Cheap Stocks, 3/6/2009 Update

This is getting ridiculous.

Last week the DOW was down 6.1%, NASDAQ was down 6.1% and the S+P 500 was down 7%. For the year the DOW is now down 24.5%, NASDAQ down 18% and the S+P 500 is down 24.3%. The Russell 3000 and the Wilshire 5000 are also down about 24% this year.

We had a 2.4% loss last week and are down 19% for the year.

No one is buying anything. We are doubling up on GSL. Doesn’t look like they are cutting their dividend anytime soon and the 46% yield looks too good.

Last week we went 6 stocks up, 15 down and 1 even. Since inception we are now 22 stocks up, and 24 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%
2009-MBRK +67%

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 24 stocks that we closed out in 2006, 2007, 2008 and 2009 the average gain was 24%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Uo $.45 to $2.70.
SPNC announced earnngs in February. Q4 revenues were as expected–$26.6 million, up 11% over last year. They lost $1.1 million after $2 million in legal expense related to the “investigation”. Cash is $1.11 per share.
SPNC is suffering from the FDA, ICE raids that apparently eminated from an ex-employee whistle-blower trying to collect some 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 growing about 25% a year.
Now down 52%. 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 $8.09 (was $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed down $.07 at $1.09, unchanged.
Cash is $.83 per share.
Earnings out in early February. Sales down 16% to $5.2 million, but they made $.06 per share. Not bad. Stock did nothing. New valuation is $8.09 down a measley $.03 from last quarter.
Now down 56%. 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 $11.30 (was $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up .43 to $4.61.
Earnings out in early February. Sales up 16% and they made $.04 per share. Cash was $2.34 per share and our valuation fell only a tad to $11.30 a share. With all of the below going on, when does MEDW get bought out?
Cannell Capital filed a 13D in February 2008, disclosing a 12.9% ownership stake. Cannell has been 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 2008, disclosing a 6.1% ownership in MEDW (499,000 shares). Constellation has $243 million in revenues and is profitable.
On November 14th, 2008, 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%
Down 27%. BUY

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up),
Valuation $4.31 (was $5.88, $8.63, $9.90, $8.69, $11.51)
Down $.06 to $.29
CLZR announced “earnings” in mid-January. Bad as expected. Our valuation fell to $4.31 per share, which is still 15 times the current market price–but they are losing money at an alarming rate, and have decided not to sell the company. They still have $1.29 per share in cash, but at the current burn-rate, this will last about 1 year.
We will give this one 1 more quarter to see if the trend can reverse.
Down 92%. 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 $5.61 (was $6.42, $6.84, $7.58, $7.59)
Up $.05 at $.16.
Blinkx, a U.K. company made an all cash offer to buy MIVA in early August 2008 for $1.20. MIVA rejected the offer almost immediately saying it was too low and they think they can do better.
Blinkx later came back with a $.55 offer to buy MIVA. Not much can make a stock go up these days–even a 300% premium take-over offer.
Down 90%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
NEW Buy Price $.59 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $4.67 (Was $4.66, $6.00, $5.96)
Down $.20 at $.20.
We are adding another $10,000 here. Even if they have to pay back some of their outstanding debt to come to a new agreement with their bank, they appear to have enough cash to survive. At this price, we think it is worth risking some capital. New Buy-Price will drop to $.69 a share.
Finaciere De Sainte Marine, is a big investor in HPOL. They now own 7,779,000 shares up from 6,640,381 shares in mid-2008, or over 14% of the company.
This past quarters results were: Sales off about 20%, and they took about $66 million of write-offs. Without all these charges they essentially had a small operating profit. Not bad for this economy and the 20% sales drop off. Cash was just a tiny bit more than bank debt (+-$26 million), and they triggered a bank covenant default. They expect to get an amended facility in place shortly, and we expect they will. Our valuation actual rose a penny to $4.67.
Down 89%. 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 $4.12 (was $4.99, $4.30, $4.09)
Up $.01 to $.93
Foxhill is buying more IPASS. Ownership now up to 6.7%. They are also nominating 3 new Board members. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
Earnings out in late February. Not bad. Sales down from $49 million to $46 million. They lost about $1.1 million on a Non-GAAP basis (excluding $84 million goodwill writeoff, etc.). Projecting $42-45 million in Q1 sales and a $.04-.07 per share Non-GAAP loss. They have $1.12 a share in cash (another “free” stock) and our valuation fell to $4.12, as margins dipped a bit.
Down 51%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.83 (Was $4.62, $4.42)
Down $.06 at $1.92.
Earnings out in late February. Nice. Sales up 13% to $13.5 million and they made $1.1 million pre-tax. Reported EPS was $.07. Our valuation rose to $4.83 per share. Not that easy to do in this economy.
Down 20%. BUY

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) (16.3% dividend yield)
NEW Valuation $14.51 (Was $17.23, $18.36)
Down $.43 to $2.27.
CCA announced earnings in late February. Bad as expected. Sales down for Q4 from $14.3 million to $12.0 million. They lost $822,000 versus making $1.7 million last year. They spent more advertising dollars to make these sales numbers too ($2.4 million).
They declared their quarterly $.11 dividend.
Our new valuation is $14.51 a share. Cash is $2.61 per share. CAW is now “free” also. Trading below cash value.
Down 59%. HOLD

