Cheap Stocks, 5/29/2009 Update

Another decent week for us and the market in general. We managed a 8.6% gain and are up 24% for the year.

The DOW was up 2.7%, NASDAQ was up 4.9% and the S+P 500 was up 3.6%. For the year the DOW is now down 3.2%, NASDAQ is UP 12.5% and the S+P 500 is up 1.8%. The Russell 3000 and the Wilshire 5000 are also up 3.75% this year.

Last week we went 16 stocks up and 4 down. Since inception we are now 28 stocks up, and 20 down.

Since our beginning, 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%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%
2009-NED +46%

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 28 stocks that we closed out in 2006, 2007, 2008 and 2009 the average gain was 25%.

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 $.33 to $4.44.
SPNC announced earnngs in May. Q1 revenues were $27.3 million, up 15% over last year. They lost $3.1 million after $1.4 million in legal expense related to the “investigation”. Cash is $1.07 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. Growing nicely in a crappy economy. Just got to wait this one out.
The company has $34 million in cash ($1.07 per share), no debt and is growing about 15% a year.
Now down 22%. 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 $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed down $.22 at $1.72.
Cash is $.83 per share.
Earnings out in May. Sales down 13% to $5.1 million, but they made $.04 per share (excluding an intangible write-off). New valuation is $8.12, back where it was 2 quarters ago.
Now down 29%. 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 $11.90 (was $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up .19 to $5.19.
MEDW announced an acquisition last week. No detais other than it is another healthcare optimization software company. No idea what it means yet. Transaction is supposed to close in June
Earnings out in May. Sales up 4% and they made $.06 per share versu $.04 last year. Cash was $2.68 per share and our valuation rose to $11.90 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 2008, bringing their combined owership in MEDW to 17.9%
Down 18%. BUY

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up),
Valuation $7.60 (was $4.31, $5.88, $8.63, $9.90, $8.69, $11.51)
Up $.11 at $1.10
Earnings out in April. Much better than the prior quarter. While sales were down, they only lost half a million dollars. They have $1.13 per share in cash and our valuation spiked up to $7.60.
Down 71%. 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 $1.89 (was $5.61, $6.42, $6.84, $7.58, $7.59)
down $.07 at $.17.
Earnings out in May. Horrible of course. Sales are now at a $25 million ANNUAL run rate, albeit at 93% gross margins. Cash ended up at just over $11 million or $.34 per share (after all the sale proceeds). They have amazed us at their ability to burn through all that cash they had. Current operating loss was almost $2.9 million in the quarter. Our valuation plunged to $1.89 per share (we were thinking $3 before the announcement).
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 90%. 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 $2.78 (Was $4.67, $4.66, $6.00, $5.96)
Up $.12 at $.52.
HPOL announced in early May that they had successfully amended their bank line and also Q1 earnings. Sales were down 30% to $39.9 million, and they lost $6.7 million or $.12 per share. The loss included $5.3 million of “restructuring” charges. They reported that they had positive “adjusted EBITDA” of about half a million dollars.
Cash declined to about $16.9 million and debt was $24.2 million. Our new valuation plunged to $2.78 a share. But the stock is still trading at only 13% of our valuation. Give this one one more quarter to see if they can stabilize things.
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.
Down 25%. 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 $4.75 (was $4.12, $4.99, $4.30, $4.09)
Up $.12 to $1.60
Q1 earnings announced in May. Revenues were down YOY 7% to $44.6 million. Their “dial-up” businss revenues dropped from $11.5 million last year to $6 million this quarter. Their ongoing business grew over last year. GAAP loss was $3 million and non-GAAP income was $1.3 million–$.02 a share. Cash stayed healthy at $68 million–$1.10 per share. Our valuation rose to $4.75 per share.
Foxhill has been buying more IPASS. Ownership now up to 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
our valuation fell to $4.12, as margins dipped a bit.
Down 16%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.81 (Was $4.83, $4.62, $4.42)
Down $.02 at $2.46.
Earnings out in late April. Sales up 19% to $13.6 million and they made $.9 million pre-tax. Reported EPS was $.04. Our valuation stayed about the same at $4.81 per share. Not that easy to do in this economy.
Up 2%. 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) (9.0% dividend yield)
Valuation $17.05 (Was $14.51, $17.23, $18.36)
Up $.09 to $3.10.
CCA filed their 10Q in May. Our new valuation was better than we expected–$17.05 and cash was $2.11 per share.
Down 44%. 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 $3.80 (was $3.97, $4.18, $4.15)
Closed up $.03 at $1.40
Earnings out in May. Sales down 9% to $13.8 million. They managed to INCREASE earnings from zero to $.02 per share. Our valuation fell a bit to $3.8- and cash stayed rose to $1.13 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 27%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
NEW Valuation $11.16 (was $9.53, $13.30, $13.03)
Closed up $.39 at $2.84
Earnings out last week. Sales fell 15% from $7.3 million to $6.2 million and they essentially broke-even. Cash was $2.34 per share, and our valuation rose to $11.16 (still more than 3 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 26%. BUY

