Buy Recommendation-CBeyond

CBeyond Inc. (NASDAQ-CBEY)
Valuation-$29.21
Price February 28, 2012-$7.94

CBEY is trading at a huge discount to our valuation.

Their last quarter (9/30/2011) sales were up 8% from the prior year to about $122.5 million, gross margins were 67% and they only lost $.04 per share ($1.1 million) compared to $.02 loss last year due to higher depreciation charges.

They don’t have a huge cash hoard (only $8 million) but they have been buying back some shares and have had heavy cap-ex requirements, which should abate somewhat in 2012.

2012 earnings guidance is about $485-$490 million in sales, $85-$90 million in adjusted EBITDA and capital expenditures of $55-$60 million resulting in free cash flow of $25-$30 million.

Over 85% of CBEY’s shares are owned by institutions and just 3% by management.
With over $450 million in annual sales, 67% gross margins, trading at a market cap of $244 million and at about a 70% discount to our valuation, we think this is a BUY.
Average trading volume is about 314,000 shares a day. There are about 30 million shares outstanding.

About CBeyond
Cbeyond, Inc. (NASDAQ: CBEY) is a leading provider of IT and communications services to more than 61,000 small businesses throughout the United States. Serving growing entrepreneurs, Cbeyond offers more than 30 productivity-enhancing applications including local and long-distance voice, broadband Internet, mobile, BlackBerry®, voicemail, email, Web hosting, fax-to-email, data backup, file-sharing, virtual private networking and cloud services. In addition, Cbeyond’s new Cloud Services division offers virtual and dedicated services and cloud PBX to small businesses worldwide. The Cloud Services division won Microsoft’s Hosting Partner of the Year for 2009 and 2010 in connection with Microsoft’s Hyper-V virtual server product. Winning over 50 awards for product innovation, growth and providing a quality customer experience, Cbeyond continues to focus on helping small businesses succeed and grow through high-performance technology, superior services and world-class support.

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Buy Recomendation-Aviat Networks

Aviat Networks, Inc. (NASDAQ-AVNW)
Valuation-$8.31
Price February 27, 2012-$2.62

Aviat is trading at a huge discount to our valuation. They have just over half their market cap in cash ($1.19 per share).

Their last quarter (12/31/2011) sales were down 10% from the prior year to about $105 million, gross margins were 30% and on a non-GAAP basis were breakeven on the bottom line. They did report a $12.8 or $.22 a share loss for the quarter but this included about $13 million of write-offs.

Forward earnings guidance for next quarter is about $100-$110 million in sales, 30% margins and breakeven cash flow.

Over 80% of Aviat’s shares are owned by institutions and just 2% by management.

With over $400 million in annual sales, $1.19 per share of cash, trading at a market cap of $161 million and at about a 70% discount to our valuation, we think this is a strong BUY.

Average trading volume is about 314,000 shares a day. There are about 59 million shares outstanding.

Aviat Networks, Inc. is a leader in wireless transmission solutions. We apply innovation and IP networking expertise toward building a carrier class foundation for future mobile and fixed broadband networks. With more than 750,000 systems installed around the world, Aviat Networks has built a reputation as a leader in offering best-of-breed solutions including LTE-ready microwave backhaul and a complete portfolio of service and support options to public and private telecommunications operators worldwide. With a global reach and local presence in more than 46 countries, Aviat Networks works by the side of its customers allowing them to quickly and cost effectively seize new market and service opportunities. Aviat Networks is headquartered in Santa Clara, California and is listed on NASDAQ (AVNW).

Cheap Stocks, 2/24/2012 Update

We squeaked by with a .1% gain last week and are up 16.6% for the year.

Some of our stocks are just stupid cheap—compared to their net cash on hand. Check this list:

Cash as % of Stock Price:

RIMG 63%
EXTR 43%
PTIX 58%
GRVY 74%
CCUR 80%
MTSL 34%
SIGM 90%
ASTX 70%
CTIG 114%
MRVC 43%
ANGN 43%

Plus EXTR, RIMG, VTRO, ANGN and MRVC.PK are all in “play” with activist shareholders either trying to get them to pay out special dividends or take them over, or they are pursuing “strategic alternatives”.

