Cheap Stocks, 5/27/2011 Update

Up .5% last week, which was not bad compared to the market averages

AVSO, CCUR, RIMG, LXK and MTSL are our favorites.

The DOW was down .6% last week, NASDAQ was down .2% and the S+P 500 was down .2%. The Russell 3000 and the Wilshire 5000 were both even.

For the year so far, we are up 5.4%. The DOW is up 7.5%, NASDAQ is up 5.4%, S+P 500 is up 5.8%, the Russell 3000 is up 6.4% and the Wilshire is up 6.0%.

Last week we went 11 stocks up, 9 down and 1 even. Since inception we are now 55 stocks up and 11 down for a 83.3% winning percentage (80% is our target win %).

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%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)

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 46 stocks that we closed out since 2006 (42 were winners) the average net gain was 34%.

Rimage. (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $26.45
Closed up $.26 at $14.46
$12.33 a share in cash, profitable and pays a $.10 quarterly dividend.
Up 2%-BUY

Lexmark International. (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $63.99
Closed up $.81 at $29.61
Apparently some takeover rumors circulating last week.
Up 3%-BUY

MER Telemanagement. (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.50
Valuation $5.11
Closed up $.26 at $1.51
$.60 a share in cash and profitable.
Up 1%-BUY

Rosetta Stone Inc. (NYSE-RST)-Recommended 3/3/2011)
Buy Price-$12.62
Valuation $28.85 (Was $31.14)
Closed down $.74 at $13.75
Earnings out in May. Not good, but the stock rose. This is what can happen with a stock that is followed by Wall Street. Our valuation fell to $28.85. Revenue fell 10% to $57 million and they lost $9 million compared to a profit of $5 million last year. Still not a sell based on our valuation, but not going in the right direction.
Up 9%-HOLD

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $2.63 (Was $2.97)
Closed at $.82, down $.08
Latest earnings were not good. Sales fell 7% and they lost $2.3 million or $.04 per share. They hired a turnaround firm to tell them how to fix the company. Probably paid a ton of money for it too. Sell the company. Could probably get $2 a share for it. Teetering on a sell here.
Our valuation fell to $2.63 per share.
Down 11%-HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $18.54 (was $15.99)
Closed up $.14 at $6.20
Looks like CCUR got a sympathy boost on Friday as SEAC (competitor) takeover rumors circulated.
Latest earnings report was great. Sales up 26% and they made $.06 per share. They have $3.41 per share in net cash. Our valuation spiked to $18.54 per share.
In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.
Up 22%-BUY

SuperGen Inc. (NASDAQ-SUPG)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $5.21 (was $4.89, $4.37, $3.48)
Closed up $.27 at $3.26
Latest earnings report was good. Sales up 19% to $17.1 million and they made $.09 a share. Our valuation moved up to $5.21 and they have $2.05 per share in cash. This looks like a steal at these price levels, but their is uncertainty caused by their recently announced acquisition.
SUPR announced in April that they were buying Astex, a UK company for $55 million in cash and stock. They will pay $25 million cash upfront and the remaining $30 million in cash or stock over 30 months. The deal is expected to close in July. The big, black mark on SUPG was that their drug pipeline was weak. From what we can tell, Astex is nothing but pipeline. They do not appear to have any commercial products and no close-in products; however, they have collaboration deals with a number of drug giants and have collected substantial milestone payments from them. There are $2 BILLION of potential milestone payments down the road. The combined company will have $120 million of cash, but we suspect the profitability will be gone. There is not enough public information at this point to update our valuation for this transaction.
Up 41%-HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $4.99-(was $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.08 at $2.18
Earnings out in May. Sales up 24% but they still lost $1.1 million or $.10 per share. Much better than the $1.9 million loss last year.
Cash per share fell to $1.04 from $1.73 as accounts receivables rose, but our valuation rose to $4.99 as sales rose significantly. We think we will hold on to this one a bit longer and see if they can get to a profit.
Down 19% HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$5.67 (was $7.36, $7.23, $7.31, $6.82, $6.81)
Closed up $.10 at $3.27
Starboard Value Fund filed a 13D/A last week disclosing that they had upped their stake to 8.5%. They bought 1.2 million shares in May (through the 19th), at prices of $3.15 to $3.26.
Latest earning report was not good. Sales fell 3%, but they lost a whopping $6.8 million or $.07 per share. Cash rose to $1.60 per share. Margin fell, sales fell and they lost money, so our valuation dropped to $5.67 per share. Next quarter guidance was decent. $80-$85 million in sales and non-GAAP earnings per share of $.03-$.05. If they can hit this, we think the price will rebound back to the $4 per share level.
CFO resigned in March. Always makes stockholders jittery, but they also got a new CEO in October last year, so it is not unusual for a CFO to go, shortly after a new CEO comes in. They hired an interim CFO in March while they look for a permanent one.
EXTR entered a settlement agreement with Ramius (Ramius owns 6.4% of EXTR). Declassify the Board, add a Ramius Director and the Ramius Director must be on any committee that reviews “strategic alternatives”. Pushing to sell EXTR obviously.
Still a cheap stock.
Up 3% HOLD

