised their 2008 guidance down from 20% sales growth and $1-6 million in operating income to double digit sales growth and breakeven operating income. ILOG’s market cap, minus cash is $80 million. This is less than 50% of annual sales, for a software company with 70%+ gross margins.
Cash is $3.84 a share (37% of market cap).
ILOG is trading at 43% of our valuation.
A buy-out is a decent possibility here.
Down 14%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up) NEW Valuation $10.99 (was $10.28, $13.32, $12.89, $13.40)
Up $.16 at $5.80.
Cannell Capital filed a 13D on February 19th, disclosing a 12.9% ownership stake. 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.
In early May, Constellation increased its bank credit line to $105 million from $50 million.
On May 21 Constellation purchased another 586,000 shares of MEDW at prices from $5.43to $5.70 (most at $5.70). So Constellation now owns 1,056,000 shares–13.9%.
Looks like something is going to happen here.
Down 8%. BUY

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $9.90 (was $8.69, $11.51)
Up $.01 to $2.28
No news
Down 39%. HOLD

MIVA. (MIVA-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up), Valuation $6.42 (was $6.84, $7.58, $7.59)
Down $.08 to $.97.
Even a “Seeking Alpha” blog article touting MIVA as a buy-out candidate at “3 or 4 times the current price” did nothing for the stock.
If they can do what they say in 2008, a valuation of close to $8 is possible.
Trading at 15% of our latest valuation
Down 41%. BUY

Datalink. (DTLK-Recommended 10/31/2007)
Buy Price $4.28, Valuation $9.97 (Was, $10.66, $9.39)
Up $.12 to $4.63.
No news.
CEO selling done until August.
Trading at 46% of our valuation.
Up 8%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $2.02 (was $2.15 before double up), Valuation $5.96
Down $.28 to $1.52.
Add another $10,000 here. New average buy price will be $1.82.
No news.
Trading at 26% of our valuation.
Down 25%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$2.07 (Was $2.15 before double up), Valuation $4.09
Down $.34 to $1.63.
With $1.09 per share in cash (67% of market cap), we feel that this has little additional downside.
Add another $10,000 here. New average buy price will be $1.90.
No news.
Down 21%. 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 12.4% on average, compared to 22% 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 $5.63 (was $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.50, down $.05.
Earnings announced in June were impressive. $.06 per share in earnings (untaxed)for the quarter and $.14 per share for the first three quarters. Our valuation moved up to $5.63 per share. This is still way too cheap.
They announced a small aquisition in early July. Will add $1 million in revenue and be profitable. This is the stuff that will help get some attention for ARI.
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 7%. 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), NEW Valuation $4.00 (was $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.73, down $.12.
Earnings out in early May. Sales weak, but earning were great.
Sales dropped from $14.6 million to $12.8 million. But, net income was $1.005 million compared to a $224,000 loss last year. EPS was $.05 versus a loss of $.02 last year. For the 9 months ended March 31, earnings per share were $.12 (untaxed).
Now down 22%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask, Valuation $1.38 (Was $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price unchanged at $.28. Closed at $.28.
CTI announced earnings in early May. Sales were good, but they had another loss. Sales were up to $5.339 million from $5.054 million. They managed to reduce their loss to $180,000 from $587,000 last year. Their VOIP business continues to struggle and lose money–$729,000 in the current quarter. Gross margin % rose to 75% from 72%. Still an “undercover” company and stock.
Maybe these guys will wake up and create some shareholder value in 2008.
This is still trading at only 20% 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) Valuation-$2.28 (Was $2.08)
Closed at $.74, up $.06.
Ah, those Chinese stocks. After announcing earnings in mid-May, it took LTUS another week or so to come out and reaffirm that they expect to make at least $13.1 million in earnings this year. On approximately 50 million shares outstanding this is $.26 per share earnings. So we are trading at a little less than 3 times 2008 EPS. 3 new drugs expected to be introduced this year also.
Down 12%. BUY

Cheap Stocks, 7/4/2008 Update

The agony continues. We sensed some capitulation in the market last week. Maybe people looking at their 401k statements online, maybe people just selling into the holiday to not worry about it over the 4th. Whatever it is, it is tough to watch. Even good news gets trampled.

As an example, Middlebrook Pharmaceutical (MBRK) announced on Wednesday that instead of being sold, a group led by Sam Zell had agreed to invest $100 million of equity in the company by buying 30 million shares at $3.30 a share. The stock plummeted from $3.07 to as low as $1.26 a share. We read the press release over and over and decided to buy a little bit. On Thursday the stock was the biggest gainer on all markets. On Wednesday 27 million shares traded on the “bad” news. What the heck is going on?

We had a horrible week as almost everyone of our stocks was down except for 2. Great buying opportunity–if you can get over the fear of buying anyting.

The DOW was down 1.4%, NASDAQ was down 3.2% and the S+P 500 was down 1.6%.

We went 0 stocks up, 13 down and 2 even.

For last week, 2008 year-to-date, and since we started this Blog in January 2006, our model portfolio is -13.9%,-42.4 and -6.9% respectively. Since inception we are now 21 stocks up and 13 down, with 3 of them being down 10% or less.

So far in 2008 the DOW is down 14.9%, NASDAQ is down 15.3% and the S+P 500 is down 14%. The NASDAQ is still down a 21.5% since October 31, 2007.