The DOW was up .3% last week, NASDAQ was up .4% and the S+P 500 was up .3%. The Russell 3000 was up .3%.

MRVC, EXTR, MTSL, and MITL are our favorites.

For the year, the DOW is up 6.3%, NASDAQ is up 13.8%, S+P 500 is up 8.6, and the Russell 3000 is up 9.4%

Last week we went 7 stocks up, 13 down and 2 unchanged. Since inception we are now 55 stocks up and 16 down for a 78% 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%
2012-BVSN +30%

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 49 stocks that we closed out since 2006 (44 were winners) the average net gain was 37%.

Top Image Systems. (NASDAQ-TISA)-Recommended 12/7/2011)
Buy Price-$2.03
Valuation $4.89
Closed up $.12 at $3.04
Next earnings due out Wednesday, February 29th before the market opens.
TISA announced a $2 million order to do the Italian census in January. Good news just keeps coming here.
TISA published a letter to shareholders in January, noting all the positives about the company and stating that they still believe the shares are still undervalued. Seemed to get some attention as the trading volume and price are up. These small Israeli software stocks can be a “value trap” if nobody knows about them, so we view this type of PR activity as a big plus.
Up 50%, HOLD

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $2.45 (after $.0475 special dividend)-(Was $2.92, $3.09)
Buy Price October 7, 2011- $.80 ($1.27 before special dividend)
Closed up $.005 at $.985
MRV announced a new CEO in February, an internal guy. At least we have a leader to sell the company now.
Raging Capital has bought more than 6 million more shares in January. They now own over 23 million shares or 14.98%. Looks like the massive number of shares came from Wells Fargo (13G/a) selling some of their large position.
CFO and VP of Finance has resigned and gotten lucrative “stay” bonuses if they stay through March 31, 2012 and get the 10K filed. We think the “stay” bonus is really to get the company sold by then.
Now it looks like all the directors are resigning from MRV. Pretty odd, but they approved the sale of CES. There might be some kind of buy-out in the works that all the directors disagree with-just speculation on our part.
MRV announced in December that it was selling it’s CES subsidiary to a private equity group for net cash proceeds of about $20 million (net of $4.1 million of escrow hold backs). This will add another $.13 to the remaining hoard of about $.42. CES’s sales, margins are not disclosed in any of their SEC filing so it is not possible to adjust our valuation for this transaction yet. The transaction is expected to close by the end of January.
Earnings announced in November. Revenue was $62.5 million down from $66.1 million last year. Net income was $2.1 million or $.01 per share comparer to $3.6 million last year ($.02 per share). Cash before the $75 dividend dropped slightly to $150 million or $.90 per share. Our valuation dropped to $2.45 per share which is still more than double the current price.
Up 15% BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $12.10 (Was $13.40, $16.02)
Closed down $.33 at $5.59
Earnings announced in November. Not great. Revenues down 50% from last year to $40 million and they lost $2.8 million on a non-GAAP basis (they reported a $122 million loss which had $111 million goodwill write down in it). Cash fell a bit to $5.03 per share and our valuation fell again to $12.10 a share. Cash was $159 million.
Mak Capital One LLC filed a 13G in November disclosing a 6.6% (2,110,000 shares) stake in SIGM.
So we are trading at a market cap of about $12 million (excluding cash) for a $150- $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation keeps falling, so we need to keep our eye on this one.
Down 34%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $15.28 (Was $14.04, $10.39)
Closed up $.63 at $4.07.
Next earnings due out Thursday, March 1st after the market close.
Earnings announced in November. Pretty good. Revenues were up to $169 million from $161 million last year and they made $13.3 million on a Non-GAAP basis ($.24 per share) compared to $9.1 million ($.16 per share. Our valuation rose to $15.28.
Up 34%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
NEW Valuation $$19.81 (Was $22.23, $25.63, $26.45)
Closed down $.94 at $11.34
Pays $.68 a share annual dividend.
Earnings last week. Hmmm. Sales fell from $24.7 million to $21.7 million and they were breakeven on a Non-GAAP basis with a reported loss of $.13 per share. Cash fell to $70 million or $6.87 per share as they spent $2 million on share buybacks and our overall valuation fell to $19.61.
Guidance for 2012 is low double digit sales growth and the same level cash flow. They also declared their $.17 quarterly dividend. Teetering on selling here despite the yield.
Down 20%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $67.94 (Was $63.84, $79.12, $63.99)
Closed down $.66 at $37.25
Pays $1.00 per share annual dividend.
Earnings announced in February. Good as expected. Revenues were $1.06 billion and they made $1.25 per share on a Non-GAAP basis. They ended the year with $6.91 per share in net cash and our valuation rose to $67.94. They repurchased 7.9 million shares over the last couple of quarters and ended up with 74 million fully diluted shares used in the EPS calculation in Q4. They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases and then they announced another $30 million (730,000 share) repurchase on Friday. They have just over $200 million left on their stock repurchase authorization.
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 29%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $6.28 (Was $5.61, $5.11)
Closed down $.13 at $2.01
MER announced a joint venture in January, but with a tiny company. It was not enough to even get 100 shares traded after the announcement.
Last earnings out in November. Sales were up from $2.7 million to $3 million and they made $226,000 ($.05 a share) versus $14,000 last year. Cash per share rose to $.68 from $.63 last quarter and our valuation rose to $6.28 per share. Overall a very good report, but no reaction in the stock price. For the 9 months ended September 30th, they have made $.13 per share compared to $.01 last year.
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap. .
Up 41% HOLD

