Cheap Stocks, 12/26/2008 Update

Again we apologize for our recent hiatus. Not much has changed in the market since our last update, but at least we seem to have leveled off and are not getting the 400point plunges–at least for a while.

Last week The DOW was down 1.3%, NASDAQ .7 and and S+P 500 .8%. For the year the DOW is now down 36%, NASDAQ 42% and the S+P 500 is down 41%. The Russell 3000 and the Wilshire 5000 are also down about 41% this year.

We had a .2% loss last week and are down 51% for the year.

Last week we went 7 stocks up, 14 down and 1 even. Since inception we are now 23 stocks up, and 22 down.

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% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%

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 23 stocks that we closed out in 2006, 2007 and 2008 the average gain was 22%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $8.90 (was $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Up $.18 to $2.93.
They are still predicting at least $107 million in sales for the year, which means Q4will be over $27 million in sales. At the current $94 million market-cap, SPNC is trading at about 50% of sales, net of $44 million in cash. Cash includes $16 million of auction-rate securities. Based on what we have been reading, these “investments” will likely turn out OK.
SPNC is suffering from the FDA, ICE raids that apparently eminated from an ex-employee whistle-blower trying to collect so money from the company. SPNC has the financial where-with-all to deal with this. Just got to wait this one out.
The company has $44 million in cash ($1.30 per share), no debt and is trading at about 50% of 2008 revenues (net of cash)and is growing about 25% a year.
Now down 67%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
Valuation $8.12 (was $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed at $1.19, up $.04.
Cash is now $.82 per share.
Trading at a measly 15% of our valuation.
Now down 51%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $11.48 (was $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Down $.23 at $4.10.
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 November 14th, Constellation filed a 13D/A. One of their subsidiary officers bought over 300,000 MEDW shares in October, bringing their combined owership in MEDW to 17.9%
Looks like something is going to happen here–but when?
Down 35%. HOLD

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $5.88 (was $8.63, $9.90, $8.69, $11.51)
Down $.08 to $.42
CLZR has hired an investment banker to sell the company. We’ll see. Maybe Palomar will buy it to cut both there legal fees ($3.2 million this quarter for CLZR).
Looks like Palomar’s lawsuit against CLZR was “stayed” by the courts last week. Legal expense should drop for maybe a couple of years.
Down 89%. HOLD, we may get lucky and this thing will be sold for North of $1.

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 $5.61 (was $6.42, $6.84, $7.58, $7.59)
Down $.03 to $.22.
Blinkx, a U.K. company made an all cash offer to buy MIVA in early August for $1.20. MIVA rejected the offer almost immediately saying it was too low and they think they can do better.
They better, or there will be shareholder lawsuits on this one.
Even though MIVA is a money losing mess, they are at such a low price to valuation that we will hold for another quarter.
Blinkx recently came back with a $.55 offer to buy MIVA. Not much can make a stock go up these days–even a 100% premium take-over offer.
Trading at 4% of our latest valuation
Down 87%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.79 (was $1.82 before adding $10,000, $2.02 before $10,000 added and $2.15 before double up),
Valuation $4.66 (Was $6.00, $5.96)
Down $.02 at $.63.
Finaciere De Sainte Marine, is a big investor in HPOL. They now own 7,779,000 shares up from 6,640,381 shares just a few months ago, or just over 14% of the company.
Trading at 14% of our valuation.
Down 65%. 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 $4.99 (was $4.30, $4.09)
Down $.01 to $1.14.
They still have $1.10 per share in cash.
Foxhill now owns 3,844,000 shares or 6.1% of IPASS.
With $1.10 per share in cash (96% of market cap), we feel that this has little additional downside.
Down 40%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.62 (Was $4.42)
Down $.07 at $2.10.
No news
Down 13%. HOLD

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (12.1% dividend yield)
Valuation $17.23 (Was $18.36)
Up $.12 to $3.62.
No news.
Down 34%. BUY

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $4.18 (was $4.15)
Closed down $.06 at $1.09
Formula Systems (NASDAQ-FORTY) filed an amended Schedule 13D in early September. They added 569,000 shares to their position between May and August and now hold 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor, but this is a good sign of course.
Down 43%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.03
Closed down $.03 at $2.69
Has $1.80 per share in cash.
Blueline Partners filed a 13D on ANGN on June 23. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 30%. BUY

Noah Educational. (NED-Recommended 10/5/2008)
Buy Price-$3.03(was $3.00 before $10,000 added)
Valuation $7.98 (Was $7.18)
Closed up $.24 at $3.20
Has cash of $3.93 per share (before special dividend).NED traded ex-dividend on Friday.
Up 24% (adjusted for $.56 dividend). HOLD

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $10.26
Closed up $.05 at $2.93
Cash is $2.08 per share–71% of the current market cap.
Down 3%. BUY

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price-$3.69
Valuation NA-Dividend yield play
Closed down $.10 at $2.40
Current dividend yield–38%
Fleet utilization is still 98%. Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012. By then, you will have collected more than the current share price in dividends.
Down 35%. BUY

Middlebrook Pharmaceutical. (MBRK-Recommended 10/12/2008)
Buy Price-$1.16
Valuation-NA-Speculation
Closed down $.03 at $1.73
“Earnings” out in mid November. $2 million in sales and $12 million loss and $83 million of cash left. They expect 2009 sales to be about $40 million and will lose money. Some possibility of profits in 2010 and they think they have enough cash to last until then. Again, this is a speculation. Increased sales in 2009 will drive this stock.
New management and capital investment at $3.90 a share.
Up 49%. HOLD

SonicWALL. (SNWL-Recommended 10/20/2008)
Buy Price-$4.50
Valuation-$11.09(Was $10.44)
Closed down $.21 at $3.80
$3.02 cash per share.
No news.
Down 16%. HOLD

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$9.10
Valuation-$29.49
Closed down $.93 at $7.94
CYNO has $7.33 per share in cash–95% of its market-cap. Cheap.
Down 13%. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.88 (Was $21.07)
Closed down $.09 at $8.96
Cash per share was $8.56 per share. Our valuation fell to $18.88 per share.
We think that given the low valuations in this sector, that consolidation is just around the corner. Too much cash, high margins and a declining economy.
Trading at just above cash value.
Up 14%. HOLD

OB-abies (Bulletin Board Listed Stocks)

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 $5.66 (was $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.90, unchanged.
Wake up management–you have a great little company here worth 5X what it is selling for.
Now down 44%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $3.30 (was $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.40, up $.05.
Earnings out in mid-November. Sales down 13%, but they remained profitable. Made $.01versus $.02 last year. Trading at only 12% of our valuation.
Down 50%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.40 (Was $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price unchanged at $.10. Closed at $.04.
Their VOIP business continues to struggle and lose money–$604,000 in the last quarter–but they did have some revenues–$38,000!
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value.
Still an “undercover” company and stock.
This is still trading at only 7% of our latest valuation.
Down 63%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.22 (Was $1.61, $2.28, $2.08)
Closed at $.24, down $.01
For the 9 months of 2008, EPS is $.13 per share. So looks like we are selling at less than 2X earnings. Unusual legal structure, $70 million factory plan, $17 million land deposit all hang over this company. Stock market stinks, Chinese stocks maybe even worse than most.
Down 67%. HOLD

Advertisements