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$13.50
Valuation $21.21-(was $22.95, $22.31, $21.77, $23.37, $27.15)
$13.57 per share in cash.
Closed down $.25 at $13.50.
Latest earnings report was so-so. Sales dropped from $5.9 million to $5.1 million and they lost $393,000 or $.09 per share. Cash per share was $13.57. Our valuation fell to $21.21.
Still trading below cash value. If we see any substantive results from their social networking products, $20 per share should be easy.
EVEN. HOLD

Ninetowns Internet Technology (NINE-Recommended 1/25/2010)
Buy Price-$1.53
Valuation-$3.54 (Was $3.54, $3.19)
$2.88 per share in cash
Closed at $1.41, up $.01.
NINE announced in April they are going into the real estate business in China, by buying 141,000 sq. meters of land rights for $39 million (out of their $100 million or so). They plan to develop this land for mixed use residential and commercial. Have to wait on this one, as their current business was not doing much, but not sure we want to be in the real estate business.
Earning out in October. Sales were $5.67 million for the first 6 months of 2010 and they lost $1 million. Cash rose to $2.88 per share and our valuation stayed at $3.54. Only doing about $10 million a year in sales, but still trading way below (50%) cash value.
Down 8%. HOLD

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price-$1.68
Valuation $5.73-(Was $4.38, $4.44, $5.15)
Closed down $.05 at $1.79.
Earnings out in November. Not bad. Cash rose to $2.33 per share and they made $.08 per share. Our valuation jumped to $5.73. Not bad at all. New game coming out in Korea this quarter (War of Gods), although Ragnarok 2 is delayed until at least Q2 2011.
Up 7%. HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed up $.12 at $2.37.
Earnings out in May. Revenues about $7.4 million for the quarter compared to $6.4 million last year and they lost $10 million. Cash was $41 million before counting about $15 million of cash received in April from the sale of stock.
AEZS announced a new partnership for perifosine in Japan. They got $8 million upfront and up to another $60 million in the future. Plus AEZS gets to sell the compound to the company and gets double digit royalties. Not a bad deal.
Riding the tail of Kerx and perifosine, new orphan drug approval from the FDA and a lot of investor interest in their pipeline of cancer products.
Speculative for sure.
Up 67% 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 –$9.00
Closed down $.06 at $5.94
Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.
In latest quarterly report, Sales grew 5% to $30.4 million and they lost $154,000 (breakeven per share). They are projecting sales of $122-$127 million for the year. No clear guidance on net income though.
SPNC got an approval in Japan in April to sell their lead locking device (used for removal of pacemaker and defibrillator leads). They also announced the start of a study on PAD (peripheral arterial disease). It is expected to last about 6 months.
Hmmm, CFO and 2 other officers got “change of control” agreements in March. Hope they actually mean something!
13D filed in November 2010. Paragon Assoc. disclosed a 2 million share (6%) ownership purchased at $5.16 per share. Maybe we have a catalyst finally to push management to do something (like sell this dog).
The company has $33 million in cash ($1.01 per share), no debt and is growing about 5% a year.
Up 5%. HOLD.

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $16.07 (was $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Closed down $.28 at $11.61
Earnings reported in May. Good again. Sales up 8% and they made $.17 per share up from $.11 last year. Our valuation rose to $16.07 per share. They have $3.66 per share in cash.
MEDW announced what sounded like a nice military contract win in April. No details though, so hard to get too excited. Hopefully this and the acquisition will keep their sales and earnings momentum going.
MEDW announced another acquisition in March. No details of what it cost, or what it will do to earnings.
It has been 12 months since they hired their investment bankers. At this point we don’t think anything is going to happen with a sale of the company..
Constellation Software owns 21.8%, but put itself up for sale recently. Should have bought Constellation stock, it has tripled since they got into MEDW!
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 83%. HOLD

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $12.42 (was $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed down $.25 at $2.35
Earnings in May. Sales actually were up to $8.4 million versus $8.1 million last year, but they fell from $9.6 sequentially. They lost $89,000 this quarter compared to a profit of $1.299 million last year. Disappointing compared to the sequential gains in sales and profits of recent quarters. Should have sold this when it traded over $6. Our valuation fell to $12.42 and cash per share fell to $.73.
Down 71%. HOLD

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
NEW Valuation $13.19 (was $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.03 at $4.60
Earnings out last week. Sales flat at $6.8 million and they lost $138,000 or $.04 per share. Their recently installed CEO was also let go last week. After plunging to the low $4’s, the stock rebounded to end the week slightly up. Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
ANGN also recently announced a distribution contract with Premier Purchasing Partners, where Premiers 2,500 hospital customers and 73,000 other customers can buy ANGN’s products at a discount. Our valuation fell to
Up 20% BUY