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $3.05 (Was $2.90, $3.11, $2.63, $2.97)
Closed at $.81, down $.03
Earnings announced in February. Things are looking up! Although revenues were down from $45 million last year to $39 million, operating income more than doubled to $2.1 million from $.9 million and net income rose to $1.6 million from $.3 million last year. Net cash also rose to over $5 million or $.10 per share. Our valuation jumped to $3.05.
A Director reported buying 10,000 shares in December at $.65 a share..
Down 12%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $14.13 (was $11.38, $14.04, $18.54, $15.99)
Closed up $.10 at $3.88
Earnings announced in February. Better than the previous quarter for sure, but just ok. Sales were down from $17.9 million last year to $16.4 million, but well above the $12.9 in Q3. They lost $833,000 compared to $1,189,000 last year and $2.6 million in Q3. Cash fell from $3.50 to $3.10 per share as receivables increased by $3.2 million ($.37 per share). Overall our valuation rose to $14.13.
Down 24%, HOLD

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.42 (was $3.11, $5.21, $4.89, $4.37, $3.48)
Closed down $.05 at $1.96
Well an FDA panel turned down Astx’s application for a new indication for Dacogen. The game is not over yet until the FDA turns it down, but the panel vote was 10-3 against approval. Many more drugs in the pipeline and 60% of the market cap in cash, so we will hold onto this one longer.
Earnings announced in November. Sales rose to almost $17 million from $13.4 million last year and they lost $3.4 million before taxes. But this loss was after almost $8 million of acquisition expenses and stock based compensation. Cash ended up at $128 million or $1.28 a share. Our valuation rose to $3.42 a share.
As we said before, 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, 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 15%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $5.94-(was $4.87, $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.07 at $1.94
Earnings announced in November. Not bad at all. Revenues were $9 million, up from $6.3 million last year and they made $.07 on a non-GAAP basis. On a GAAP basis they lost $86,000. Cash per share was $1.12 and our valuation rose to $5.94 on increased sales, margins and reduced losses.
Down 28%, BUY

