Merry Christmas, Happy Holidays to all
Good week for the markets, and a very good week for us–up 7.2%
Now up 79.6% this year.
IPAS, MEDW, DWCH, MGIC, LTUS.ob and CAW still are our favorites.
Expect tax loss selling and slow trading as we are deep in the holiday vacation season. We have 4 stocks (out of 26) that are down this year-GSL, AEZS, ARIS.ob and CTIG.ob. We expect tax selling pressure on GSL and AEZS.
The DOW was up 1.9%, NASDAQ was up 3.4% and the S+P 500 was up 2.2%. For the year the DOW is up 19.2%. NASDAQ is up 44.9% and the S+P 500 is up 24.7%. The Russell 3000 and the Wilshire 5000 are up 27-28% this year.
Last week we went 9 stocks up, 4 down and 3 even. Since inception we are now 36 stocks up and 14 down (we are trying hard to get to our 80% winner target) .
Since our beginning, we have closed out the following positions:
2006-ONXS +11% (Buyout offer)
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2009-HSTM +67% (continued good earnings)
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
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 34 stocks that we closed out since 2006 the average net gain was 27%.
AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Closed down $.03 at $.79.
Following the early December announcement that Cetrorelix is dead, Sandofi and AEZS canceled their agreement to develope Cetrorelix. On the other hand Kerx (AEZS partner in U.S. on Perifosine) announced positive news, “The data presented here further supports the planned Phase 3 trial design which has been granted Special Protocol Assessment by the FDA”. This is still a “lottery ticket”.
Earnings out in November. Revenues about $8.5 million and they lost $11.3 million. This of course all means nothing yet. Still has $45 million of cash.
Their pipeline and the related announcements will be what drives this stock.
Just waiting for some more good developement news here.
They stil have $45 million in cash, marketed products and a good pipeline
Down 45% HOLD
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.
Closed up $.50 at $5.97.
Everyone is waitng for the promised FDA resolution.
SPNC is up 129% this year.
SPNC announced FDA approval on a new “lead” management device in December.
Earnings out in October. Pretty good actually. Sales up 7% to $28.8 million (second highest quarterly sales ever). They lost $2.5 million or $.08 per share. Excluding write-offs and litigation costs they made $641k pre-tax.
Got to get past this FDA matter to allow this stock to move up.
A 510(K) filing for in-stent restenosis happened in early Octobber.
Canaccord Adams issued a BUY on SPNC in September. Target price is $8.
Hopefully we are getting close to a settlement with the FDA. Canaccord seems to think so.
SPNC is suffering from the year-ago FDA, ICE raids that apparently eminated from the ex-employee whistle-blower. 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 ($1.04 per share), no debt and is growing about 10% a year.
Up 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 $7.17 (was $7.46, $8.12, $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 $.12 at $2.48
Earnings out in November. Not bad. Revenue down 14% as you would expect this year, but they maintained profitability and made $.04 a share. Has $.94 a share in cash and our valuation is still $7.17, almost 3 times the current price.
KVO Capital management filed a 13D in September. They own 402,000 shares (just under 7% of the company). Purchases were all in the second half of August from $1.66 to $2.74 per share. Finally, someone else seems to see the value here.
Up 3%. 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 $12.57 (was $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up $.21 at $7.01.
MEDW announced the acquisition of 2 companies in the home infusion market for $5.5 million in November. These deals were closed in December.
Earnings out in November. Sales were up 9% and EPS more than doubled to $.08 per share. Cash is $2.78 per share and our valuation rose to $12.57 per share. The stock got up to $7.38 before falling back a bit. This should be a $10 stock right now, in our opinion.
Constellation Software filed another 13D/A in late August. Bought 290,000 shares at $5.20 raising their stake to 21.8%. When is the take-over offer??
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 11%. BUY
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 $2.17 (was $1.65, $1.89, $5.61, $6.42, $6.84, $7.58, $7.59)
Up $.02 at $.39.
Earnings out in November. Sales were $7.4 million and they lost $1.8 million before a $1.2 million gain from discontinued operations. Cash was about $6.9 million or $.20 per share. Our valuation rose to $2.17 per share. Thet are still saying they think they will get to positive EBITDA in Q4. We’ll see.
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 76%. HOLD
Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $.69 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $2.72 (Was $3.09, $2.78, $4.67, $4.66, $6.00, $5.96)
Closed up $.09 at $1.24.
Earnings out in late October. Not bad at all. While sales were down 23% to $38.8 million, they had a tiny loss of $.01 per share ($.04 loss last year). Adjusted EBITDA was $2.1 million up from $.7 million last year.
Our valuation fell to $2.72 per share.
More interestingly, Mill Road Capital filed a Form 13D/A on 10/29/2009 disclosing that they bought another 742,000 shares at an average price of about $.88 from October 8th to October 28th. This brings their ownership up to 4,178,000 shares or 7.7% of the company (up from 6.4% previously).
Finaciere De Sainte Marine, is a big investor in HPOL. They own over 14% of the company.
Up 79%. HOLD
IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.42 (adjusted for $.32 and $.16 dividends) (Was $2.07 before another $10,000 added and $2.15 before double up
Valuation $4.17 (was $4.73, $4.75, $4.12, $4.99, $4.30, $4.09)
Up $.05 at $1.02
Huge volume last week. Either a big seller getting out, or the company buying back shares–or both. Whatever the reason, the selling pressure seemed to pass, allowing a small rise in the price.
