Cheap Stocks, 8/26/2011 Update

Big up week for the markets. Unfortunately we lagged the gains. We seem to hold on to gains a bit longer than the averages, but it also takes us a bit longer to catch back up.

We were up 2.5% last week and are now down 6.4% for the year.

The DOW was up 4.3% last week, NASDAQ was up 5.9% and the S+P 500 was up 4.7%. The Russell 3000 and the Wilshire 5000 were both up 5% for the week

AVSO, CCUR, EXTR, RIMG, MTSL and MITL are our favorites.

For the year, the DOW is down 2.5%, NASDAQ is down 6.5%, S+P 500 is down 6.4%, the Russell 3000 is down 7.1% and the Wilshire is down 7.4%.

Last week we went 9 stocks up, 10 down and 2 unchanged. Since inception we are now 50 stocks up and 19 down for a 73% 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)

2011-RST +12%

2011-NINE -10%

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 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)

Buy Price-$8.49

NEW Valuation $13.40 (Was $16.02)

Closed down $.15 at $7.71

Well this is the first earnings report that has really stunk up the place. Sales were down 23% to just under $47 million and they lost $22 million. Yuck. But it is not as bad as it seems. Cash and investments actually went up to $5.40 a share ($170 million) and if you exclude the GAAP non-cash BS and the inventory write down, the loss was “only” about $6 million. So we are trading at a market cap of about $75 million (excluding cash) for a $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation dived to $13.40, so we need to keep our eye on this one.

Down 9%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)

Buy Price- $3.36( Was $3.95 before $10,000 added)

Valuation $10.39

Closed up $.08 at $3.00

No reason that we can see for the decline other than the overall market.

Down 11%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)

Buy Price-$14.20

Valuation $25.63 (Was $26.45)

Closed up $.87 at $14.08

Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.

Their activist shareholder Arcadia Capital Management sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.

Down 1%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)

Buy Price-$28.80

Valuation $79.12 (Was $63.99)

Closed up $1.90 at $30.36

Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.

Up 5%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)

Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)

Valuation $5.61 (Was $5.11)

Closed up $.08 at $1.44

MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap.

Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). Our valuation jumped to $5.61 per share.

Up 1%, BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)

Buy Price-$.92

Valuation $2.63 (Was $2.97)

Closed at $.59, down $.11

New CEO is cleaning up. They are closing their Hong Kong, Singapore and Shanghai offices and downsizing their U.K. office. Their will be a restructuring charge in the September quarter of some amount. Nevertheless this will all help to reduce their losses going forward and get this ready to sell.

Old CEO was booted in June 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, still 4X the current price.

Down 36%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)

Buy Price-$5.08

Valuation $18.54 (was $15.99)

Closed down $.04 at $5.81

Next earnings due out Tuesday, August 30th after the market close.

Company announced four new sales wins in China in July. The price shot up to as high as $6.89 on the news.

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 14%, BUY

SuperGen Inc. (NASDAQ-SUPG)-Recommended 10/4/2010)

Buy Price-$2.31 (was $2.09 before adding $10,000)

Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)

Closed down $.08 at $2.10

Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.

As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.

There are $2 BILLION of potential milestone payments down the road.

Down 9%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)

Buy Price-$2.70

Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)

Closed up $.22 at $2.02

Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87

We think we will hold on to this one a bit longer and see if they can get to a profit.

Down 25%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)

Buy Price-$3.18 (Was $3.04 before adding another $10,000)

Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)

Closed up $.21 at $2.84

Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.

Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.

Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.

Down 11%, HOLD

Broadvision (BVSN-Recommended 3/16/2010)

Buy Price-$13.50

Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)

$13.14 per share in cash.

Closed down $.51 at $9.19

Now trading $3.95 below cash value. Nuts.

Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.

Down 32%, HOLD

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)

Buy Price-$1.68

Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)

Closed down $.06 at $1.50

Trading at just 70% of cash value.

June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.

Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 30% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.

Down 11%, 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 $.11 at $1.82

Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.

Perifosine got a European patent issued, as announced in July.

Oppenheimer put a $5.50 price target on AEZS in June.

Needham also gave AEZS a buy recommendation with a $5 price target.

Earlier this year AEZS announced a 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 28%, 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 –$10.00

Closed down $.03 at $6.02

Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.

SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.

Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.

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 $.32 at $10.33

Constellation has sold a few thousand shares here and there, but appear to have stopped for a while. They have 1.7 million shares left.

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.

We give up on the sale of the company anytime soon.

Constellation Software owns 21.8%, but put itself up for sale this year. 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 63%, 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 $10.91 (was $12.42, $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 $.07 at $1.47

Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).

Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.

Down 82%, 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 $.07 at $4.03

Next earnings due out Thursday, September 1st, after the market close.

ANGN announced a distribution contact last week with Novation, where Novation’s 30,000 customer sites can buy ANGN’s products at a discount.

Earnings out in June. Sales flat at $6.8 million and they lost $138,000 or $.04 per share. Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.

Up 5%, 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 $5.65 (was $5.39, $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 $.66 unchanged

Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.

Wake up management–you have a great little company here worth 6X what it is selling for.

Now down 59%, 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 $.75, unchanged

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 6%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)

Buy price $.27 ask,

Valuation $1.23 (Was $.91, $1.21, $.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 $.084.

Earnings announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—double the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.

At a $2.5 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-$1.05 (Was $2.43, $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 $.40, down $.02

Last earnings report in August. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. If this is going to work, it won’t be until 2012 that we see anything.

Down 65%, HOLD

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Cheap Stocks, 8/19/2011 Update

Another brutal week for the markets. Seems like everyone is just dumping stocks, even when there is no news to justify it. Margin selling, fund redemptions, whatever. It all makes for a depressing scenario.

We were down 5.3% last week and are now down 8.9% for the year.

The DOW was down 4.0% last week, NASDAQ was down 6.6% and the S+P 500 was down 4.7%. The Russell 3000 and the Wilshire 5000 were both down 5.1% for the week

AVSO, CCUR, EXTR, RIMG, MTSL, SIGM and MITL are our favorites.

For the year, the DOW is down 6.7%, NASDAQ is down 11.7%, S+P 500 is down 10.7%, the Russell 3000 is down 11.5% and the Wilshire is down 11.7%.

Last week we went 2 stocks up, 17 down and 2 unchanged. Since inception we are now 48 stocks up and 21 down for a 70% 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)

2011-RST +12%

2011-NINE -10%

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 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)

Buy Price-$8.49

Valuation $16.02

Closed down $.49 at $7.86

Next earnings due out Wednesday, August 24th after the market close.

SIGM got “upgraded” by Lazard in July from Sell to Neutral. Hey, at least it is the right direction!

Down 7%-BUY

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)

Buy Price-$3.95

Valuation $10.39

Closed down $.60 at $2.92

No reason that we can see for the decline other than the overall market. We are buying more here. Double up at $2.92. New average buy price will be $3.36.

Down 26%-BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)

Buy Price-$14.20

Valuation $25.63 (Was $26.45)

Closed down $.32 at $13.21

Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.

Their activist shareholder Arcadia Capital Management sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.

Down 7%-HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)

Buy Price-$28.80

Valuation $79.12 (Was $63.99)

Closed down $3.23 at $28.46

I guess the fact that HP decided to maybe sell their PC business, convinced investors that the printer business is bad. Still, to be down only 1% on anything in this market should be considered a “win”.

Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.

Down 1%-HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)

Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)

Valuation $5.61 (Was $5.11)

Closed up $.18 at $1.36

MER announced a contract extension last week of $2.5 million (minimum). This is almost 50% of MER’s entire market cap. The stock price actually did go up—even last week.

Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). The stock spiked up to $1.55 on the report, but we think that the increased trading activity coaxed panicky holders into dumping their shares. Our valuation jumped to $5.61 per share.

MER recently ran to $2.07 but has settled back below our buy price.

Down 4%-BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)

Buy Price-$.92

Valuation $2.63 (Was $2.97)

Closed at $.70, up $.02.

New CEO is cleaning up. They are closing their Hong Kong, Singapore and Shanghai offices and downsizing their U.K. office. Their will be a restructuring charge in the September quarter of some amount. Nevertheless this will all help to reduce their losses going forward and get this ready to sell.

Old CEO was booted in June 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.

Down 24%-HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)

Buy Price-$5.08

Valuation $18.54 (was $15.99)

Closed down $.09 at $5.85

Next earnings due out Tuesday, August 30th after the market close.

Company announced four new sales wins in China in July. The price shot up to as high as $6.89 on the news.

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 15%-BUY

SuperGen Inc. (NASDAQ-SUPG)-Recommended 10/4/2010)

Buy Price-$2.31 (was $2.09 before adding $10,000)

Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)

Closed down $.14 at $2.18

Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.

As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.

There are $2 BILLION of potential milestone payments down the road.

Down 5%-HOLD

Performance Technology (PTIX-Recommended 3/30/2010)

Buy Price-$2.70

Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)

Closed down $.27 at $1.80

Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87

We think we will hold on to this one a bit longer and see if they can get to a profit.