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$7.01 (was $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed up $.16 at $3.62
Earnings announced in February. Revenues dropped a tad from $85 million last year to $83 million and they made $5.8 million of net income on a Non-GAAP basis versus $5.1 million last year. Cash per share rose to $1.56 per share from $1.50 and our valuation rose to $7.01 per share. The company also announced last week that they have sold an option to a possible buyer of their corporate headquarters in California for $48.5 million. The option lasts until the end of 2012. That would add another $.50 a share (pre-closing costs and taxes) to the cash till.
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%.
Up 14%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $5.39-(Was $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.12 at $2.77
Ragnarok 2’s final test began 12/26/2011. We have our fingers crossed that this really is the final test. Final product release is supposed to be in March.
Earnings announced in November. Not bad at all. Revenues rose 8% to $13.4 million and they made $3.1 million or $.11 per ADS. For the nine months ended September 30th, they have made $.25 per ADS. Cash fell about $1.5 million to $2.05 per ADS.
Our valuation rose a bit to $5.39, and at less than cash value and way below our valuation this is one good lottery ticket if they ever commercially release Ragnarok 2.
Up 99%, 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 $1.58
OMG! Zacks ranks AEZS #1. Will wonders never cease. Updated interim results on AEZ-108 were announced at ASCO in February—they were positive, but this is still Phase 1. AEZS also announced they were selling another 10 million shares under their “at the market” program.
AEZS announced a collaboration deal in January with a division of Roche on AEZ-108.
Earnings announced in November. Revenues rose to $9.5 million from $7.5 million and they lost $8.2 million versus $5.5 million from operations. They continue to sell stock under their “at the market” program and raised $15.8 million during and just after the quarter. They had $48 million of cash at September 30th and about $54 million after their latest stock sales. Shares outstanding are up over 100 million now.
This is pretty normal for a developing drug company.
Speculative for sure.
Up 11%, 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 –$13.00 (was $12, $10)
Closed down $.30 at $8.38
Earnings announced in February. Revenues were up 11% and they made $.04 on a non-GAAP basis (lost $.06 on a GAAP basis after the litigation charge and license termination charge). Cash rose to $39 million, gross margins improved a bit also. Guidance for 2012 is a 5-7% increase in revenues and $.04-$.08 in earnings per share, excluding two new product introductions anticipated for mid year introductions.
.This company needs to be sold so that someone can take advantage of their 70%+ gross margins and enjoy some profits.
Paragon filed a 13D/A in May 2011 disclosing they had upped their stake to 7%.
Up 48%, 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 $18.15 (was $17.96, $18.34, $16.07, $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 $.55 at $15.00
Earnings announced in February. Another good report. Sales were up 18%, pre-tax income was up 30%, but due to a higher tax rate EPS was flat at $.21 per share. Cash rose to $4.27 per share and our valuation moved up again to $18.15.
MEDW announced an acquisition in January. The acquired company sells software into the same customers as MEDW but in the adult stem cell and cord blood management area. No financial information about the acquisition or its revenues was disclosed. Looks like another growth area for the company. Constellation Software, who owns over 20% of MEDW announced in January that they had concluded their analysis of strategic alternatives. This is the code for they couldn’t find a buyer. Good company but already overvalued. Maybe they will turn their attention back to acquiring MEDW? We can dream.
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 137%, 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 $8.04 (was $10.91, $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 $1.44
Inuvo and Vetro announced in January that the shareholder votes on the merger will be on February 29th and that the merger will take effect shortly thereafter (assuming shareholders vote “FOR” the merger. They expect merger cost savings to be more than $2.4 million a year.
“Earnings” announced in November. Not good. Revenue fell to $6.3 million from $9.8 million last year and they lost about $1.6 million from operations compared to a profit of $368,000 last year. Cash fell to $.53 per share (about $4 million in total) and our valuation plunged to $8.04.
Inuvo (AMEX–INUV) announced in October they had agreed to buy VTRO in an all stock deal. The price is 1.546 shares of INUV for each share of VTRO. INUV was $1.75 when the deal was announced indicating a value of $2.71, but INUV shares have fallen to $.96 making the value about $1.49. INUV has about $50 million in sales, 40% gross margins and is slightly EBITDA positive. Maybe 1 and 1 can make 3 here. Our valuation of INUV is $4.32. VTRO’s largest shareholder filed a 13D/a indicating he is not happy with this deal and included calculations indicating that VTRO could return $3.38-$4.39 a share to shareholders on a liquidation of the company.
Should have sold this when it traded over $6.
Down 82% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $15.90 (was $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.11 at $5.57
Next earnings due out Tuesday, February 28th after the market close.
ANGN inked another group purchasing deal in February.
Angeion disclosed in an SEC filing in December that they had retained an investment banker to look at “strategic alternatives” that may also involve the sale of its New Leaf product line. Company could be for sale, or just a part of it. In any event this should be good news for us shareholders and ANGN continues to be significantly undervalued.
Earnings out in December. Sales were flat at about $8.4 million as was net income at about $400,000 or $.10 a share. Cash per share rose to $2.40 and our valuation rose to $15.90 in this seasonally good quarter, still up from $15.00 last year this time.
CEO bought 10,000 shares in September at $4.25. Good sign.
If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 46%, 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 $5.81 (was $5.72, $5.65, $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 $1.45 unchanged.
ARI announced a reseller win in February in addition to one in January for a 160 dealer outfit.
Earnings out in December. Revenues were up slightly to $5.410 million from $5.324 last year. Net income rose to $272,000 from $99,000 and EPS rose to $.03 from $.01 (fully taxed). Our valuation rose to $5.81 per share.
Looks like they may be serious about getting the stock price up and more visibility for the company.
Hmm, in addition to earnings and all the other recent announcements, the CEO got an amendment to his “change of control” agreement. Wonder why they are reviewing these kind of agreements right now?
ARIS announced in October that they had engaged a PR firm, saying their stock was undervalued and the business had great opportunities ahead.
ARIS filed an 8k in September with presentation materials for a “potential investor”.
Management finally looks like it is waking up and trying to increase the share price. Got a long way to go yet though.
Now down 10%, 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 $2.08 (was $2.09, $2.12, $2.60, $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 $.60, down $.05
Earnings announced in February. Decent. Sales were $22.5 million up from $21.7 million last year, gross margin was 47% and they made $1 million or $.02 per share. Our valuation dropped $.01 to $2.08 as there were 3 million more fully diluted shares outstanding. Cash was still a net negative, but getting close to even. Apparently this did not impress anyone as the stock fell on the earnings report. Market cap of $34 million for an $80 million in sales company with almost 50% margins and not losing money, just too cheap.
Still more than 2X the current price.
Down 24%, BUY