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 $1.95
Current dividend yield–suspended
Earnings out in May. Let’s see, revenues up 47%, operating income up 56%. They made $.21 per share. Yet we sit at $1.95 with no dividend due to the banks that don’t lend. All their ships are chartered and payments are current. Could be the buy of a lifetime–or the banks could screw us.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 25%. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 15.40 (Was $18.06, $18.88, $21.07)
Closed up $.67 at $7.78
Earnings out in May. Sales down 33% to $14.4 million and they lost about $2.2 million pre-tax (excluding the one-time litigation settlement). Again, not bad given the economy. Cash fell a bit to $7.88 a share, and our valuation fell to $15.40. Yes, the business is “free” and you get $.77 per share of cash as a gift to buy it.
Down 1%. HOLD

OPKO Health Inc. (OPK-Recommended 2/16/2009)
Buy Price-$1.25
Valuation-NA–Speculation
Closed up $.04 $1.20.
This is still a Phillip Frost play–Key and KOS Pharmaceutical sold for billions. Frost 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 4%. BUY

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$9.24
Closed up $.36 at $5.30.
$4.24 in cash and a real business.
UP 7%. BUY

RealNetworks Inc.. (RNWK-Recommended 5/26/2009)
Buy Price-$2.55
Valuation-$9.88
Closed up $.01 at $2.56
$2.91 per share in cash and a real businss.
Up .4%. BUY

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),
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 $1.16, up $.16.
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 28%. 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 $2.81 (was $2.78, $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 $.10.
Earnings out in May. Sales down 38% to $8 million. But they only lost $.01 per share. While results were not good, our valuation actually moved up $.03 to $2.81.
Down 37%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.85 (Was $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.11 down $.02. Closed at $.09.
Earnings out in May. Sales down 26% to $3.9 million and they lost $522,000. Our valuation plummeted to $.85 (still 8 times the current selling price)
Their VOIP business continues to struggle and lose money–$771,000 on $72,000 of revenues. They also spent $245,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
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-$1.56 (Was $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $.60, up $.12.
10Q for Q1 filed in May. Sales were up only 1%, but margins and earnings soared. Gross margin rose from 34% to 56% and they made $.07 per share versus $.02 last year. Not bad at all. LTUS business is seasonal, with this quarter being the weakest revenue quarter. Our “unadjusted” valuation fell to $1.56 per share–but this is up 50% from last year Q1.
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 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.
Down 28%. BUY

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RealNetworks, Inc.-Buy Recommendation

Real Networks, Inc. (NASDAQ–RNWK)
Valuation-$9.88
Closing price May 22, 2009-$2.55

With the recent market rebound, we thought it might be time to look around for some real value stocks that haven’t participated. We think RNWK is one.

RNWK is sitting on $2.91 per share in cash (114% of current market cap) and is only about 30% off its 52 week low.

Its’ operating performance has not been stellar (but whose has?). Last quarter sales were off 5% to $141 million and they lost $12 million ($.10 per share). Adjusted EBITDA for the quarter was slightly positive.

This is complex company with almost $400 million in cash and no debt, 60% margins and 114% of its market cap in cash, we see little downside risk. Maybe some big company will come along and buy it out at double, or even triple its current price.

Among its shareholders with more that 5% holdings are Royce, Dimension and the CEO owns almost 40% of the shares.

RNWK trades over 700,000 shares a day, so liquidity is not an issue here.

There are about 134 million fully diluted shares outstanding.

About Real Networks
RealNetworks, Inc. delivers digital entertainment services to consumers via PC, portable music player, home entertainment system and mobile phone. Real created the streaming media category in 1995 and has continued to lead the market with pioneering products and services, including: RealPlayer®, the first mainstream media player to enable one-click downloading and recording of Internet video; the award-winning Rhapsody® digital music service, which delivers more than 1 billion songs per year; RealArcade®, one of the largest casual games destinations on the Web; and a variety of mobile entertainment services, such as ringback tones, offered to consumers through leading wireless carriers around the world.

