Cheap Stocks, 6/26/2009 Update

Well we eked out a tiny gain this week–.2% and are now up 24.2% in 2009

The DOW was down 1.2%, NASDAQ was up .6% and the S+P 500 was down .3%. For the year the DOW is down 3.9%. NASDAQ is up 16.6% and the S+P 500 is up 1.7%. The Russell 3000 and the Wilshire 5000 are also up 3-4% this year.

Last week we went 8 stocks up, 9 down and 3 even. Since inception we are now 30 stocks up, and 19 down.

Doubling up on AEZS. Just have a feeling………

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%
2009-CUTR +13%

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

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.82
Valuation –Speculation.
Closed down $.09 to $1.73.
Double up on this. New buy prices will be $1.78.
Down 5% BUY

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 $.39 to $5.31.
SPNC got CE approval on one of the next generation Kensey Nash products they purchased. Product will start selling immediatley in the EU.
Last week SPNC announced that they settled their wrongful dismissal lawsuit with an ex-employee, who purportedly is the wistleblower in the FDA/ICE raids last year. Maybe these issues will be resolved soon too. It has been 9 months since the raids.
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 the 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 6.5%. 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 $1.77.
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 26%. 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 .60 to $5.70.
MEDW announced it closed the earlier announced acquisition last week. Cost was $2 million cash and some earnout potential. It is another healthcare optimization software company. 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.
Cannell Capital filed a 13D in February 2008, disclosing a 12.9% ownership stake. Cannell has been pushing MEDW management to sell the company. Last week Cannell filed an amended 13D showing they had reduced their ownership to 6.2%. 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 10%. 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)
Unchanged at $.87
Looks like they lost some of their claims against Palomar. While these findings are not final, not a good outcome.
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 77%. HOLD.

Vertro. (VTRO (was-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 $.01 at $.18.
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 89%. 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)
Down $.09 at $.34.
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 51%. 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 $.09 at $1.80
IPASS had two ammouncements in early June. The first was a bit of a management shakeup-New CFO, new General Counsel, new VP of Marketing. The second was a settlement with Foxhill. Among other things they agreed to return $40 million of their $68 million cash hoard to shareholders. The first $20 million will be a dividend (about $.32 per share) and the second $20 million may be a dividend or a stock buyback (ICK).
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%.
Down 5%. HOLD

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.81 (Was $4.83, $4.62, $4.42)
Down $.09 at $2.56.
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 7%. 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 $.13 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)
Valuation $3.80 (was $3.97, $4.18, $4.15)
Closed up $.01 at $1.38
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 $3.80- and cash 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 28%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.16 (was $9.53, $13.30, $13.03)
Closed down $.40 at $2.94
Earnings out in late May. 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 23%. 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 down $.06 at $1.87
Current dividend yield–suspended
They got another waiver from their bank, to July 31. We just wait on this one.
Earnings out in May. Let’s see, revenues up 47%, operating income up 56%. They made $.21 per share. Yet we sit at $2.18 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 28%. HOLD

OPKO Health Inc. (OPK-Recommended 2/16/2009)
Buy Price-$1.25
Valuation-NA–Speculation
Closed doen $.09 to $1.80.
OPKO announced the completion of a $31 million private placement of stock at $1 per share in mid-June. Then the stock took off.
This is still a Phillip Frost play–Key and KOS Pharmaceutical sold for billions. Frost keeps buying on the open market all the time. His ownership has now exceeded 50% with just over 100 million shares (now about 130 million.
Up 41%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$9.24
Closed up $.48 at $5.99.
$4.24 in cash and a real business.
UP 21%. HOLD

RealNetworks Inc.. (RNWK-Recommended 5/26/2009)
Buy Price-$2.55
Valuation-$9.88
Closed up $.45 at $3.12
$2.91 per share in cash and a real businss.
Up 22%. 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),
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 $.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 $2.81 (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 $.49, down $.01.
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 38%. 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 $.105 unchanged. 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 61%. 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 $.49, 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.
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 35%. BUY

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AEZS-New Recommendation

AEtera Zentaris, Inc. (NASDAQ–AEZS)
Valuation-Speculative
Closing price June 19, 2009-$1.82

This is a Canadian drug stock. Small revenues, losing $12 million a quarter and Its 52 week low stock price was $.26. Good deal huh?