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.37 (Was $1.23, $.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 $.115, closed at $.09.
CEO reported another 44,000 of stock purchases in late 2011 at $.095 to $.10 per share.
Earnings announced in November. Revenues were up 30% to $4,379,000 and they made $200,000 excluding a $289,000 severance charge. Yikes. Not bad. VOIP revenues were $475,000 up from $170,000 in the prior year and up slightly from the June quarter ($461,000). VOIP still lost $481,000 but this is down from $667,000 last year and $545,000 last quarter. Cash per share fell to $.13 (still more than the current market price) and our valuation rose again to $1.37 per share.
One of their Directors, Michael Reinarts, filed a 13D in November disclosing a 9.5% ownership stake. There were no specific proposals in the filing. We’ll have to wait and see what happens here. We know the stock is ridiculously cheap, and filing a 13D usually precedes some type of activist position.
At a $2.6 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 57%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$.85 (Was $1.05, $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 $.21, up $.01.
Oiy! Lotus announced in January that they had “sold” their Mongolian land. They get nothing for it and give up 3 drugstores in Bejing and $7 million of receivables. Not good as reflected on the huge (percentage wise at least) drop in the stock. This has indeed become a cheap lottery ticket. 5 shares for a buck. We are licking our wounds on this one, but will just wait it out. It may go to $0, or may hang around in the penny stock range for a while. The move into the new building has commenced and the warehouse (supposedly critical to selling in Bejing) will be functional by March and production to start by September.
Earnings announced in November. Revenues were up slightly over last year at $19 million versus $18.3 last year, but gross margins remained low and they made $2.1 million of $.04 per share compared to $.25 last year. Our valuation fell again to $.85.
Down 87%, HOLD

Cheap Stocks, February 17, 2012 Update

We were up 5% last week and are up 16.5% for the year as some of our boring small caps have taken off.