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

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 $5.39 (was $4,86, $5.60, $5.73, $5.54, $5.74, $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 $.65 up $.15.
Earnings out in March. Sales down 2% to $5.238 million, operating income was $254,000 and they made $.02 per share. Our valuation jumped back up to $5.39 on higher than expected margins.
Wake up management–you have a great little company here worth 7X what it is selling for.
Now down 60%. BUY. Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.60 (was $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $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 $.69, down $.03.
Earnings out in May. Sales were $27.4 million and they made $.04 a share. Our valuation jumped to $2.60 a share. Hopefully another quarter or two of positive results will get this over $1.50.
Down 13%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.21 (Was $.71, $.83, $.88 $.96, $.93, $.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 $.09, closed at $.08.
The CEO has been buying shares. About 39,000 purchased on the open market in filings last week.
Earnings out in March. Sales were $4.37 million and they actually made $200,000 of net income! Our valuation spiked back up to $1.21. They also announced that they signed a contract with a customer for $6 million most of which will come in Q2. Their VOIP business did $900,000 of revenue in 2010 compared to $150,000 in 2009.
At a $3 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.
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 67%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$2.43 (Was $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)
Closed at $.69, down $.05
Earnings in May. Sales down 12% and they made $.08 versus $.18 last year. Our valuation plunged to $2.43 per share on sales, margins and income declines. This quarter is typically their weakest sales quarter. Not great guidance either in amounts or specifics, other than this will be a “transitional year” as they get their buildings done. We still think this will e a big winner in the end, but it looks like it will take another year to find out.
Ghost stories of ALL Chinese reverse merger companies being shams continue to spook stockholders. We don’t think LTUS is one of them.
.Looks like the Mongolian land story has shifted AGAIN. Now they intend to keep some of the land and build a distribution facility on it and trade the excess land for the new building to preserve about $6 million a year of tax benefits they are getting. The move into the Beijing building is delayed also–till sometime near the end of the year. This delay will keep 2011 sales and earning flat to slightly down.
When the Beijing building is complete, they expect to have invested a total of $48 million ($36 million already spent) and that based on current market values, the building will be worth over $100 million. This plus the Mongolian land are worth 3 times the current market cap of LTUS.
Down 59%. HOLD

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Buy Rimage @ $14.20

Rimage Corporation (NASDAQ-RIMG)
Valuation-$26.45
Price May 24, 2011-$14.20

RIMG is trading about $.20 above its 53 week low. It has $12.33 a share in net cash, is making money and pays a $.10 quarterly dividend for a 2.8% yield. Guidance for the year is revenues of $80-85 million and earnings of $.55-$.65 per share.

Not in an exciting business, but a new joint venture in China seems to be fueling some sales growth opportunities and a virtual publishing initiative sound interesting.

Not much downside here with the huge cash cushion. Any signs of sales growth should propel the stock to $20. Cash is 87% of the market cap.

Average trading volume is about 24,000 million shares a day, so patience is required.

About Rimage Corporation
Rimage Corporation (www.rimage.com) is the world’s leading provider of workflow-integrated digital publishing solutions that produce CD/DVD/Blu-ray Discs™ with customized content and durable color or monochrome disc labeling. Key vertical markets and applications for our systems include video workflows, retail, medical imaging and law enforcement. In addition, we have launched a multi-year process aimed at transforming Rimage into a higher-performing business. Our comprehensive strategy involves strengthening Rimage’s core disc publishing business; generating new revenue streams by leveraging our core capabilities and transitioning from a hardware supplier into a provider of total solutions; and identifying and investing in future opportunities in adjacent markets with strong growth potential. Headquartered in Minneapolis, Minnesota, Rimage is a global business with operations in North America, Europe and Asia.

Buy Lexmark International –$28.80

Lexmark International Inc. (NYSE-LXK)
Valuation-$63.99
Price May 24, 2011-$28.80

OMG, another NYSE listed pick!

When you can find high quality stocks on the NYSE trading at less than 50% of our valuation formula, you gotta buy them.

LXK has disappointed analysts with non-growth in earnings, causing it to fall to this 52 weeks low . Sales in the March quarter were down 1% at $1.034 billion and EPS was $1.14 versus $1.35 last year (both non-GAAP numbers). Guidance for Q2 was tepid also at about $1.00 per share in earnings versus $1.23 last year.

Never mind about these numbers. LXK is still looking to make over $4.00 per share in earnings this year and is trading at just over 7 times earnings. Its market cap is $2.4 billion, well within the affordability of PE firms and lots of other strategic buyers.

LXK also has about $8 per share in net cash-over 25% of its market cap. We would not be surprised to see a buyout in the future if it stays at these price levels.

Average trading volume is over 1 million shares a day.

About Lexmark International, Inc. (NYSE:LXK – News) provides businesses of all sizes with a broad range of printing and imaging products, software, solutions and services that help customers to print less and save more. Perceptive Software, a stand-alone software business within Lexmark, is a leading provider of enterprise content management software that helps organizations easily manage the entire lifecycle of their documents and content, simplifying their business processes, and fueling greater operational efficiency. In 2010, Lexmark sold products in more than 170 countries and reported more than $4 billion in revenue.

Cheap Stocks, 5/20/2011 Update

OK week for us. We rebounded 2% on the PRM buyout this past Monday (56% gain in a week).

AVSO, CCUR, and MTSL are our favorites.

The DOW was down .7% last week, NASDAQ was down .9% and the S+P 500 was down .3%. The Russell 3000 and the Wilshire 5000 were both down about .4%.

For the year so far, we are up 4.9%. The DOW is up 8.1%, NASDAQ is up 5.7%, S+P 500 is up 6.0%, the Russell 3000 is up 6.4% and the Wilshire is up 6.0%.