Well, AEZS has a lot going on. They or their partner’s, have a number of Phase 3 drugs in the pipeline and recently inked a deal with Sandofi-Aventis that brought in $30 million cash and could add another $135 million for Cetrorelix. Many other drugs in their pipeline too.

Last week they announced that they completed a private placement of stock for $1.88 a share. Raising money for a money losing outfit just is not easy these days, so the investors must see something pretty good here.

They also announced that they were accelerating the announcement of the results of their Phase III trials of Cetrorelix from Q4 to Q3 2009 (which starts in about 10 days).

We expect that at a less than $100 million market cap, with over $60 million in cash (as of March 31, 2009) real revenues (albeit maybe $6 million a quarter), and a promising drug pipeline, that this could soar on positive Cetrorelix news in the next couple of months. After the last couple of press releases, the stock price moved over $2.50 and over $3 on different days. It has fallen back after those people lucky enough to have bought under $1 took their profits.

Bad news on the drug development front will hammer the share price—so this is very “speculative”

AEZS trades about 93,000 shares a day.

There are about 53 million fully diluted shares outstanding.

About AEterna Zentaris, Inc
AEterna Zentaris Inc. is a global biopharmaceutical company focused on endocrine therapy and oncology, with proven expertise in drug discovery, development and commercialization. News releases and additional information are available at http://www.aezsinc.com.

Cheap Stocks, 6/19/2009 Update

Nothing goes straight up I guess. Our 12 week winning streak ended last week with a 3.85% loss. All the talking heads were worried that the market advance was ovedone, so guess what–it was, just because they decided to focus on the negative.

The DOW was down 3%, NASDAQ was down 1.7% and the S+P 500 was down 2.6%. For the year the DOW is back down 2.7%. NASDAQ is up 15.9% and the S+P 500 is up 2%. The Russell 3000 and the Wilshire 5000 are also up 3-4% this year.

We are still up 23.9% for 2009.

Last week we went 4 stocks up, 11 down and 4 even. Since inception we are now 30 stocks up, and 18 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%
2009-CUTR +13%

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 29 stocks that we closed out in 2006, 2007, 2008 and 2009 the average net 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 $.31 to $4.92.
SPNC announced that they settled their wrongful dismissal lawsuit with an ex-employee, who purportedly is the wistleblower in the FDA/ICE raids last year. Maybe these issues will be resolved soon too. It has been 9 months since the raids.
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 13%. 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 $1.80.
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 25%. 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 .02 to $5.10.
MEDW announced it closed the earlier announced acquisition last week. Cost was $2 million cash and some earnout potential. It is another healthcare optimization software company. 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.
Cannell Capital filed a 13D in February 2008, disclosing a 12.9% ownership stake. Cannell has been pushing MEDW management to sell the company. Last week Cannell filed an amended 13D showing they had reduced their ownership to 6.2%. 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 19%. 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 $.30 at $.87
Looks like they lost some of their claims against Palomar. While these findings are not final, not a good outcome.
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 77%. HOLD.