Some of our stocks are just stupid cheap—compared to their net cash on hand. Check this list:

Cash as % of Stock Price:

RIMG 58%
EXTR 45%
PTIX 60%
GRVY 71%
CCUR 82%
MTSL 32%
SIGM 85%
ASTX 69%
CTIG 131%
MRVC 43%
ANGN 42%

Plus EXTR, RIMG, VTRO, ANGN and MRVC.PK are all in “play” with activist shareholders either trying to get them to pay out special dividends or take them over, or they are pursuing “strategic alternatives”.

The DOW was up 1.2% last week, NASDAQ was up 1.7% and the S+P 500 was up 1.4%. The Russell 3000 was up 1.5%.

MRVC, EXTR, MTSL, and MITL are our favorites.

SPNC and RWWI.ob earnings last week.

For the year, the DOW is up 6%, NASDAQ is up 13.3%, S+P 500 is up 8.2, and the Russell 3000 is up 9.1%

Last week we went 12 stocks up, 7 down and 3 unchanged. Since inception we are now 55 stocks up and 16 down for a 78% 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%
2012-BVSN +30%

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 49 stocks that we closed out since 2006 (44 were winners) the average net gain was 37%.

Top Image Systems. (NASDAQ-TISA)-Recommended 12/7/2011)
Buy Price-$2.03
Valuation $4.89
Closed up $.27 at $2.92
Next earnings due out Wednesday, February 29th before the market opens.
TISA announced a $2 million order to do the Italian census in January. Good news just keeps coming here.
TISA published a letter to shareholders in January, noting all the positives about the company and stating that they still believe the shares are still undervalued. Seemed to get some attention as the trading volume and price are up. These small Israeli software stocks can be a “value trap” if nobody knows about them, so we view this type of PR activity as a big plus.
Up 44%, HOLD