Down 33% HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)

Buy Price-$3.18 (Was $3.04 before adding another $10,000)

Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)

Closed down $.38 at $2.63

Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.

Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.

Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.

Down 17% HOLD

Broadvision (BVSN-Recommended 3/16/2010)

Buy Price-$13.50

Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)

$13.14 per share in cash.

Closed down $.05 at $9.70

Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.

Down 28%. HOLD

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)

Buy Price-$1.68

Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)

Closed down $.01 at $1.56.

Trading at just 70% of cash value.

June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.

Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 30% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.

Down 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 down $.06 at $1.71

Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.

Perifosine got a European patent issued, as announced in July.

Oppenheimer put a $5.50 price target on AEZS in June.

Needham also gave AEZS a buy recommendation with a $5 price target.

Earlier this year AEZS announced a 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 20% 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 –$10.00

Closed unchanged at $6.05

Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.

SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.

Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.

Up 7%. 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 $.01 at $10.01

Constellation continues to sell a few thousand shares here and there. This is putting a damper on the stock price. Something needs to happen here to overcome this selling pressure. They have 1.7 million shares left.

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.

We give up on the sale of the company anytime soon.

Constellation Software owns 21.8%, but put itself up for sale this year. 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 58%. 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 $10.91 (was $12.42, $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 $.22 at $1.54

Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).

Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.

Down 81%. 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 $.15 at $4.10

ANGN announced a distribution contact last week with Novation, where Novation’s 30,000 customer sites can buy ANGN’s products at a discount.

ANGN announced in July that they hired their interim CEO.

Earnings out in June. Sales flat at $6.8 million and they lost $138,000 or $.04 per share. 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.

Up 7% 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 $5.65 (was $5.39, $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 $.99 down $.33.

Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.

Wake up management–you have a great little company here worth 6X what it is selling for.

Now down 59%. 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 $.75, down $.05.

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 6%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)

Buy price $.27 ask,

Valuation $1.23 (Was $.91, $1.21, $.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 announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—double the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.

At a $2.5 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-$1.05 (Was $2.43, $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 $.59, up $.06

10Q filed on time last Friday. Not great from what we can see. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. We will have to see their press release and listen to the conference call to see how they plan to address this. LTUS has a great story and a lot of promise, but they need to explain how they handle the margin issues and capital commitments

Down 65%. HOLD

Cheap Stocks, 8/12/2011 Update

The markets started out the week in the dumper, but almost recovered their losses by the end of the week.

We were down .8% last week and are now down 3.7% for the year.

The DOW was down 1.5% last week, NASDAQ was down 1% and the S+P 500 was down 1.7%. The Russell 3000 and the Wilshire 5000 were both down 1.6% for the week

AVSO, CCUR, EXTR, RIMG, MTSL, SIGM and MITL are our favorites.

For the year, the DOW is down 2.7%, NASDAQ is down 5.5%, S+P 500 is down 6.3%, the Russell 3000 is down 6.7% and the Wilshire is down 7%.

Last week we went 6 stocks up, 12 down and 3 unchanged. Since inception we are now 51 stocks up and 18 down for a 74% 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)

2011-RST +12%

2011-NINE -10%

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 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)

Buy Price-$8.49

Valuation $16.02

Closed down $.16 at $8.35

SIGM got “upgraded” by Lazard in July from Sell to Neutral. Hey, at least it is the right direction!

Down 2%-BUY

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)

Buy Price-$3.95

Valuation $10.39

Closed down $.95 at $3.52

No reason that we can see for the decline. We may buy more here.

Down 11%-BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)

Buy Price-$14.20

Valuation $25.63 (Was $26.45)

Closed down $.68 at $13.53

Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.

Their activist shareholder Arcadia Capital Management sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.

Down 5%-HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)

Buy Price-$28.80

Valuation $79.12 (Was $63.99)

Closed down $1.36 at $31.69

Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.

UP 10%-HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)

Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)

NEW Valuation $5.61 (Was $5.11)

Closed down $.02 at $1.18

Earnings last week. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). The stock spiked up to $1.55 on the report, but we think that the increased trading activity coaxed panicky holders into dumping their shares. Our valuation jumped to $5.61 per share.

MER recently ran to $2.07 but has settled back below our buy price.

Down 17%-BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)

Buy Price-$.92

Valuation $2.63 (Was $2.97)

Closed at $.68, up $.02.

New CEO is cleaning up. They are closing their Hong Kong, Singapore and Shanghai offices and downsizing their U.K. office. Their will be a restructuring charge in the September quarter of some amount. Nevertheless this will all help to reduce their losses going forward and get this ready to sell.