Vertro. (VTRO (was-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 $.04 at $.19.
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 88%. 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)
Down $.02 at $.43.
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 39%. 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)
Unchanged at $1.71
IPASS had two ammouncements in early June. The first was a bit of a management shakeup-New CFO, new General Counsel, new VP of Marketing. The second was a settlement with Foxhill. Among other things they agreed to return $40 million of their $68 million cash hoard to shareholders. The first $20 million will be a dividend (about $.32 per share) and the second $20 million may be a dividend or a stock buyback (ICK).
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%.
Down 10%. HOLD

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.81 (Was $4.83, $4.62, $4.42)
Unchanged at $2.65.
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 10%. 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 $.17 to $2.87.
CCA filed their 10Q in May. Our new valuation was better than we expected–$17.05 and cash was $2.11 per share.
Down 48%. 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 down $.02 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 $3.80- and cash 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 $11.16 (was $9.53, $13.30, $13.03)
Closed down $.01 at $3.34
Earnings out in late May. 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 13%. 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 down $.16 at $1.93
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 $2.18 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

OPKO Health Inc. (OPK-Recommended 2/16/2009)
Buy Price-$1.25
Valuation-NA–Speculation
Closed up $.21 to $1.89.
OPKO announced the completion of a $31 million private placement of stock at $1 per share last week. Then the stock took off. At one point we got to $1.88 (up 50%), but sold off some on Friday.
This is still a Phillip Frost play–Key and KOS Pharmaceutical sold for billions. Frost keeps buying on the open market all the time. His ownership has now exceeded 50% with just over 100 million shares (now about 130 million.
Up 51%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$9.24
Closed up $.11 at $5.51.
$4.24 in cash and a real business.
UP 12%. HOLD

RealNetworks Inc.. (RNWK-Recommended 5/26/2009)
Buy Price-$2.55
Valuation-$9.88
Closed down $.28 at $2.67
$2.91 per share in cash and a real businss.
Up 5%. 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 $.85, up $.05.
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 $2.81 (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, unchanged.
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 $.105 unchanged. Closed at $.11.
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 61%. 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 $.49, down $.08.
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 41%. BUY

Cheap Stocks, 6/12/2009 Update

Well we managed to have a positive week for the 12th week in a row. Barely. We managed a .1% gain last week and are now up 27.8% so far this year.

The DOW was up .26%, NASDAQ was up .5% and the S+P 500 was up .7%. For the year the DOW is now finally UP. A whopping .25%, NASDAQ is UP 17.9% and the S+P 500 is up 4.8%. The Russell 3000 and the Wilshire 5000 are also up 6-7% this year.

Last week we went 9 stocks up, 8 down and 2 even. Since inception we are now 30 stocks up, and 18 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%
2009-CUTR +13%

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 29 stocks that we closed out in 2006, 2007, 2008 and 2009 the average net 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 $.11 to $5.23.
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.
Been about 9 months since the “raid”. I would think we would hear someting in the next couple of month on the outcome.
Now down 8%. 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 $.04 at $1.83.
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 24%. 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)
Down .32 to $5.08.
MEDW announced an acquisition in June. 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 20%. 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 $.06 at $1.17
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.

Vertro. (VTRO (was-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 $.01 at $.23.
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 86%. 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)
Down $.05 at $.45.
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 36%. 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 $.13 to $1.71
IPASS had two ammouncements in early June. The first was a bit of a management shakeup-New CFO, new General Counsel, new VP of Marketing. The second was a settlement with Foxhill. Among other things they agreed to return $40 million of their $68 million cash hoard to shareholders. The first $20 million will be a dividend (about $.32 per share) and the second $20 million may be a dividend or a stock buyback (ICK). Yet we lost $.02–who can figure.
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%.
Down 10%. HOLD

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.81 (Was $4.83, $4.62, $4.42)
Up $.09 at $2.65.
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 10%. 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 $3.03.
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 $.04 at $1.39
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 $3.80- and cash 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 28%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.16 (was $9.53, $13.30, $13.03)
Closed up $.35 at $3.35
Earnings out in late May. 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 12%. 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 down $.09 at $2.09
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 $2.18 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 19%. HOLD