New Recommendation-DivX

DivX, Inc. (NASDAQ–DIVX)
Valuation-$9.24
Closing price May 22, 2009-$4.94

With the recent market rebound, we thought it might be time to look around for some real value stocks that haven’t participated in the rally. We think DIVX is one.

DivX is sitting on $4.24 per share in cash (86% of current market cap) and is only about 28% off its 52 week low.

Its operating performance has not been stellar. Last quarter sales were off 25% to $18.7 million and they lost $1.4 million ($.04 per share). Non-GAAP net income was about $1.2 million.

With basically a royalty income stream, 86% margins and 86% of its market cap in cash, we see little downside risk. Maybe some big company will come along and buy it out at double this price.

Among its shareholders with more that 5% holdings are Royce, Draper, FMR and JDS Capital Management.

DivX trades over 130,000 shares a day, so liquidity is not an issue here.

There are about 32 million fully diluted shares outstanding.

About DivX, Inc.
DivX, Inc. is a digital media company that enables consumers to enjoy a high-quality video experience across any kind of device. DivX creates, distributes and licenses digital video technologies that span the “three screens” comprising today’s consumer media environment — the PC, the television and mobile devices. Over 100 million DivX Certified® devices have shipped into the market from leading consumer electronics manufacturers. DivX also offers content providers and publishers a complete solution for the distribution of secure, high-quality digital video content. Driven by a globally recognized brand and a passionate community of hundreds of millions of consumers, DivX is simplifying the video experience to enable the digital home.

Cheap Stocks, 5/22/2009 Update

Another decent week for us. We managed a 2.4% more than double any of the indexes.

SELL NED for a 46% gain. This likely has way more to go, but why mess around with an almost 50% gain.

The DOW was up .1%, NASDAQ was up .7% and the S+P 500 was up .5%. For the year the DOW is now down 5.7%, NASDAQ is UP 7.3% and the S+P 500 is down 1.8%. The Russell 3000 and the Wilshire 5000 are also down 1% this year.

We had a 2.4% gain last week and are now up 15.5% for the year.

Last week we went 11 stocks up, 7 down and 1 even. Since inception we are now 26 stocks up, and 20 down.

Since our beginning, 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%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%
2009-NED +46%

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 27 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 $.16 to $4.11.
SPNC announced earnngs in May. Q1 revenues were $27.3 million, up 15% over last year. They lost $3.1 million after $1.4 million in legal expense related to the “investigation”. Cash is $1.07 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. Growing nicely in a crappy economy. Just got to wait this one out.
The company has $34 million in cash ($1.07 per share), no debt and is growing about 15% a year.
Now down 28%. 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 $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed down $.03 at $1.94.
Cash is $.83 per share.
Earnings out in May. Sales down 13% to $5.1 million, but they made $.04 per share (excluding an intangible write-off). New valuation is $8.12, back where it was 2 quarters ago.
Now down 19%. 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 $11.90 (was $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up .10 to $5.00.
MEDW announced an acquisition last week. No detais other than it is another healthcare optimization software company. No idea what it means yet. Transaction is supposed to close in June
Earnings out in May. Sales up 4% and they made $.06 per share versu $.04 last year. Cash was $2.68 per share and our valuation rose to $11.90 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 2008, bringing their combined owership in MEDW to 17.9%
Down 21%. BUY