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $2.45 (after $.0475 special dividend)-(Was $2.92, $3.09)
Buy Price October 7, 2011- $.80 ($1.27 before special dividend)
Closed down $.02 at $.98
MRV announced a new CEO in February, an internal guy. At least we have a leader to sell the company now.
Raging Capital has bought more than 6 million more shares in January. They now own over 23 million shares or 14.98%. Looks like the massive number of shares came from Wells Fargo (13G/a) selling some of their large position.
CFO and VP of Finance have resigned and gotten lucrative “stay” bonuses if they stay through March 31, 2012 and get the 10K filed. We think the “stay” bonus is really to get the company sold by then.
Now it looks like all the directors are resigning from MRV. Pretty odd, but they approved the sale of CES. There might be some kind of buy-out in the works that all the directors disagree with-just speculation on our part.
MRV announced in December that it was selling it’s CES subsidiary to a private equity group for net cash proceeds of about $20 million (net of $4.1 million of escrow hold backs). This will add another $.13 to the remaining hoard of about $.42. CES’s sales, margins are not disclosed in any of their SEC filing so it is not possible to adjust our valuation for this transaction yet. The transaction is expected to close by the end of January.
Earnings announced in November. Revenue was $62.5 million down from $66.1 million last year. Net income was $2.1 million or $.01 per share comparer to $3.6 million last year ($.02 per share). Cash before the $75 dividend dropped slightly to $150 million or $.90 per share. Our valuation dropped to $2.45 per share which is still more than double the current price.
Up 15% BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $12.10 (Was $13.40, $16.02)
Closed up $.18 at $5.92
Earnings announced in November. Not great. Revenues down 50% from last year to $40 million and they lost $2.8 million on a non-GAAP basis (they reported a $122 million loss which had $111 million goodwill write down in it). Cash fell a bit to $5.03 per share and our valuation fell again to $12.10 a share. Cash was $159 million.
Mak Capital One LLC filed a 13G in November disclosing a 6.6% (2,110,000 shares) stake in SIGM.
So we are trading at a market cap of about $12 million (excluding cash) for a $150- $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation keeps falling, so we need to keep our eye on this one.
Down 30%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $15.28 (Was $14.04, $10.39)
Closed up $.41 at $3.44.
Next earnings due out Thursday, March 1st after the market close.
Earnings announced in November. Pretty good. Revenues were up to $169 million from $161 million last year and they made $13.3 million on a Non-GAAP basis ($.24 per share) compared to $9.1 million ($.16 per share. Our valuation rose to $15.28.
Up 14%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.67 (Was $25.63, $26.45)
Closed unchanged at $12.25
Pays $.68 a share annual dividend.
Next earnings due out Thursday, February 23rd before the market opens.
After climbing back to within $1 of our buy price, RIMG announced they would miss Q4 sales and earnings last week. Wham. Sales are expected to be $22 million and not the $24-$26 million anticipated. They blamed the entire shortfall on “delayed deals” for Qumu. The expected GAAP loss is estimated at $.15-$.17 per share including the Qumu transaction costs of $1.7 million, Nice start.
Earnings announced in November. Revenues down from $23.4 million to $20.3 million. They made $1.5 million ($.16 per share vs. $.24 last year). Cash was $115 million or $12.14 per share (before the Qumu $39 million payment after the quarter end). Our valuation just on their Q3 performance actually increased a bit to $25.67. Looking at their guidance we estimate that our valuation will fall to about $22 next year. This is still a big enough value gap to hang onto the stock, collect the 6% dividend and see what this Qumu acquisition does.
They are projecting the combined company will generate more than 15% sales growth in 2012 and that cash flows will be about the same as 2011. Accordingly they upped the quarterly dividend to $.17 per share.
After the Qumu payment they will have about $75 million in cash, or over $7 a share.
Down 14%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $67.94 (Was $63.84, $79.12, $63.99)
Closed up $.59 at $37.91
Pays $1.00 per share annual dividend.
Earnings announced in February. Good as expected. Revenues were $1.06 billion and they made $1.25 per share on a Non-GAAP basis. They ended the year with $6.91 per share in net cash and our valuation rose to $67.94. They repurchased 7.9 million shares over the last couple of quarters and ended up with 74 million fully diluted shares used in the EPS calculation in Q4. They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases and then they announced another $30 million (730,000 share) repurchase on Friday. They have just over $200 million left on their stock repurchase authorization.
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 32%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $6.28 (Was $5.61, $5.11)
Closed up $.15 at $2.14
MER announced a joint venture in January, but with a tiny company. It was not enough to even get 100 shares traded after the announcement.
Last earnings out in November. Sales were up from $2.7 million to $3 million and they made $226,000 ($.05 a share) versus $14,000 last year. Cash per share rose to $.68 from $.63 last quarter and our valuation rose to $6.28 per share. Overall a very good report, but no reaction in the stock price. For the 9 months ended September 30th, they have made $.13 per share compared to $.01 last year.
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap. .
Up 51% HOLD

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $3.05 (Was $2.90, $3.11, $2.63, $2.97)
Closed at $.84, down $.04
Earnings announced in February. Things are looking up! Although revenues were down from $45 million last year to $39 million, operating income more than doubled to $2.1 million from $.9 million and net income rose to $1.6 million from $.3 million last year. Net cash also rose to over $5 million or $.10 per share. Our valuation jumped to $3.05.
A Director reported buying 10,000 shares in December at $.65 a share..
Down 9%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $14.13 (was $11.38, $14.04, $18.54, $15.99)
Closed up $.09 at $3.78
Earnings announced in February. Better than the previous quarter for sure, but just ok. Sales were down from $17.9 million last year to $16.4 million, but well above the $12.9 in Q3. They lost $833,000 compared to $1,189,000 last year and $2.6 million in Q3. Cash fell from $3.50 to $3.10 per share as receivables increased by $3.2 million ($.37 per share). Overall our valuation rose to $14.13.
Down 26%, HOLD

