The markets continued in positive territory last week.
The DOW was up .8%, NASDAQ was up 1.9% and the S+P 500 was up 1.7%. For the year the DOW is now down 7.9%, NASDAQ is UP 4.8% and the S+P 500 is down 5.2%. The Russell 3000 and the Wilshire 5000 are also down about 4% this year.
We had a .5% gain last week and are down 5.6% for the year.
Last week we went 11 stocks up, 8 down and 3 even. Since inception we are now 24 stocks up, and 22 down.
Selling SNWL this week. See below.
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%
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-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)
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.
Up $.22 to $2.82.
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 50%. 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 $.04 at $1.45.
Cash is $.83 per share.
DWCH announced some more cost cutting last week–12 employees.
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 40%. 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)
Down .32 to $4.30.
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 32%. 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)
Up $.11 at $.57
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 85%. 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 $.04 at $.33.
Earnings out in April. Horrible of course. This all means nothing at this point due to the sale of the media business for $11.6 million after the quarter ended.
The MEDIA had 20-30% gross margins and likely lost money. Looks like this will reduce annual revenues to maybe $40 million with 90% gross margins. No info on the bottom line impact. With say $15-$20 million of cash (our guess) and a high margin sales base we think our valuation will be in the $3+ range.
Down 80%. HOLD
Harris Interactive. (HPOL-Recommended 5/25/2008)
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)
Up $.01 at $.31.
HPOL recently announced another cost reduction effort to cut $10 million of expense base. They also announced they got another 30 day waiver on their bank loans. All-in-all–good news.
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.
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).
Down 55%. 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)
Down $.08 to $.96
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 50%. BUY
Healthstream Inc. (HSTM-Recommended 8/4/2008)
Valuation $4.83 (Was $4.62, $4.42)
Down $.08 at $2.05.
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. Insiders are buying lately too.
Down 15%. 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) (9.2% dividend yield)
Valuation $14.51 (Was $17.23, $18.36)
Up $.14 to $3.05.
CCA announced preliminary earnings last week. A lot better than we expected. Sales up to $14.9 million from $13.9 million and they were profitable–but only $125,000 of earnings compared to $344,000 last year. They spent more advertising dollars than last year to make these sales numbers($1 million).
They CUT their quarterly dividend to $.07. Rats. The 9.2% current dividend yield is still pretty nice though. Have to wait until they file their 10Q, to get a new valuation, as they give such little infomation in their press realease, but we expect the valuation to remain in the $15 per share range.
Cash is $2.61 per share.
Down 45%. 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 up $.06 at $1.32
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 31%. 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 up $.08 at $2.30
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 $.17 at $3.02
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–10% more than its share price. This valuation is just stupid.
Up 18% (adjusted for $.56 dividend). BUY
Datalink . (DTLK-Recommended 10/12/2008)
Valuation $10.27 (Was $10.26)
Closed up $.11 at $3.08
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.
UP 2%. HOLD
Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.59-(Was $3.69 before adding another $10,000)
Valuation NA-Dividend yield play
Closed up $.03 at $2.14
Current dividend yield–43%
Earnings out in March. Fleet utilization is 99%.
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 18%. BUY
SonicWALL. (SNWL-Recommended 10/20/2008)
Valuation-$11.47(Was $11.09, $10.44)
Closed up $.19 at $5.13
$3.06 cash per share.
Shoe dropped on Thursday. They will not make their quarterly sales target, although they will be more profitable. This is a solid company with over $3 per share in cash–but we are going to cash out with our 14% gain on this one. We expect our valuation to fall to around $10, and in this market, even a 50% discount to our valuation is not complelling enough to keep us onboard.
UP 14%. SELL
Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$6.84 (Was $9.10 before double-up)
Closed down $.02 at $6.67
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).
Cash is still more than their market cap, and they seem to know how to manage their expenses in this downturn. “On sale”–FREE plus $.78 a share in cash. As noted above.
Down 3%. BUY
Cutera. (CUTR-Recommended 10/29/2008)
Valuation-$ 18.06 (Was $18.88, $21.07)
Closed down $.02 at $6.83
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 120% of the share price. Yes, the business is “free” and you get $1.50 per share of cash as a gift to buy it.
Down 13%. BUY
OPKO Health Inc. (OPK-Recommended 2/16/2009)
Up $.07 at $1.12.
Suspension of a Phase 3 trial in March 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.
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. His ownership has now exceeded 50% with just over 100 million shares.
Down 10%. 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),
aluation $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 $.85, unchanged.
Earnings out in March. 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 47%. 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 $.30, unchanged.
They announced more cost cuts in April and made it sound like this quarter will be a bummer. They are taking out $500k per quarter in expenses. Hopefully this will be enough to keep them going. Their current market cap of $5 million is about 12.5% of annual sales.
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 62%. HOLD.
CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.57 (Was $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price down $.03 at $.11. Closed at $.085.
Earnings out in late March. Sales for the year of $22.5 million, and they made $.03 per share. Our new valuation is $1.57 per share.
Their VOIP business continues to struggle and lose money–$2.7 million last year on $212,000 of revenues.
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 59%. 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 $.30, unchanged.
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 64%. BUY