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up),
Valuation $7.60 (was $4.31, $5.88, $8.63, $9.90, $8.69, $11.51)
Even at $.99
Earnings out in April. Much better than the prior quarter. While sales were down, they only lost half a million dollars. They have $1.13 per share in cash and our valuation spiked up to $7.60.
Down 74%. 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),
NEW Valuation $1.89 (was $5.61, $6.42, $6.84, $7.58, $7.59)
down $.08 at $.24.
Earnings out last week. Horrible of course. Sales are now at a $25 million ANNUAL run rate, albeit at 93% gross margins. Cash ended up at just over $11 million or $.34 per share (after all the sale proceeds). They have amazed us at their ability to burn through all that cash they had. Current operating loss was almost $2.9 million in the quarter. Our valuation plunged to $1.89 per share (we were thinking $3 before the announcement.
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 85%. 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 $2.78 (Was $4.67, $4.66, $6.00, $5.96)
Up $.02 at $.40.
HPOL announced in early May that they had successfully amended their bank line and also Q1 earnings. Sales were down 30% to $39.9 million, and they lost $6.7 million or $.12 per share. The loss included $5.3 million of “restructuring” charges. They reported that they had positive “adjusted EBITDA” of about half a million dollars.
Cash declined to about $16.9 million and debt was $24.2 million. Our new valuation plunged to $2.78 a share. But the stock is still trading at only 13% of our valuation. Give this one one more quarter to see if they can stabilize things.
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.
Down 42%. 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 $4.75 (was $4.12, $4.99, $4.30, $4.09)
Down $.01 to $1.48
Q1 earnings announced in May. Revenues were down YOY 7% to $44.6 million. Their “dial-up” businss revenues dropped from $11.5 million last year to $6 million this quarter. Their ongoing business grew over last year. GAAP loss was $3 million and non-GAAP income was $1.3 million–$.02 a share. Cash stayed healthy at $68 million–$1.10 per share. Our valuation rose to $4.75 per share.
Foxhill has been buying more IPASS. Ownership now up to 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
our valuation fell to $4.12, as margins dipped a bit.
Down 22%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.81 (Was $4.83, $4.62, $4.42)
Down $.04 at $2.48.
Earnings out in late April. Sales up 19% to $13.6 million and they made $.9 million pre-tax. Reported EPS was $.04. Our valuation stayed about the same at $4.81 per share. Not that easy to do in this economy.
Up 3%. 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) (9.0% dividend yield)
Valuation $17.05 (Was $14.51, $17.23, $18.36)
Up $.01 to $3.01.
CCA filed their 10Q in May. Our new valuation was better than we expected–$17.05 and cash was $2.11 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 $3.80 (was $3.97, $4.18, $4.15)
Closed up $.05 at $1.37
Earnings out in May. Sales down 9% to $13.8 million. They managed to INCREASE earnings from zero to $.02 per share. Our valuation fell a bit to $3.8- and cash stayed rose to $1.13 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 29%. 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 $.03 at $2.45
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 36%. 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 up $.55 at $3.85
NOw trading for more than cash value. Why take any “China” risk”
Up 46% (adjusted for $.56 dividend). SELL

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 $.16 at $1.92
Current dividend yield–suspended
Earnings out last week. Let’s see, revenues up 47%, operating income up 56%. They made $.21 per share. Yet we sit at $1.92 with no dividend due to the banks that don’t lend. All their ships are chartered and payments are current. Could be the buy of a lifetime–or the banks could screw us.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 26%. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 15.40 (Was $18.06, $18.88, $21.07)
Closed down $.49 at $7.11
Earnings out in May. Sales down 33% to $14.4 million and they lost about $2.2 million pre-tax (excluding the one-time litigation settlement). Again, not bad given the economy. Cash fell a bit to $7.88 a share, and our valuation fell to $15.40. Yes, the business is “free” and you get $.77 per share of cash as a gift to buy it.
Down 10%. HOLD

OPKO Health Inc. (OPK-Recommended 2/16/2009)
Buy Price-$1.25
Valuation-NA–Speculation
Closed down $.11 $1.16.
This is still a Phillip Frost play–Key and KOS Pharmaceutical sold for billions. Frost 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 7%. BUY

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 $1.00, up $.20.
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 38%. 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 $2.81 (was $2.78, $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 $.40, down $.05.
Earnings out in May. Sales down 38% to $8 million. But they only lost $.01 per share. While results were not good, our valuation actually moved up $.03 to $2.81.
Down 50%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.85 (Was $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.13 up $.01. Closed at $.09.
Earnings out in May. Sales down 26% to $3.9 million and they lost $522,000. Our valuation plummeted to $.85 (still 8 times the current selling price)
Their VOIP business continues to struggle and lose money–$771,000 on $72,000 of revenues. They also spent $245,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 52%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$1.56 (Was $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $.48, up $.05.
10Q for Q1 filed in May. Sales were up only 1%, but margins and earnings soared. Gross margin rose from 34% to 56% and they made $.07 per share versus $.02 last year. Not bad at all. LTUS business is seasonal, with this quarter being the weakest revenue quarter. Our “unadjusted” valuation fell to $1.56 per share–but this is up 50% from last year Q1. Hard to predict but LTUS could be selling at 1 times forward 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 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.
Down 43%. BUY

Cheap Stocks, 5//15/2009 Update

After our double digit gain last week, we managed to eke out a .6% gain this past week–which was way better than the markets did.

SELL DTLK for a 33% gain. This is our 4th trip on DTLK with gains of 41%, 25% and 40% before.

The DOW was down 3.6%, NASDAQ was down 3.4% and the S+P 500 was down 5.0%. For the year the DOW is now down 5.9%, NASDAQ is UP 6.5% and the S+P 500 is down 1.6%. The Russell 3000 and the Wilshire 5000 are also down 1-2% this year.