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 $3.97 (was $4.18, $4.15)
Closed down $.10 at $1.04
Earnings out in late February. They were good, but the markets nullified any positive action in MGIC. Our valuation fell a bit to $3.97 and cash stayed steady at $1.01 per share. Sales were only down 4% to $15.1 million and net income (before discontinued operations) tripled to $.03 per share. Not bad.
Formula Systems (NASDAQ-FORTY) holds 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor that at some point will want to sell MGIC.
Down 46%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $9.53 (was $13.30, $13.03)
Closed down $.02 at $2.31
Earnings out in late February. Sales fell from $7.5 million to $6.4 million and they lost $600,000 (actually less of a loss than last year). Cash was $2.11 per share, but our valuation fell to $9.53 (still almost 4 times the current share price).
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 40%. BUY

Noah Educational. (NED-Recommended 10/5/2008)
Buy Price-$3.03(was $3.00 before $10,000 added)
Valuation $7.79 (Was $7.98, $7.18)
Closed down $.04 at $3.01
Earnings out in February. Revenue up 11% and they made $.04 per share.
Our valuation fell a tad to $7.79. Has cash of $3.58 per share–20% more than its share price. This valuation is just stupid.
Up 18% (adjusted for $.56 dividend). BUY

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $10.27 (Was $10.26)
Closed down $.34 at $2.61
Cash is $2.23 per share.
Earnings out in early February. Sales down about 5% at $48 million, and they made $.07 per share compared to $.11 last year. Not bad for this economy. All sounded good until they said they expect a small loss next quarter. Cash is $2.23 per share and our valuation rose to $10.27. We expect our valuation to fall if their projections are correct to maybe $8.50 per share. Still trading at less than 50% of even that reduced projected valuation.
Down 14%. HOLD

Global Shipping . (GSL-Recommended 10/12/2008)
NEW Buy Price $2.59-(Was $3.69)
Valuation NA-Dividend yield play
Closed down $.13 at $2.00
Current dividend yield–46%
Earnings out last week. Fleet utilization is 99%. Even though we don’t like the debt on this one, we are going to double up here. Dividend just too good, and it seems sustainable. Hell, even if they cut it in half it is a 23% yield. New average buy price will be $2.59.
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.
Went ex-dividend in February–still $.23 per quarter and they restructured their bank lines to help insure they can continue the dividend.
Down 46%. BUY

SonicWALL. (SNWL-Recommended 10/20/2008)
Buy Price-$4.50
Valuation-$11.47(Was $11.09, $10.44)
Closed down $.17 at $4.25
$3.06 cash per share.
Earnings out in Mid-February. Sales were down less than 5%, but pre-tax earnings almost tripled. They expect to be profitable next quarter also. Aside from this crappy market theis should be an $8 stock right now. Our valuation rose to $11.47 a share. That is 2 straight increases in valuation. Cash is 69% of the current market cap.
Down 6%. BUY

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$6.84 (Was $9.10 before double-up)
Valuation-$20.79-(Was $29.49)
Closed down $.55 at $4.93
CYNO has $7.45 per share in cash.
Earnings out in Mid-February. Sales down 30% and they lost $1.9 million on a non-GAAP basis. Not bad performance given the sales drop. They ended with $95 million in cash ($7.45 a share). Our valuation fell to $20.79 per share.
Cash is now 150% of the market cap, and they seem to know how to manage their expenses in this downturn. “On sale”–FREE plus $2.50 a share in cash. As noted above.
Down 28%. BUY

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.06 (Was $18.88, $21.07)
Closed down $.62 at $5.75
Earnings out in Mid-February. Sales down 32% and they essentially broke-even for the quarter. Again, not bad given the economy. Cash fell a tad to $8.35 a share, and our valuation fell to $18.06. Cash is 145% of the share price. Yes, the business is “free” and you get $2.50 per share of cash as a gift to buy it.
Down 27%. BUY

OPKO Health Inc. (OPK-Recommended 2/16/2009)
Buy Price-$1.25
Valuation-NA–Speculation
Down $.33 at $.80.
Suspension of a Phase 3 trial late last week hammered OPK. The announcement didn’t make it sound like a total failure, more like they have some more work to do and may have to restructure the trial. Always complicated with new drugs and the FDA. That is why this is a speculation.
Share price which got down to $.59 on the news, rebounded to the $.80 close.
This is still a Phillip Frost play–Key and KOS Pharmaceutical. Frost just put in $20 million to buy shares at $1.00–and keeps buying on the open market all the time.
Down 36%. HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks, especially in this Bear Market.

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),
NEW Valuation $5.19 (was $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.70, unchanged.
Earnings out last week. Not bad. Sales down about 6% from $3.4 to $3.2 million and they made $273,000 pre-tax income. Our valuation remained over $5 per share at $5.19.
Wake up management–you have a great little company here worth 5X what it is selling for.
Now down 57%. 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 $2.78 (was $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.50, up $.05.
Earnings out in February. Sales down 27%, and they lost $.03 per share.
Our valuation fell to $2.78 from $3.30. Still, they are not hemoragging cash and the current share price is less than 20% of our valuation.
Down 37%. HOLD.

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 up $.02 at $.09. Closed at $.08.
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.
Down 67%. HOLD

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 $.19, down $.02
For the 9 months of 2008, EPS is $.13 per share. So looks like we are selling at about 1X earnings. Lotus announced in February that it bought the land use rights in Mongolia for $26 million, subject to contruction approvals etc. If the project is not approved, they get the money back. They said they paid for this out of internally generated funds. Pretty impressive. 3 years and $58 million to go to build this plant. They are also looking to sell or rent up to 80% of the land to other pharma companies to create a pharma industrial park.
This may work out ok. Unusual legal structure, $58 million construction project all hang over this company. Stock market stinks, Chinese stocks maybe even worse than most.
Down 77%. BUY

Advertisements

Leave a Reply

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

WordPress.com Logo

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

Google+ photo

You are commenting using your Google+ 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