Last week we went 10 stocks up, 9 down and 1 even. Since inception we are now 52 stocks up and 14 down for a 78.8% winning percentage (80% is our target win %).

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%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)

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 46 stocks that we closed out since 2006 (42 were winners) the average net gain was 34%.

MER Telemanagement. (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.50
Valuation $5.11
Closed down $.25 at $1.25
$.60 a share in cash and profitable.
Looks like we got in a tad too early on this. Averaging down is ok on this one.
Down 17%

Rosetta Stone Inc. (NYSE-RST)-Recommended 3/3/2011)
Buy Price-$12.62
Valuation $28.85 (Was $31.14)
Closed up $.01 at $14.49
Earnings out in May. Not good, but the stock rose. This is what can happen with a stock that is followed by Wall Street. Our valuation fell to $28.85. Revenue fell 10% to $57 million and they lost $9 million compared to a profit of $5 million last year. Still not a sell based on our valuation, but not going in the right direction.
Up 15%-HOLD

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $2.63 (Was $2.97)
Closed at $.90, up $.05
Latest earnings were not good. Sales fell 7% and they lost $2.3 million or $.04 per share. They hired a turnaround firm to tell them how to fix the company. Probably paid a ton of money for it too. Sell the company. Could probably get $2 a share for it. Teetering on a sell here.
Our valuation fell to $2.63 per share.
Down 2%-HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $18.54 (was $15.99)
Closed up $.02 at $6.06
Skellig filed another 13D/A last week. This time urging a $7.5 million Dutch Auction for CCUR’s stock be implemented by the company. I don’t like stock buy-backs, but anything that will bring attention to this company is probably a good thing. I would prefer a special dividend. Skellig did talk glowingly about the company’s future prospects.
Latest earnings report was great. Sales up 26% and they made $.06 per share. They have $3.41 per share in net cash. Our valuation spiked to $18.54 per share.
In April the company announced that it would not do the stock buy back that Skellig was suggesting. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.
Up 19%-BUY

SuperGen Inc. (NASDAQ-SUPG)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $5.21 (was $4.89, $4.37, $3.48)
Closed up $.30 at $2.99
Latest earnings report was good. Sales up 19% to $17.1 million and they made $.09 a share. Our valuation moved up to $5.21 and they have $2.05 per share in cash. This looks like a steal at these price levels, but the uncertainty caused by their recently announced acquisition discussed below is keeping a cap on the stock price.
SUPR announced in April that they were buying Astex, a UK company for $55 million in cash and stock. They will pay $25 million cash upfront and the remaining $30 million in cash or stock over 30 months. The deal is expected to close in July. The big, black mark on SUPG was that their drug pipeline was weak. From what we can tell, Astex is nothing but pipeline. They do not appear to have any commercial products and no close-in products; however, they have collaboration deals with a number of drug giants and have collected substantial milestone payments from them. There are $2 BILLION of potential milestone payments down the road. The combined company will have $120 million of cash, but we suspect the profitability will be gone. There is not enough public information at this point to update our valuation for this transaction.
Up 30%-HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $4.99-(was $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.05 at $2.10
Earnings out in May. Sales up 24% but they still lost $1.1 million or $.10 per share. Much better than the $1.9 million loss last year.
Cash per share fell to $1.04 from $1.73 as accounts receivables rose, but our valuation rose to $4.99 as sales rose significantly. We think we will hold on to this one a bit longer and see if they can get to a profit.
Down 22% HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$5.67 (was $7.36, $7.23, $7.31, $6.82, $6.81)
Closed down $.03 at $3.17
Latest earning report was not good. Sales fell 3%, but they lost a whopping $6.8 million or $.07 per share. Cash rose to $1.60 per share. Margin fell, sales fell and they lost money, so our valuation dropped to $5.67 per share. Next quarter guidance was decent. $80-$85 million in sales and non-GAAP earnings per share of $.03-$.05. If they can hit this, we think the price will rebound back to the $4 per share level.
CFO resigned in March. Always makes stockholders jittery, but they also got a new CEO in October last year, so it is not unusual for a CFO to go, shortly after a new CEO comes in. They hired an interim CFO in March while they look for a permanent one.
EXTR entered a settlement agreement with Ramius (Ramius owns 6.4% of EXTR). Declassify the Board, add a Ramius Director and the Ramius Director must be on any committee that reviews “strategic alternatives”. Pushing to sell EXTR obviously.
Still a cheap stock.
Down .3% HOLD

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$13.50
Valuation $21.21-(was $22.95, $22.31, $21.77, $23.37, $27.15)
$13.57 per share in cash.
Closed up $.53 at $13.75.
Latest earnings report was so-so. Sales dropped from $5.9 million to $5.1 million and they lost $393,000 or $.09 per share. Cash per share was $13.57. Our valuation fell to $21.21.
Still trading below cash value. If we see any substantive results from their social networking products, $20 per share should be easy.
Up 2%. HOLD