We had a .6% gain last week and are now up 13.1% for the year.

Last week we went 5 stocks up and 15 down. Since inception we are now 27 stocks up, and 19 down.

Since our beginning, 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%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%

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 27 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.
Down $.22 to $3.95.
SPNC announced earnngs in May. Q1 revenues were $27.3 million, up 15% over last year. They lost $3.1 million after $1.4 million in legal expense related to the “investigation”. Cash is $1.07 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. Growing nicely in a crappy economy. Just got to wait this one out.
The company has $34 million in cash ($1.07 per share), no debt and is growing about 15% a year.
Now down 30%. 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 $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed up $.22 at $1.97.
Cash is $.83 per share.
Earnings out in May. Sales down 13% to $5.1 million, but they made $.04 per share (excluding an intangible write-off). New valuation is $8.12, back where is was 2 quarters ago.
Now down 18%. 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 $11.90 (was $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up .84 to $4.90.
Earnings out last week. Sales up 4% and they made $.06 per share versu $.04 last year. Cash was $2.68 per share and our valuation rose to $11.90 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 2008, bringing their combined owership in MEDW to 17.9%
Down 23%. BUY

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up),
Valuation $7.60 (was $4.31, $5.88, $8.63, $9.90, $8.69, $11.51)
Down $.16 at $.99
Earnings out in April. Much better than the prior quarter. While sales were down, they only lost half a million dollars. They have $1.13 per share in cash and our valuation spiked up to $7.60.
Down 74%. 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)
down $.01 at $.32.
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 $2.78 (Was $4.67, $4.66, $6.00, $5.96)
Up $.01 at $.38.
HPOL announced in early May that they had successfully amended their bank line and also Q1 earnings. Sales were down 30% to $39.9 million, and they lost $6.7 million or $.12 per share. The loss included $5.3 million of “restructuring” charges. They reported that they had positive “adjusted EBITDA” of about half a million dollars.
Cash declined to about $16.9 million and debt was $24.2 million. Our new valuation plunged to $2.78 a share. But the sock is still tading at only 13% of our valuation. Give this one one more quarter to see if they can stabilize things.
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.
Down 44%. 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 $4.75 (was $4.12, $4.99, $4.30, $4.09)
Down $.01 to $1.49
Q1 earnings announced in May. Revenues were down YOY 7% to $44.6 million. Their “dial-up” businss revenues dropped from $11.5 million last year to $6 million this quarter. Their ongoing business grew over last year. GAAP loss was $3 million and non-GAAP income was $1.3 million–$.02 a share. Cash stayed healthy at $68 million–$1.10 per share. Our valuation rose to $4.75 per share.
Foxhill has been buying more IPASS. Ownership now up to 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
our valuation fell to $4.12, as margins dipped a bit.
Down 22%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.81 (Was $4.83, $4.62, $4.42)
Down $.17 at $2.52.
Earnings out in late April. Sales up 19% to $13.6 million and they made $.9 million pre-tax. Reported EPS was $.04. Our valuation stayed about the same at $4.81 per share. Not that easy to do in this economy.
Up 5%. 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) (9.0% dividend yield)
Valuation $17.05 (Was $14.51, $17.23, $18.36)
Down $.11 to $3.00.
CCA filed their 10Q in May. Our new valuation was better than we expected–$17.05 and cash was $2.11 per share.
Down 46%. 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)
NEW Valuation $3.80 (was $3.97, $4.18, $4.15)
Closed down $.01 at $1.32
Earnings out last week. Sales down 9% to $13.8 million. They managed to INCREASE earnings from zero to $.02 per share. Our valuation fell a bit to $3.8- and cash stayed rose to $1.13 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 down $.33 at $2.42
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 37%. 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 $.02 at $3.30
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 28% (adjusted for $.56 dividend). BUY

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $8.55 (Was $10.27, $10.26)
Closed up $.46 at $4.01
Cash is $2.34 per share.
SELL–still taking gains where we can get them.
Earnings out in mid-April. Sales down about 16% at $40 million, and they lost $.05 per share compared to a profit of $.04 last year. As expected, our valuation fell to $8.55. Still trading at less than 50% of even that reduced projected valuation.
UP 33%. SELL