Old CEO was booted in June 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.

Down 26%-HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)

Buy Price-$5.08

Valuation $18.54 (was $15.99)

Closed up $.04 at $5.94

Company announced four new sales wins in China in July. The price shot up to as high as $6.89 on the news.

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 17%-BUY

SuperGen Inc. (NASDAQ-SUPG)-Recommended 10/4/2010)

Buy Price-$2.31 (was $2.09 before adding $10,000)

Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)

Closed down $.23 at $2.32

Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarters results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $4.06 as revenues declined from the prior quarters $17 million.

As we suspected, the merger with the revenue poor Astex hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, it not losing a ton of money and is trading at even close to our valuation.

There are $2 BILLION of potential milestone payments down the road.

Up 1%-HOLD

Performance Technology (PTIX-Recommended 3/30/2010)

Buy Price-$2.70

Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)

Closed unchanged at $2.07

Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87

We think we will hold on to this one a bit longer and see if they can get to a profit.

Down 23% HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)

Buy Price-$3.18 (Was $3.04 before adding another $10,000)

Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)

Closed down $.01 at $3.01

Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.

Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.

Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.

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 5% HOLD

Broadvision (BVSN-Recommended 3/16/2010)

Buy Price-$13.50

Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)

$13.57 per share in cash.

Closed down $1.24 at $9.75

Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.

Down 28%. HOLD

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)

Buy Price-$1.68

NEW Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)

Closed up $.13 at $1.57.

Trading at just 70% of cash value.

June quarterly earnings out last week. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.

Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 30% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.

Down 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 $.11 at $1.77

Earnings last week. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.

Perifosine got a European patent issued, as announced in July.

Oppenheimer put a $5.50 price target on AEZS in June.

Needham also gave AEZS a buy recommendation with a $5 price target.

Earlier this year AEZS announced a 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 24% 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 –$10.00

Closed down $.20 at $6.05

Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.

SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.

Paragan filed a 13D/A in May disclosing they had upped their stake to 7%.

a year.

Up 7%. 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 $.72 at $10.02

Constellation continues to sell a few thousand shares here and there. This is putting a damper on the stock price. Something needs to happen here to overcome this selling pressure. They have 1.7 million shares left.

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.

We give up on the sale of the company anytime soon.

Constellation Software owns 21.8%, but put itself up for sale this year. 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 59%. 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 $10.91 (was $12.42, $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 $1.76

Earnings last week. Not great. Sales were were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).

Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.

Down 78%. 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 $.13 at $4.25

ANGN announced in July that they hired their interim CEO.

Earnings out in June. Sales flat at $6.8 million and they lost $138,000 or $.04 per share. 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.

Up 15% 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 $5.65 (was $5.39, $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 $.99 unchanged.

Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.

Wake up management–you have a great little company here worth 6X what it is selling for.

Now down 39%. 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 $.80, up $.10.

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.

Up 1%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)

Buy price $.27 ask,

Valuation $.91 (Was $1.21, $.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 May. Sales were $4.17 million and they lost $380,000. Our valuation dropped to $.91. 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 $246,000 of revenue in 2010 compared to $120,000 in 2010.

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-$1.05 (Was $2.43, $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 $.59, up $.06

10Q filed on time on Friday. Not great from what we can see. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. We will have to see their press release and listen to the conference call to see how they plan to address this. LTUS has a great story and a lot of promise, but they need to explain how they handle the margin issues and capital commitments

Down 65%. HOLD

Cheap Stocks, 8/5/2011 Update

Well we exceeded last weeks melt down. Even with the debt reduction issue settled for now and the FAA back to getting paid.

We were down 6.6% last week and are now down 2.8% for the year.

The DOW was down 5.8% last week, NASDAQ was down a whopping 8.1% and the S+P 500 was down 7.2%. The Russell 3000 and the Wilshire 5000 were both down 7.9% for the week.

Interestingly, Motley Fool had an article out last week that of the 3,500 stocks trading on the exchanges with market caps over $200 million there were only 15 stocks that were up over 10% since July 22nd. We had numbers 14 and 15. Mitel and Lexmark.

AVSO, CCUR, EXTR, RIMG, MTSL, SIGM and MITL are our favorites.

For the year, the DOW is down 1.2%, NASDAQ is down 4.5%, S+P 500 is down 4.6%, the Russell 3000 is down 5.2% and the Wilshire is down 5.5%.