Ninetowns Internet Technology (NINE-Recommended 1/25/2010)
Buy Price-$1.53
Valuation-$3.54 (Was $3.54, $3.19)
$2.88 per share in cash
Closed at $1.40, down $.02.
NINE announced in April they are going into the real estate business in China, by buying 141,000 sq. meters of land rights for $39 million (out of their $100 million or so). They plan to develop this land for mixed use residential and commercial. Have to wait on this one, as their current business was not doing much, but not sure we want to be in the real estate business.
Earning out in October. Sales were $5.67 million for the first 6 months of 2010 and they lost $1 million. Cash rose to $2.88 per share and our valuation stayed at $3.54. Only doing about $10 million a year in sales, but still trading way below (50%) cash value.
Down 8.5%. HOLD

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price-$1.68
Valuation $5.73-(Was $4.38, $4.44, $5.15)
Closed up $.02 at $1.84.
Earnings out in November. Not bad. Cash rose to $2.33 per share and they made $.08 per share. Our valuation jumped to $5.73. Not bad at all. New game coming out in Korea this quarter (War of Gods), although Ragnarok 2 is delayed until at least Q2 2011.
Up 9.5%. HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed down $.04 at $2.25.
Earnings out last week. Revenues about $7.4 million for the quarter compared to $6.4 million last year and they lost $10 million. Cash was $41 million before counting about $15 million of cash received in April from the sale of stock.
AEZS announced a new partnership for perifosine in Japan. They got $8 million upfront and up to another $60 million in the future. Plus AEZS gets to sell the compound to the company and gets double digit royalties. Not a bad deal.
Riding the tail of Kerx and perifosine, new orphan drug approval from the FDA and a lot of investor interest in their pipeline of cancer products.
Speculative for sure.
Up 58% 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 –$9.00
Closed down $.21 at $6.00
Paragon filed a 13D/A last week disclosing they had upped their stake to 7%.
In latest quarterly report, Sales grew 5% to $30.4 million and they lost $154,000 (breakeven per share). They are projecting sales of $122-$127 million for the year. No clear guidance on net income though.
SPNC got an approval in Japan in April to sell their lead locking device (used for removal of pacemaker and defibrillator leads). They also announced the start of a study on PAD (peripheral arterial disease). It is expected to last about 6 months.
Hmmm, CFO and 2 other officers got “change of control” agreements in March. Hope they actually mean something!
13D filed in November 2010. Paragon Assoc. disclosed a 2 million share (6%) ownership purchased at $5.16 per share. Maybe we have a catalyst finally to push management to do something (like sell this dog).
The company has $33 million in cash ($1.01 per share), no debt and is growing about 5% a year.
Up 6%. HOLD.

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $16.07 (was $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Closed up $.14 at $11.89
Earnings reported in May. Good again. Sales up 8% and they made $.17 per share up from $.11 last year. Our valuation rose to $16.07 per share. They have $3.66 per share in cash.
MEDW announced what sounded like a nice military contract win in April. No details though, so hard to get too excited. Hopefully this and the acquisition will keep their sales and earnings momentum going.
MEDW announced another acquisition in March. No details of what it cost, or what it will do to earnings.
It has been 11 months since they hired their investment bankers, so it is about time for something to happen, hopefully more than the acquisition last week..
Constellation Software owns 21.8%.
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 88%. HOLD

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $12.42 (was $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed down $.06 at $2.60.
Earnings in May. Sales actually were up to $8.4 million versus $8.1 million last year, but they fell from $9.6 sequentially. They lost $89,000 this quarter compared to a profit of $1.299 million last year. Disappointing compared to the sequential gains in sales and profits of recent quarters. Should have sold this when it traded over $6. Our valuation fell to $12.42 and cash per share fell to $.73.
Down 68%. HOLD

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.60 (was $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.17 at $4.57
Next earnings due out May 26th, after the market close. ANGN announced a $2 million share buy-back in April. Not too exciting, but should provide some price support.
ANGN also announced a distribution contract with Premier Purchasing Partners, where Premiers 2,500 hospital customers and 73,000 other customers can buy ANGN’s products at a discount.
Earnings out in March. Not bad we thought. Sales up 7% to $7.1 million and they cut their weak quarter loss from $.20 a share to an adjusted profit of $.02 a share (excluding a severance charge for their ex-CEO). Our valuation fell to $13.60, but again this is their seasonally weak quarter, so we are not upset about it.
Up 20% BUY

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),
Valuation $5.39 (was $4,86, $5.60, $5.73, $5.54, $5.74, $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 $.50 down $.10.
Earnings out in March. Sales down 2% to $5.238 million, operating income was $254,000 and they made $.02 per share. Our valuation jumped back up to $5.39 on higher than expected margins.
Wake up management–you have a great little company here worth 7X what it is selling for.
Now down 69%. BUY. Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
NEW Valuation $2.60 (was $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $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 $.72, up $..17.
Earnings out last week. Sales were $27.4 million and they made $.04 a share. Our valuation jumped to $2.60 a share. Hopefully another quarter or two of positive results will get this over $1.50.
Down 9%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.21 (Was $.71, $.83, $.88 $.96, $.93, $.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 $.09, closed at $.08.
Earnings out in March. Sales were $4.37 million and they actually made $200,000 of net income! Our valuation spiked back up to $1.21. They also announced that they signed a contract with a customer for $6 million most of which will come in Q2. Their VOIP business did $900,000 of revenue in 2010 compared to $150,000 in 2009.
At a $3 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.
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 67%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
NEW Valuation-$2.43 (Was $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)
Closed at $.74, down $.11
Earnings last week. Sales down 12% and they made $.08 versus $.18 last year. Our valuation plunged to $2.43 per share on sales, margins and income declines. This quarter is typically their weakest sales quarter. Not great guidance either in amounts or specifics, other than this will be a “transitional year” as they get their buildings done. We still think this will e a big winner in the end, but it looks like it will take another year to find out.
Ghost stories of ALL Chinese reverse merger companies being shams continue to spook stockholders. We don’t think LTUS is one of them.
.Looks like the Mongolian land story has shifted AGAIN. Now they intend to keep some of the land and build a distribution facility on it and trade the excess land for the new building to preserve about $6 million a year of tax benefits they are getting. The move into the Beijing building is delayed also–till sometime near the end of the year. This delay will keep 2011 sales and earning flat to slightly down.
When the Beijing building is complete, they expect to have invested a total of $48 million ($36 million already spent) and that based on current market values, the building will be worth over $100 million. This plus the Mongolian land are worth 3 times the current market cap of LTUS.
Down 56%. HOLD