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 down $.07 at $1.76
Current dividend yield–suspended
Well the screwed up banking envoronment, the decline in ship values, the relectance of appraisers to even give appraisals all converged on GSL last week. They announced that they were trying to get appraisals on their ships but needed more time (until June 30) and that they would suspend their dividend until the banking crap was sorted out. Meanwhile they also announced that operating income is expected to increase 30% to $13 million as the impact of the last 3 ships put in service took effect. Unbelievable. They also said they would revisit the dividend after this mess is resolved.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 32%. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 15.40 (Was $18.06, $18.88, $21.07)
Closed down $.15 at $7.60
Earnings out in May. Sales down 33% to $14.4 million and they lost about $2.2 million pre-tax (excluding the one-time litigation settlement). Again, not bad given the economy. Cash fell a bit to $7.88 a share, and our valuation fell to $15.40. Yes, the business is “free” and you get $.28 per share of cash as a gift to buy it.
Down 4%. HOLD

OPKO Health Inc. (OPK-Recommended 2/16/2009)
Buy Price-$1.25
Valuation-NA–Speculation
Closed up $.11 $1.27.
This is still a Phillip Frost play–Key and KOS Pharmaceutical sold for billions. Frost 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.
Up 2%. BUY

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 $.80, down $.23.
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 50%. 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),
NEW Valuation $2.81 (was $2.78, $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 $.45, down $.01.
Earnings out on Friday. Sales down 38% to $8 million. But they only lost $.01 per share. While results were not good, our valuation actually moved up $.03 to $2.81.
Down 43%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
NEW Valuation $.85 (Was $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.12 down $.01. Closed at $.11.
Earnings out on Friday. Sales down 26% to $3.9 million and they lost $522,000. Our valuation plummeted to $.85 (still 7 times the current selling price)
Their VOIP business continues to struggle and lose money–$771,000 on $72,000 of revenues. They also spent $245,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
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 56%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
NEW Valuation-$1.56 (Was $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $.43, down $.01.
10Q for Q1 filed last week. Sales were up only 1%, but margins and earnings soared. Gross margin rose from 34% to 56% and they made $.07 per share versus $.02 last year. Not bad at all. LTUS business is seasonal, with this quarter being the weakest revenue quarter. Our “unadjusted” valuation fell to $1.56 per share–but t his is up 50% from last year Q1. Hard to predict but LTUS could be selling at 1 times forward 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 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.
Down 49%. BUY

Cheap Stocks, 5/8/2009 Update

Finally. A double digit gain week–at least for us.

SELL CYNO for a 25% gain.

The DOW was up 4.4%, NASDAQ was up 1.2% and the S+P 500 was up 5.9%. For the year the DOW is now down 2.3%, NASDAQ is UP 10.3% and the S+P 500 is up 2.9%. The Russell 3000 and the Wilshire 5000 are also down 1-2% this year.

We had a 10.6% gain last week and are now up 12.5% for the year.

Last week we went 15 stocks up 5 down and 1 even. Since inception we are now 26 stocks up, and 20 down.

Since our beginning, 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%
2009-SNWL +14%
2009-CYNO +25%

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 $.37 to $4.17.
SPNC announced earnngs last week. Q1 revenues were $27.3 million, up 15% over last year. They lost $3.1 million after $1.4 million in legal expense related to the “investigation”. Cash is $1.07 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. Growing nicely in a crappy economy. Just got to wait this one out.
The company has $34 million in cash ($1.07 per share), no debt and is growing about 15% a year.
Now down 27%. 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),
NEW Valuation $8.12 (was $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed up $.13 at $1.75.
Cash is $.83 per share.
Earnings out last week. Sales down 13% to $5.1 million, but they made $.04 per share (excluding an intangible write-off). New valuation is $8.12, back where is was 2 quarters ago.
Now down 27%. 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 .06 to $4.06.
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 2008, bringing their combined owership in MEDW to 17.9%
Down 36%. BUY