Last week we went 3 stocks up, 16 down and 2 unchanged. Since inception we are now 53 stocks up and 14 down for a 77% 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)
2011-RST +12%
2011-NINE -10%

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 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $16.02
Closed down $.04 at $8.51
SIGM got “upgraded” by Lazard in July from Sell to Neutral. Hey, at least it is the right direction!
UP .2%-BUY

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price-$3.95
Valuation $10.39
Closed up $.02 at $4.47
UP 13%-BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.63 (Was $26.45)
Closed down $.61 at $14.21
Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.
Their activist shareholder Arcadia Capital Management sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.
UP .1%-HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $79.12 (Was $63.99)
Closed down $.52 at $33.02
Earnings last week. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.
UP 15%-HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.11
Closed down $.10 at $1.20
MER recently ran to $2.07 but has settled back below our buy price. Seems to be some persistent accumulation going on. If their next quarter earnings are decent, we could see a another run well past $2.00
$.60 a share in cash and profitable.
Down 16%-BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $2.63 (Was $2.97)
Closed at $.66, down $.11.
New CEO is cleaning up. They are closing their Hong Kong, Singapore and Shanghai offices and downsizing their U.K. office. Their will be a restructuring charge in the September quarter of some amount. Nevertheless this will all help to reduce their losses going forward and get this ready to sell.
Old CEO was booted in June 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.
Down 28%-HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $18.54 (was $15.99)
Closed down $.53 at $5.90
We bought some more CCUR last week.
Company announced four new sales wins in China in July. The price shot up to as high as $6.89 on the news.
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 16%-BUY

SuperGen Inc. (NASDAQ-SUPG)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)
Closed down $.51 at $2.55
Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarters results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $4.06 as revenues declined from the prior quarters $17 million.
As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex.. Based on their pro-forma projections for 2011, our valuation will fall to $3.11, about the current price. Normally we would sell as we have hit our valuation, but in this case we think the opportunity for some huge upside is worth holding on for a while. In any event there will be $1.39 per share in cash to support the stock price and based on their second half projections, they will be operating at a cash breakeven, excluding about $2.6 million of severance and deal expenses. It is not easy to find a small drug company that has a pile of cash, it not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 11%-HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
NEW Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed unchanged at $2.07
Earnings out last week. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87
We think we will hold on to this one a bit longer and see if they can get to a profit.
Down 23% HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
NEW Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed down $.37 at $3.02
Earnings last week. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.
Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.
Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.
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 5% HOLD

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$13.50
Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)
$13.57 per share in cash.
Closed down $.96 at $10.99
Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.
Down 19%. HOLD

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price-$1.68
Valuation $5.61-(Was $5.73, $4.38, $4.44, $5.15)
Closed down $.14 at $1.44.
Trading at just 70% of cash value.
Earnings out in July. Pretty good. Cash was $2.07 per share and they made $.08 per share. Our valuation is $5.61. Not bad at all. Ragnarok 2 is delayed until at least Q3 2011.
Down 14%. 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 $.32 at $1.66
Next earnings report due out August 10th, before the market opens.
Perifosine got a European patent issued, as announced in July. Market yawned.
Oppenheimer put a $5.50 price target on AEZS in June. .
Needham also gave AEZS a buy recommendation 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 16% 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 –$10.00
Closed down $.68 at $6.25
Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.
SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.
Paragan filed a 13D/A in May disclosing they had upped their stake to 7%.
a year.
Up 10%. 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 $.46 at $10.80
Constellation continues to sell a few thousand shares here and there. This is putting a damper on the stock price. Something needs to happen here to overcome this selling pressure. They have 1.7 million shares left.
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.
We give up on the sale of the company anytime soon.
Constellation Software owns 21.8%, but put itself up for sale this year. 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 71%. 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 $.21 at $1.82
Next earnings out Wednesday, August 10th, after the market close.
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 $1.3 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 78%. 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 $.16 at $4.38
ANGN announced in July that they hired their interim CEO.
Earnings out in June. Sales flat at $6.8 million and they lost $138,000 or $.04 per share. 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.
Up 15% 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 $5.65 (was $5.39, $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 $.99 up $.24.
ARI announced last week that they had refinanced their 14% debt with a regular bank loan, with regular interest rates. Should save them over $300,000 a year in interest expense ($.04 a share).
Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.
Wake up management–you have a great little company here worth 6X what it is selling for.
Now down 39%. 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 $.70, down $.10.
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 12%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.91 (Was $1.21, $.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 in May.
Earnings out in May. Sales were $4.17 million and they lost $380,000. Our valuation dropped to $.91. 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 $246,000 of revenue in 2010 compared to $120,000 in 2010.
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 $.53, up $.03
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 be 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 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 69%. HOLD