BUY MTSL @ $1.50

MER Telemanagement Soltions Ltd (NASDQ-MTSL)Valuation-$5.11
Price May 17, 2011-$1.50

We have watched MER for a long time. Trading in it is “thin” and their financial results have been boring. However, the same could be said about PRM and another Israeli stock that I bought personally, but unfortunately did not recommend on this blog-Top Image Systems (NASDAQ-TISA) which recently spiked from $1.30 to $2.30 in a day after a decent earnings report.

MER’s recent quarter (March 31) was positive, they made $.04 per share. Revenues were up about 11% and they had $.60 a share in cash. They only have about 4.5 million shares outstanding.

MER stock price was as high as $2 as recently as early April and was over $3 in December of 2010 on huge volume.

This will likely be very boring—until it’s not.

Average trading volume is about 25,000 shares a day, so patience on building a position is required.

About MERMer Telemanagement Solutions Ltd. (MTS) is a worldwide provider of innovative solutions for comprehensive telecommunications expense management (TEM) used by enterprises, and for business support systems (BSS) used by information and telecommunication service providers.
Since 1984, MTS Telecommunications’ expense management solutions have been used by thousands of enterprises and organizations to ensure that their telecommunication services are acquired, provisioned, and invoiced correctly. In addition, the MTS’s Application Suite has provided customers with a unified view of telecommunication usage, proactive budget control, personal call management, employee cost awareness and more.
AnchorPoint TEM solutions enable enterprises to gain visibility and control of strategic assets that drive key business processes and crucial competitive advantage. The AnchorPoint’s software, consulting and managed services solutions — including integrated Invoice, Asset, and Usage Management and Business Analytics tools — provide professionals at every level of the organization with rapid access to concise, actionable data.
MTS’s solutions for Information and Telecommunication Service Providers are used worldwide by wireless and wireline service providers for interconnect billing, partner revenue management and for charging and invoicing their customers. MTS has pre-configured solutions to support emerging carriers of focused solutions (e.g. IPTV, VoIP, WiMAX, MVNO) to rapidly install a full-featured and scaleable solution.
Headquartered in Israel, MTS markets its solutions through wholly owned subsidiaries in the United States, Hong Kong and The Netherlands as well as through OEM partnerships with Siemens, Phillips, NEC and other vendors.

Cheap Stocks, May 16, 2011 Update

Bad week for us. We were down 4.8% last week on the heels of unexplained falls in MEDW and RWWI.OB and less than stellar quarterly results from VTRO.

AVSO, SUPG, CCUR, PRM and LTUS.ob are our favorites.

The DOW was down .3% last week, NASDAQ was even and the S+P 500 was down .2%. The Russell 3000 and the Wilshire 5000 were both down about .1%.

For the year so far, we are up 2.9%. The DOW is up 8.9%, NASDAQ is up 6.6%, S+P 500 is up 6.4%, the Russell 3000 is up 6.8% and the Wilshire is up 6.4%.

Last week we went 8 stocks up, 9 down and 2 even. Since inception we are now 50 stocks up and 14 down for a 78.1% winning percentage (80% is our target win %).

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%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%

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 45 stocks that we closed out since 2006 (41 were winners) the average net gain was 33%.

Primedia Inc. (NYSE-PRM)-Recommended 5/9/2011)
Buy Price-$4.49
Valuation $8.04
Closed down $.11 at $4.38
Down 2%-BUY

Rosetta Stone Inc. (NYSE-RST)-Recommended 3/3/2011)
Buy Price-$12.62
NEW Valuation $28.85 (Was $31.14)
Closed up $.73 at $14.48
Earnings out last week. Not good, but the stock rose. This is what can happen with a stock that is followed by Wall Street. Our valuation fell to $28.85. Revenue fell 10% to $57 million and they lost $9 million compared to a profit of $5 million last year. Still not a sell based on our valuation, but not going in the right direction.
Up 15%-HOLD