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up),
Valuation $7.60 (was $4.31, $5.88, $8.63, $9.90, $8.69, $11.51)
Up $.20 at $1.15
Earnings out in April. Much better than the prior quarter. While sales were down, they only lost half a million dollars. They have $1.13 per share in cash and our valuation spiked up to $7.60.
Down 69%. 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)
down $.02 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 79%. 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),
NEW Valuation $2.78 (Was $4.67, $4.66, $6.00, $5.96)
Down $.01 at $.37.
HPOL announced last week that they had successfully amended their bank line and also Q1 earnings. Sales were down 30% to $39.9 million, and they lost $6.7 million or $.12 per share. The loss included $5.3 million of “restructuring” charges. They reported that they had positive “adjusted EBITDA” of about half a million dollars.
Cash declined to about $16.9 million and debt was $24.2 million. Our new valuation plunged to $2.78 a share. But the sock is still tading at only 13% of our valuation. Give this one one more quarter to see if they can stabilize things.
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.
Down 47%. 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 $4.75 (was $4.12, $4.99, $4.30, $4.09)
Up $.32 to $1.50
Q1 earnings announced last week. Revenues were down YOY 7% to $44.6 million. Their “dial-up” businss revenues dropped from $11.5 million last year to $6 million this quarter. Their ongoing business grew over last year. GAAP loss was $3 million and non-GAAP income was $1.3 million–$.02 a share. Cash stayed healthy at $68 million–$1.10 per share. Our valuation rose to $4.75 per share and the stock responded by rising 27% last week.
Foxhill has been 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%.
our valuation fell to $4.12, as margins dipped a bit.
Down 21%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
NEW Valuation $4.81 (Was $4.83, $4.62, $4.42)
Up $.39 at $2.69.
Earnings out in late April. Sales up 19% to $13.6 million and they made $.9 million pre-tax. Reported EPS was $.04. Our valuation stayed about the same at $4.81 per share. Not that easy to do in this economy.
Up 12%. 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) (9.0% dividend yield)
Valuation $17.05 (Was $14.51, $17.23, $18.36)
Up $.06 to $3.11.
CCA filed their 10Q last week. Our new valuation was better than we expected–$17.05 and cash was $2.11 per share.
Down 44%. 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 $.06 at $1.33
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 $.50 at $2.75
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 28%. 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 up $.22 at $3.32
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 28% (adjusted for $.56 dividend). BUY

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $8.55 (Was $10.27, $10.26)
Closed up $.11 at $3.55
Cash is $2.34 per share.
Earnings out in mid-April. Sales down about 16% at $40 million, and they lost $.05 per share compared to a profit of $.04 last year. As expected, our valuation fell to $8.55. Still trading at less than 50% of even that reduced projected valuation.
UP 18%. 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 $.06 at $1.83
Current dividend yield–suspended
Well the screwed up banking envoronment, the decline in ship values, the relectance of appraisers to even give appraisals all converged on GSL last week. They announced that they were trying to get appraisals on their ships but needed more time (until June 30) and that they would suspend their dividend until the banking crap was sorted out. Meanwhile they also announced that operating income is expected to increase 30% to $13 million as the impact of the last 3 ships put in service took effect. Unbelievable. They also said they would revisit the dividend after this mess is resolved.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 30%. HOLD

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$6.84 (Was $9.10 before double-up)
Valuation-$20.79-(Was $29.49)
Closed up $2.05 at $8.54
CYNO has $7.45 per share in cash.
Earnings last week. Sales down to $14.8 million from $36.8 million. Yikes! They also lost about $7 million pre-tax. Nothing good other than “order rates picked up slightly in March”. Cash ended up at about $89 million–$6.99 per share.
We will take this opportunity and SELL CYNO
Up 25%. SELL

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
NEW Valuation-$ 15.40 (Was $18.06, $18.88, $21.07)
Closed up $1.28 at $7.75
Earnings out last week. Sales down 33% to $14.4 million and they lost about $2.2 million pre-tax (excluding the one-time litigation settlement). Again, not bad given the economy. Cash fell a bit to $7.88 a share, and our valuation fell to $15.40. Yes, the business is “free” and you get $.13 per share of cash as a gift to buy it.
Down 2%. HOLD

OPKO Health Inc. (OPK-Recommended 2/16/2009)
Buy Price-$1.25
Valuation-NA–Speculation
Unchanged at $1.16.
This is still a Phillip Frost play–Key and KOS Pharmaceutical sold for billions. Frost 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 7%. BUY

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 $1.03, up $.03.
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 36%. 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 $.46, up $.15.
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 $8 million is about 21% 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 42%. 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 $.13 down $.01. Closed at $.12.
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 50%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$1.99 (Was $2.22, $1.61, $2.28, $2.08)
Closed at $.44, up $.13.
Nice article in The Street.com touting LTUS as one of the yop 10 China microcap stocks.
Sales for 2008 were up 30% to $74 million and they made $.27 per share. Q4 sales were a whopping $26 million and they made $.14 per share in the QUARTER. Our valuation fell a bit though as gross margin fell to 46% and net cash continued to decline–to $1.99 per share. Still a lot of upside here we think.
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 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.
Down 47%. BUY

Cheap Stocks, May 1, 2009 Update

A decent week all around last week. All the averages up as were we.

