Six weeks in a row of down markets. Death by a thousand cuts.
We were down 2.1% last week and are now just above water with a YTD gain of .6%.
The DOW was down 1.6% last week, NASDAQ was down 3.3% and the S+P 500 was down 2.2%. The Russell 3000 and the Wilshire 5000 were both down about 2.5%
AVSO, CCUR, RIMG, LXK and MTSL are our favorites.
For the year, the DOW is up 3.2%, NASDAQ is DOWN .3%, S+P 500 is up 1.1%, the Russell 3000 is up 1.2% and the Wilshire is up .9%.
Last week we went 8 stocks up and 13 down. Since inception we are now 49 stocks up and 17 down for a 74% winning percentage (80% is our target win %).
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)
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-CAW EVEN (excluding 2.5 years of dividends)
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 38%.
Rimage. (NASDAQ-RIMG)-Recommended 5/24/2011)
Closed down $.34 at $13.52
Now trading at $1.19 above cash value.
$12.33 a share in cash, profitable and pays a $.10 quarterly dividend.
Lexmark International. (NYSE-LXK)-Recommended 5/24/2011)
Closed down $1.29 at $26.81
MER Telemanagement. (NASDAQ-MTSL)-Recommended 5/17/2011)
Closed up $.04 at $1.40
$.60 a share in cash and profitable.
Rosetta Stone Inc. (NYSE-RST)-Recommended 3/3/2011)
Valuation $28.85 (Was $31.14)
Closed up $.15 at $13.50
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.
Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Valuation $2.63 (Was $2.97)
Closed at $.75, up $.05
CEO was booted last week and a turnaround guy made CEO. This is good news. He has sold his previous companies.
Latest earnings were not good. Sales fell 7% and they lost $2.3 million or $.04 per share. Our valuation fell to $2.63 per share.
Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Valuation $18.54 (was $15.99)
Closed down $.02 at $5.97
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%.
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 down $.30 at $2.90
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.
Performance Technology (PTIX-Recommended 3/30/2010)
Valuation $4.99-(was $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.11 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 up $.01 at $3.12
Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.
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 2% HOLD
Broadvision (BVSN-Recommended 3/16/2010)
Valuation $21.21-(was $22.95, $22.31, $21.77, $23.37, $27.15)
$13.57 per share in cash.
Closed down $.38 at $13.12.
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 3%. HOLD
Ninetowns Internet Technology (NINE-Recommended 1/25/2010)
Valuation-$3.54 (Was $3.54, $3.19)
$2.88 per share in cash
Closed at $1.38, 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 10%. HOLD
Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Valuation $5.73-(Was $4.38, $4.44, $5.15)
Closed down $.11 at $1.60.
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 Q3 2011.
Down 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)
Closed down $.14 at $2.28
Oppenheimer put a $5.50 price target in AEZS last week. Lost $.14 on that one.
Needham also gave AEZS a buy recommendation the prior week with a $5 price target.
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 60% 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 $.15 at $5.73
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 1%. 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 $.23 at $11.10
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 75%. 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 up $.07 at $2.24
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 73%. HOLD
Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
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 down $.01 at $4.27
Earnings out in June. 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. 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 12% 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 $.73 up $.08.
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 55%. 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 $.68, down $.04.
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 14%. 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 $.095, closed at $.08.
The CEO has been buying shares. About 39,000 purchased on the open market in filings in May.
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 $.57, down $.07
Relentless decline. We are teetering on doubling up on this whole position.
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 66%. HOLD