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92 Valuation $2.63 (Was $2.97)
Closed at $.85, down $.01
Latest earnings were not good. Sales fell 7% and they lost $2.3 million or $.04 per share. They hired a turnaround firm to tell them how to fix the company. Probably paid a ton of money for it too. Sell the company. Could probably get $2 a share for it. Teetering on a sell here.
Our valuation fell to $2.63 per share.
Down 8%-HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $18.54 ( was $15.99)
Closed down $.09 at $6.04
Latest earnings report was great. Sales up 26% and they made $.06 per share. They have $3.41 per share in net cash. Our valuation spiked to $18.54 per share.
In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.
Up 19%-BUY

SuperGen Inc. (NASDAQ-SUPG)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $5.21 (was $4.89, $4.37, $3.48)
Closed up $.07 at $2.69
Latest earnings report was good. Sales up 19% to $17.1 million and they made $.09 a share. Our valuation moved up to $5.21 and they have $2.05 per share in cash. This looks like a steal at these price levels, but the uncertainty caused by their recently announced acquisition discussed below is keeping a cap on the stock price.
SUPR announced in April that they were buying Astex, a UK company for $55 million in cash and stock. They will pay $25 million cash upfront and the remaining $30 million in cash or stock over 30 months. The deal is expected to close in July. The big, black mark on SUPG was that their drug pipeline was weak. From what we can tell, Astex is nothing but pipeline. They do not appear to have any commercial products and no close-in products; however, they have collaboration deals with a number of drug giants and have collected substantial milestone payments from them. There are $2 BILLION of potential milestone payments down the road. The combined company will have $120 million of cash, but we suspect the profitability will be gone. There is not enough public information at this point to update our valuation for this transaction.
Up 17%-HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
NEW Valuation $4.99-(was $3.79, $3.87, $5.03, $5.98, $7.13)
Closed down $.17 at $2.05
Earnings out last week. Sales up 24% but they still lost $1.1 million or $.10 per share. Much better than the $1.9 million loss last year.
Cash per share fell to $1.04 from $1.73 as accounts receivables rose, but our valuation rose to $4.99 as sales rose significantly. We think we will hold on to this one a bit longer and see if they can get to a profit.
Down 24% HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$5.67 (was $7.36, $7.23, $7.31, $6.82, $6.81)
Closed up $.02 at $3.20
Latest earning report was not good. Sales fell 3%, but they lost a whopping $6.8 million or $.07 per share. Cash rose to $1.60 per share. Margin fell, sales fell and they lost money, so our valuation dropped to $5.67 per share. Next quarter guidance was decent. $80-$85 million in sales and non-GAAP earnings per share of $.03-$.05. If they can hit this, we think the price will rebound back to the $4 per share level.
CFO resigned in March. Always makes stockholders jittery, but they also got a new CEO in October last year, so it is not unusual for a CFO to go, shortly after a new CEO comes in. They hired an interim CFO in March while they look for a permanent one.
EXTR entered a settlement agreement with Ramius (Ramius owns 6.4% of EXTR). Declassify the Board, add a Ramius Director and the Ramius Director must be on any committee that reviews “strategic alternatives”. Pushing to sell EXTR obviously.
Still a cheap stock.
Up 1% HOLD

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$13.50
Valuation $21.21-(was $22.95, $22.31, $21.77, $23.37, $27.15)
$13.57 per share in cash.
Closed up $.32 at $13.22.
Latest earnings report was so-so. Sales dropped from $5.9 million to $5.1 million and they lost $393,000 or $.09 per share. Cash per share was $13.57. Our valuation fell to $21.21.
Still trading below cash value. If we see any substantive results from their social networking products, $20 per share should be easy.
Down 2%. HOLD

Ninetowns Internet Technology (NINE-Recommended 1/25/2010)
Buy Price-$1.53
Valuation-$3.54 (Was $3.54, $3.19)
$2.88 per share in cash
Closed at $1.42, up $.02.
NINE announced in April they are going into the real estate business in China, by buying 141,000 sq. meters of land rights for $39 million (out of their $100 million or so). They plan to develop this land for mixed use residential and commercial. Have to wait on this one, as their current business was not doing much, but not sure we want to be in the real estate business.
Earning out in October. Sales were $5.67 million for the first 6 months of 2010 and they lost $1 million. Cash rose to $2.88 per share and our valuation stayed at $3.54. Only doing about $10 million a year in sales, but still trading way below (50%) cash value.
Down 7%. HOLD

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price-$1.68
Valuation $5.73-(Was $4.38, $4.44, $5.15)
Closed up $.04 at $1.82.
Earnings out in November. Not bad. Cash rose to $2.33 per share and they made $.08 per share. Our valuation jumped to $5.73. Not bad at all. New game coming out in Korea this quarter (War of Gods), although Ragnarok 2 is delayed until at least Q2 2011.
Up 8%. HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed up $.04 at $2.29.
Earnings out in March. Revenues about $10 million for the quarter and $27.7 for the year. They only lost $2.7 for the quarter and lost $20.5 for the year. Cash was $33.9 million before counting about $14 million of cash received in the current quarter for royalty payments, their Japan deal and sale of stock.
AEZS announced a new partnership for perifosine in Japan. They got $8 million upfront and up to another $60 million in the future. Plus AEZS gets to sell the compound to the company and gets double digit royalties. Not a bad deal.
Riding the tail of Kerx and perifosine, new orphan drug approval from the FDA and a lot of investor interest in their pipeline of cancer products.
Speculative for sure.
Up 61% 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 –$9.00
Closed up $.23 at $6.21
In latest quarterly report, Sales grew 5% to $30.4 million and they lost $154,000 (breakeven per share). They are projecting sales of $122-$127 million for the year. No clear guidance on net income though.
SPNC got an approval in Japan in April to sell their lead locking device (used for removal of pacemaker and defibrillator leads). They also announced the start of a study on PAD (peripheral arterial disease). It is expected to last about 6 months.
Hmmm, CFO and 2 other officers got “change of control” agreements in March. Hope they actually mean something!
13D filed in November 2010. Paragon Assoc. disclosed a 2 million share (6%) ownership purchased at $5.16 per share. Maybe we have a catalyst finally to push management to do something (like sell this dog).
The company has $33 million in cash ($1.01 per share), no debt and is growing about 5% a year.
Up 9%. HOLD.