The DOW was up 1.7%, NASDAQ was up 1.5% and the S+P 500 was up 1.3%. For the year the DOW is now down 6.4%, NASDAQ is UP 9% and the S+P 500 is down 2.9%. The Russell 3000 and the Wilshire 5000 are also down 1-2% this year.

We had a 1.1% gain last week and are up 1.9% for the year.

Last week we went 14 stocks up 6 down and 1 even. Since inception we are now 24 stocks up, and 22 down.

Since our beginning, 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%
2009-SNWL +14%

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 $.45 to $3.80.
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 33%. 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 up $.12 at $1.62.
Cash is $.83 per share.
DWCH announced some more cost cutting in April–12 employees.
Earnings out in early February. Sales down 16% to $5.2 million, but they made $.06 per share. New valuation is $8.09 down a measley $.03 from last quarter.
Now down 33%. 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 .12 to $4.12.
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 35%. BUY

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up),
Valuation $7.60 (was $4.31, $5.88, $8.63, $9.90, $8.69, $11.51)
Down $.08 at $.95
Earnings out in April. Much better than the prior quarter. While sales were down, they only lost half a million dollars. They have $1.13 per share in cash and our valuation spiked up to $7.60.
Down 75%. 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 $.02 at $.35.
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 79%. 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)
Down $.07 at $.38.
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 45%. 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 $.13 to $1.18
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 38%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
NEW Valuation $4.81 (Was $4.83, $4.62, $4.42)
Up $.23 at $2.30.
Earnings out last week. Nice. Sales up 19% to $13.6 million and they made $.9 million pre-tax. Reported EPS was $.04. Our valuation stayed about the same at $4.81 per share. Not that easy to do in this economy.
Down 4%. 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) (9.3% dividend yield)
Valuation $17.05 (Was $14.51, $17.23, $18.36)
Down $.02 to $3.05.
CCA filed their 10Q last week. Our new valuation was better than we expected–$17.05 and cash was $2.11 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 $.15 at $1.39
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 28%. 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 $.12 at $2.25
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 41%. 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 up $.13 at $3.10
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 21% (adjusted for $.56 dividend). BUY

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $8.55 (Was $10.27, $10.26)
Closed up $.20 at $3.44
Cash is $2.34 per share.
Earnings out last week. Sales down about 16% at $40 million, and they lost $.05 per share compared to a profit of $.04 last year. As expected, our valuation fell to $8.55. Still trading at less than 50% of even that reduced projected valuation.
UP 14%. 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 down $.58 at $1.77
Current dividend yield–39%
Well the screwed up banking envoronment, the decline in ship values, the relectance of appraisers to even give appraisals all converged on GSL last week. They announced that they were trying to get appraisals on their ships but needed more time (until June 30) and that they would suspend their dividend until the banking crap was sorted out. Meanwhile they also announced that operating income is expected to increase 30% to $13 million as the impact of the last 3 ships put in service took effect. Unbelievable. They also said they would revisit the dividend after this mess is resolved.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 31%. HOLD

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$6.84 (Was $9.10 before double-up)
Valuation-$20.79-(Was $29.49)
Closed up $.28 at $6.49
CYNO has $7.45 per share in cash.
Announced preliminary results in April. Hmmmm, sales are expected to be down to about $15 million from $37 million last year and they expect to lose about $4 million. Not good.
Cash is still more than their market cap (about $100 million we think), and they seem to know how to manage their expenses in this downturn. “On sale”–FREE plus $1. a share in cash. As noted above.
Down 4%. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.06 (Was $18.88, $21.07)
Closed up $.17 at $6.47
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. Yes, the business is “free” and you get $1.88 per share of cash as a gift to buy it.
Down 18%. BUY

OPKO Health Inc. (OPK-Recommended 2/16/2009)
Buy Price-$1.25
Valuation-NA–Speculation
Up $.03 at $1.16.
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 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 7%. 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 $1.00, up $.15.
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 38%. 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 $.31, down $.09.
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 61%. 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 $.14 unchanged. Closed at $.14.
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-$1.99 (Was $2.22, $1.61, $2.28, $2.08)
Closed at $.31, down $.01.
10K out last week. Sales for the year up 30% to $74 million and they made $.27 per share. Q4 sales were a whopping $26 million and they made $.14 per share in the QUARTER. Our valuation fell a bit though as gross margin fell to 46% and net cash continued to decline–to $1.99 per share. Still a lot of upside here we think.
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 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 still stinks, Chinese stocks maybe even worse than most.
Down 63%. BUY