OPKO Health Inc. (OPK-Recommended 2/16/2009)
Buy Price-$1.25
Valuation-NA–Speculation
Closed up $.11 to $1.68.
OPKO announced the completion of a $31 million private placement of stock at $1 per share last week. Then the stock took off. At one point we got to $1.88 (up 50%), but sold off some on Friday.
This is still a Phillip Frost play–Key and KOS Pharmaceutical sold for billions. Frost keeps buying on the open market all the time. His ownership has now exceeded 50% with just over 100 million shares (now about 130 million.
Up 34%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$9.24
Closed up $.24 at $5.40.
$4.24 in cash and a real business.
UP 9%. HOLD

RealNetworks Inc.. (RNWK-Recommended 5/26/2009)
Buy Price-$2.55
Valuation-$9.88
Closed up $.18 at $2.95
$2.91 per share in cash and a real businss.
Up 16%. 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 $.80, up $.05.
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 $2.81 (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, unchanged.
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 $.105 unchanged. Closed at $.08.
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 61%. 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 $.59, down $.02.
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 32%. BUY

Cheap Stocks, 6/5/2009 Update

another up week for us and the markets. We managed a 3.5% gain last week and are now up 27.7% so far this year.

We are finally back in the black on Cutera. It is now trading over cash value, so we will take our 13% gain and run. SELL.

The DOW was up 3.1%, NASDAQ was up 4.2% and the S+P 500 was up 2.3%. For the year the DOW is now down .1%, NASDAQ is UP 17.3% and the S+P 500 is up 4.1%. The Russell 3000 and the Wilshire 5000 are also up 5-6% this year.

Last week we went 11 stocks up, 8 down and 1 even. Since inception we are now 30 stocks up, and 18 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 $.90 to $5.34.
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 6%. 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 $.15 at $1.87.
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 22%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $11.90 (was $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up .21 to $5.40.
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 15%. 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 $.13 at $1.23
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 67%. 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)
Up $.07 at $.24.
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 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)
Down $.02 at $.50.
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 28%. 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 $.02 to $1.58
IPASS had two ammouncements last week. The first was a bit of a management shakeup-New CFO, new General Counsel, new VP of Marketing. The second was a settlement with Foxhill. Among other things they agreed to return $40 million of their $68 million cash hoard to shareholders. The first $20 million will be a dividend (about $.32 per share) and the second $20 million may be a dividend or a stock buyback (ICK). Yet we lost $.02–who can figure.
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%.
Down 17%. HOLD

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.81 (Was $4.83, $4.62, $4.42)
Up $.10 at $2.56.
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 7%. 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 $.13 to $2.97.
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)
Valuation $3.80 (was $3.97, $4.18, $4.15)
Closed down $.05 at $1.35
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 30%. 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 $.16 at $3.00
Earnings out in late May. 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 22%. 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 $.23 at $2.18
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 $2.18 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 16%. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 15.40 (Was $18.06, $18.88, $21.07)
Closed up $1.12 at $8.90
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. Hmmm, not over cash value. We will take our small gain and go home on this one.
Up 13%. SELL.

OPKO Health Inc. (OPK-Recommended 2/16/2009)
Buy Price-$1.25
Valuation-NA–Speculation
Closed up $.37 $1.57.
OPKO announced the completion of a $31 million private placement of stock at $1 per share last week. Then the stock took off. At one point we got to $1.88 (up 50%), but sold off some on Friday.
This is still a Phillip Frost play–Key and KOS Pharmaceutical sold for billions. Frost keeps buying on the open market all the time. His ownership has now exceeded 50% with just over 100 million shares (now about 130 million.
Up 26%. BUY

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$9.24
Closed down $.14 at $5.16.
$4.24 in cash and a real business.
UP 5%. BUY

RealNetworks Inc.. (RNWK-Recommended 5/26/2009)
Buy Price-$2.55
Valuation-$9.88
Closed up $.21 at $2.77
$2.91 per share in cash and a real businss.
Up 9%. 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 $.80, down $.36.
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),
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, unchanged.
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 $.105 down $.005. Closed at $.08.
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 61%. 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 $.59, down $.01.
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 30%. BUY