IPASS announced a 80 person layoff in November. This is about 18% of their workforce.
They will take a $4.6 million charge in Q4 and this will supposedly save about $8.6 million a year. We think this is a good move in light of the economy and last quarters loss.
Earning out in November. Hmmmm. Revenues down 12% and they lost $6.1 million. Excluding “dial-up” revenues, revenues were still down 2.3%. $4.8 million of the loss was “one-time”. Apparently they figured out that they should have been charging sales taxes on some or all of their services. It took a state audit to turn this light on. This does not help with their credibility.
They also initiated a share buyback program of $10 million. Any buyback money not used will be dividended to shareholders in April 2010.
At September 30, they had $50 million in cash ($.81 per share) and our valuation fell a bit to $4.17.
Foxhill ownership is 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
Down 21%. 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) (6.5% dividend yield)
Valuation $18.89 (Was $17.09, $17.05, $14.51, $17.23, $18.36)
Up $.56 $4.92.
This is definitely a BUY.
CCA announced earnings in October. Revenues were up 8% to $15.3 million and they earned $.23 per share compared to $.16 last year. They also declared their $.07 quarterly dividend. Our valuation moved up slightly to $18.89 per share. Cash was $2.76 per share.
Down 11%. BUY
Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $3.78 (was $3.84, $3.80, $3.97, $4.18, $4.15)
Closed down $.13 at $1.85
Earnings out in November. Sales fell 15% to $13.5 million but they were still profitable and made $.03 per share. Our valuation fell $.06 to $3.78 per share and cash per share was $1.15.
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 4%. BUY
Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.73 (was $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.17 at $3.60
Earnings out in December. Sales fell 13% to $6.6 million (but increased from the $6.2 million last quarter) and they lost $600,000 or $.14 per share. Cash increased to $2.71 per share, and our valuation rose to $11.73 (still about 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 8%. HOLD
Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.16-(Was $2.59, $3.69 before adding another $10,000 each time)
Valuation NA-Dividend yield play
Closed up $.06 at $1.41
Current dividend yield–suspended
Earnings in November. Good again. Revenues up 57% to $37.6 million. Made $6.2 million or $.12 per share excluding a $8 million “mark-to-market” derivative charge. Everything else seems good.
CGM (their main customer continues to struggle. Trying to restructure their debt, get funding from the French goverment etc. We would think that GSL would be the last “supplier” to CGM to feel any effects of this due to CGM’s equity ownership in GSL.
Big announcements in late August. They finally made a deal with their bank and survived the ordeal. They had the rest of their credit line canceled, were allowed to take delivery of a used ship, no dividend until the loan to ship value is less than 75% and they have to start prepaying their loans. CGM has to stay in as an equity holder until at least November 30, 2010. Meanwhile their business is great. This is definitely going to be long-term though.
Could be the buy of a lifetime if the ecomomy–and ship prices recover.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 36%. HOLD
DIVX Inc. (DIVX-Recommended 5/26/2009)
Valuation-$8.57 (Was $8.49, $9.24)
Closed unchanged at $5.24.
Earnings out in November. Sales fell 32% to $16.6 million. They lost about $2.5 million, excluding a $9.5 million litigation gain. Cash rose to $143 million or $4.34 per share. On a non-GAAP basis they lost about $300,000.
Our valuation rose to $8.57 per share.
We will hang on to this one for a while more.
Up 6%. HOLD
OB-abies (Bulletin Board Listed Stocks)
As proven by OPTIO, patience is necessary with these stocks, especially in this Market.
ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
NEW Valuation $5.74 (was $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.80 unchanged.
Earnings out in December. Sales up 35% to $5.5 million and they made $162,000 or $.02 per share.
Our valuation backed off a bit to $5.74 per share. No one cares.
Wake up management–you have a great little company here worth 5-6X 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 $2.38 (was $2.57, $2.81, $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 $.57, down $.03.
Earnings out in November. Sales down 28% to $7.8 million, but they still made $127,000 of income. Our valuation fell to $2.38 per share, which is still 4X the current price. Market cap is about $9 million. AVSO sales are over $30 million, with decent margins, profitable and with $.11 in net cash.
Down 28%. HOLD.
CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.93 (Was $.75, $.85, $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 $.095 unchanged. Closed at $.08.
At a $2 million market cap, this is stupidly cheap. Their itellectual property is probably worth 10 times this price. They need to liquify this value somehow.
Earnings out in November. Sales down 54% to $3.6. million (down from $4.1 in Q2) and they lost $320,000 (essentially breakeven excluding depreciation). They blame the sales decline on currency issues and the economy. Our valuation rose to $.93 ( 11 times the current selling price) as losses were reduced and margins gapped up over 70%.
Their VOIP business continues to struggle and lose money, sales were $112,000 down from $188,000 last quarter. They VOIP loss was $675,000. They also spent $129,000 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 65%. HOLD
Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.00 (Was $1.84, $1.56, $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $1.30, up $.15.
Lotus is up 550% from the stupidly low price at the end of 2008.
Remember our $2 valuation is a true “value” calculation. EPS is not given much weight. But LTUS looks like it will earn $.40 this year, fully diluted. So at even a measly 8 multiple we could see over $3 per share.
Earnings out in November. Sales fell only 13% from last year, but they were up from Q2. They made $5.5 million in profit or $.11 per share. For the nine months they have now earned $.28 per share. Our valuation headed back up again to $2.00 per share. Also selling under 3 times earnings.
Lotus announced in February 2009 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.
UP 55%. BUY