The Russell 3000 and the Wilshire 5000 are both down just about 13.5% 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)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)

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 20 stocks that we closed out in 2006, 2007 and 2008 the average gain was 20%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $9.40 (was $10.65 before double up), Valuation $20-$22
Down $.16 to $9.82.
Hackers continue to play this stock.
The company has $43.4 million in cash ($1.37 per share), and is trading at about 2.5 times 2008 revenues (net of cash)and is growing about 30% a year.
Now up 4%. BUY.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $3.02 (was $3.21 added $10,000, averaged down from $3.66), Valuation $8.47 (was $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed at $2.29, down $.12.
Our valuation is $8.47, so we are trading at 27% of our valuation.
No news.
Now down 24%. BUY

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 $12.40 (Was $11.24, $10.80 $9.20, $8.63, $13.77)
PARL closed at $4.81, down $.31.
Parl announced FY 2008 earnings in early June. Sales were $154 million, gross margin was 50%, they have $1 per share in cash and made $.24 a share for the year-fully taxed. Q4 EPS was like $.13. Our valuation moved up to $12.40 per share.
Now trading at 39% of our valuation—still cheap.
The new management has 2.0 million reasons to make this stock go up. Glenn Nussdorf paid $6 for his shares.
Up 16%. 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 $24.06 (was $24.67, $20.51, $23.22, $20.99, $20.52)
Closed at $9.43 down $.82.
ILOG revised their 2008 guidance down from 20% sales growth and $1-6 million in operating income to double digit sales growth and breakeven operating income. ILOG’s market cap, minus cash is $80 million. This is less than 50% of annual sales, for a software company with 70%+ gross margins.
Cash is $3.84 a share (37% of market cap).
ILOG is trading at 39% of our valuation.
A buy-out is a decent possibility here.
Down 22%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up) NEW Valuation $10.99 (was $10.28, $13.32, $12.89, $13.40)
Down $.20 at $5.64.
Cannell Capital filed a 13D on February 19th, disclosing a 12.9% ownership stake. 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.
In early May, Constellation increased its bank credit line to $105 million from $50 million.
On May 21 Constellation purchased another 586,000 shares of MEDW at prices from $5.43to $5.70 (most at $5.70). So Constellation now owns 1,056,000 shares–13.9%.
Looks like something is going to happen here.
Down 11%. BUY

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $9.90 (was $8.69, $11.51)
Down $.11 to $2.27
Even the news that Chindex got approval to sell some CLZR product in China couldn’t hold the price up. Chindex was up 17% on the news.
Down 36%. HOLD

MIVA. (MIVA-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up), Valuation $6.42 (was $6.84, $7.58, $7.59)
Down $.06 to $1.05.
Even a “Seeking Alpha” blog article touting MIVA as a buy-out candidate at “3 or 4 times the current price” did nothing for the stock.
If they can do what they say in 2008, a valuation of close to $8 is possible.
Trading at 16% of our latest valuation
Down 36%. BUY

Datalink. (DTLK-Recommended 10/31/2007)
Buy Price $4.28, Valuation $9.97 (Was, $10.66, $9.39)
Down $.18 to $4.51.
No news. CEO likely got his 30,000 shares sold last week, so the selling pressure should be off till next month.
Trading at 45% of our valuation.
Up 5%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $2.02 (was $2.15 before double up), Valuation $5.96
Down $.27 to $1.80.
No news.
Trading at 30% of our valuation.
Down 11%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$2.07 (Was $2.15 before double up), Valuation $4.09
Down $.03 to $1.97.
With $1.09 per share in cash (55% of market cap), we feel that this has little additional downside. No news.
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 10% on average, compared to 22% 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 $5.63 (was $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.55, down $.10.
Earnings announced in June were impressive. $.06 per share in earnings (untaxed)for the quarter and $.14 per share for the first three quarters. Our valuation moved up to $5.63 per share. This is still way too cheap.
They announced a small aquisition last week. Will add $1 million in revenue and be profitable. This is the stuff that will help get some attention for ARI.
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 4%. 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), NEW Valuation $4.00 (was $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.85, even.
Earnings out in early May. Sales weak, but earning were great.
Sales dropped from $14.6 million to $12.8 million. But, net income was $1.005 million compared to a $224,000 loss last year. EPS was $.05 versus a loss of $.02 last year. For the 9 months ended March 31, earnings per share were $.12 (untaxed).
Now down 9%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask, Valuation $1.38 (Was $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price unchanged at $.28. Closed at $.27.
CTI announced earnings in early May. Sales were good, but they had another loss. Sales were up to $5.339 million from $5.054 million. They managed to reduce their loss to $180,000 from $587,000 last year. Their VOIP business continues to struggle and lose money–$729,000 in the current quarter. Gross margin % rose to 75% from 72%. Still an “undercover” company and stock.
Our valuation rose slightly to $1.38 from $1.31.
Maybe these guys will wake up and create some shareholder value in 2008.
This is still trading at only 20% 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) Valuation-$2.28 (Was $2.08)
Closed at $.68, down $.13.
Ah, those Chinese stocks. After announcing earnings in mid-May, it took LTUS another week or so to come out and reaffirm that they expect to make at least $13.1 million in earnings this year. On approximately 50 million shares outstanding this is $.26 per share earnings. So we are trading at a little less than 3 times 2008 EPS. 3 new drugs expected to be introduced this year also.
Down 19%. BUY