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $16.07 (was $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Closed down $1.34 at $11.75
No reason we can find for the decline last week. Disappointing though.
Earnings reported in May. Good again. Sales up 8% and they made $.17 per share up from $.11 last year. Our valuation rose to $16.07 per share. They have $3.66 per share in cash.
MEDW announced what sounded like a nice military contract win in April. No details though, so hard to get too excited. Hopefully this and the acquisition will keep their sales and earnings momentum going.
MEDW announced another acquisition in March. No details of what it cost, or what it will do to earnings.
It has been 10 months since they hired their investment bankers, so it is about time for something to happen, hopefully more than the acquisition last week..
Constellation now owns 21.8%.
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 86%. HOLD

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
NEW Valuation $12.42 (was $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed down $.80 at $2.66.
Earnings last week. Sales actually were up to $8.4 million versus $8.1 million last year, but they fell from $9.6 sequentially. They lost $89,000 this quarter compared to a profit of $1.299 million last year. Dissappointing compared to the sequential gains in sales and profits of recent quarters. Should have sold this when it traded over $6. Our valuation fell to $12.42 and cash per share fell to $.73.
Down 73%. HOLD

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.60 (was $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.01 at $4.74
Announced a $2 million share buy-back in April. Not too exciting, but should provide some price support.
ANGN also announced a distribution contract with Premier Purchasing Partners, where Premiers 2,500 hospital customers and 73,000 other customers can buy ANGN’s products at a discount.
Earnings out in March. Not bad we thought. Sales up 7% to $7.1 million and they cut their weak quarter loss from $.20 a share to an adjusted profit of $.02 a share (excluding a severance charge for their ex-CEO). Our valuation fell to $13.60, but again this is their seasonally weak quarter, so we are not upset about it.
Up 24% BUY

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),
Valuation $5.39 (was $4,86, $5.60, $5.73, $5.54, $5.74, $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 $.60 unchanged.
Earnings out in March. Sales down 2% to $5.238 million, operating income was $254,000 and they made $.02 per share. Our valuation jumped back up to $5.39 on higher than expected margins.
Wake up management–you have a great little company here worth 7X what it is selling for.
Now down 63%. BUY. Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.40 (was $1.90, $2.26 $3.07, $3.03, $2.38, $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 $.55, down $..17
Next earnings report Monday, May 16th, before the markets open.
Earnings out in February. Sales were $21.7 million and they made $.02 a share. Our valuation jumped back up to $2.40 a share. Trading at 28% of our valuation. Cheap.
RWWI announced a $5.6 million deal in January. Maybe new management will get the word out on Rand and at least get us over $1.
Down 31%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.21 (Was $.71, $.83, $.88 $.96, $.93, $.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 $.09, closed at $.08.
Earnings out in March. Sales were $4.37 million and they actually made $200,000 of net income! Our valuation spiked back up to $1.21. They also announced that they signed a contract with a customer for $6 million most of which will come in Q2. Their VOIP business did $900,000 of revenue in 2010 compared to $150,000 in 2009.
At a $3 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.
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 67%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$4.11 (Was $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)
Closed at $.85, down $.04
This is the Rodney Dangerfield of stocks. No respect whatsoever. Now trading at close to 1 1/2 times this years earnings! Ghost stories of ALL Chinese reverse merger companies being shams continue to spook stockholders. We don’t think LTUS is one of them.
Earnings in March. Surprise, they wrote off $6.8 million of development cost on the Mongolian property. Wham! Q4 sales were up 22% to $20 million. They made $.78 per share for the year after adjusting out the Mongolia write-off. Our valuation dropped to $4.11 per share on a slight drop in sales, lower income and more shares outstanding. Still a huge valuation gap.
Looks like the Mongolian land story has shifted AGAIN. Now they intend to keep some of the land and build a distribution facility on it and trade the excess land for the new building to preserve about $6 million a year of tax benefits they are getting. The move into the Beijing building is delayed also–till sometime near the end of the year. This delay will keep 2011 sales and earning flat to slightly down.
When the Beijing building is complete, they expect to have invested a total of $48 million ($36 million already spent) and that based on current market values, the building will be worth over $100 million. This plus the Mongolian land are worth 3 times the current market cap of LTUS. Oh yeah, then there is the $.80 in annual earnings. Think this is a buy?
Down 50%. BUY