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.42 (was $3.11, $5.21, $4.89, $4.37, $3.48)
Closed down $.03 at $2.01
Well an FDA panel turned down Astx’s application for a new indication for Dacogen. The game is not over yet until the FDA turns it down, but the panel vote was 10-3 against approval. Many more drugs in the pipeline and 60% of the market cap in cash, so we will hold onto this one longer.
Earnings announced in November. Sales rose to almost $17 million from $13.4 million last year and they lost $3.4 million before taxes. But this loss was after almost $8 million of acquisition expenses and stock based compensation. Cash ended up at $128 million or $1.28 a share. Our valuation rose to $3.42 a share.
As we said before, 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, 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 13%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $5.94-(was $4.87, $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed down $.12 at $1.87
Earnings announced in November. Not bad at all. Revenues were $9 million, up from $6.3 million last year and they made $.07 on a non-GAAP basis. On a GAAP basis they lost $86,000. Cash per share was $1.12 and our valuation rose to $5.94 on increased sales, margins and reduced losses.
Down 31%, BUY

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$7.01 (was $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed up $.09 at $3.46
Earnings announced in February. Revenues dropped a tad from $85 million last year to $83 million and they made $5.8 million of net income on a Non-GAAP basis versus $5.1 million last year. Cash per share rose to $1.56 per share from $1.50 and our valuation rose to $7.01 per share. The company also announced last week that they have sold an option to a possible buyer of their corporate headquarters in California for $48.5 million. The option lasts until the end of 2012. That would add another $.50 a share (pre-closing costs and taxes) to the cash till.
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%.
Up 9%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $5.39-(Was $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed up $.79 at $2.89
Ragnarok 2’s final test began 12/26/2011. We have our fingers crossed that this really is the final test. Final product release is supposed to be in March.
Earnings announced in November. Not bad at all. Revenues rose 8% to $13.4 million and they made $3.1 million or $.11 per ADS. For the nine months ended September 30th, they have made $.25 per ADS. Cash fell about $1.5 million to $2.05 per ADS.
Our valuation rose a bit to $5.39, and at less than cash value and way below our valuation this is one good lottery ticket if they ever commercially release Ragnarok 2.
Up 99%, 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 unchanged at $1.64
OMG! Zacks ranks AEZS #1. Will wonders never cease. Updated interim results on AEZ-108 were announced at ASCO in February—they were positive, but this is still Phase 1. AEZS also announced they were selling another 10 million shares under their “at the market” program.
AEZS announced a collaboration deal in January with a division of Roche on AEZ-108.
Earnings announced in November. Revenues rose to $9.5 million from $7.5 million and they lost $8.2 million versus $5.5 million from operations. They continue to sell stock under their “at the market” program and raised $15.8 million during and just after the quarter. They had $48 million of cash at September 30th and about $54 million after their latest stock sales. Shares outstanding are up over 100 million now.
This is pretty normal for a developing drug company.
Speculative for sure.
Up 15%, 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),
NEW Valuation –$13.00 (was $12, $10)
Closed up $.35 at $8.68
Earnings announced last week. Revenues were up 11% and they made $.04 on a non-GAAP basis (lost $.06 on a GAAP basis after the litigation charge and license termination charge). Cash rose to $39 million, gross margins improved a bit also. Guidance for 2012 is a 5-7% increase in revenues and $.04-$.08 in earnings per share, excluding two new product introductions anticipated for mid year introductions.
.This company needs to be sold so that someone can take advantage of their 70%+ gross margins and enjoy some profits.
Paragon filed a 13D/A in May 2011 disclosing they had upped their stake to 7%.
Up 53%, 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 $18.15 (was $17.96, $18.34, $16.07, $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 $.51 at $14.45
Earnings announced in February. Another good report. Sales were up 18%, pre-tax income was up 30%, but due to a higher tax rate EPS was flat at $.21 per share. Cash rose to $4.27 per share and our valuation moved up again to $18.15.
MEDW announced an acquisition in January. The acquired company sells software into the same customers as MEDW but in the adult stem cell and cord blood management area. No financial information about the acquisition or its revenues was disclosed. Looks like another growth area for the company. Constellation Software, who owns over 20% of MEDW announced in January that they had concluded their analysis of strategic alternatives. This is the code for they couldn’t find a buyer. Good company but already overvalued. Maybe they will turn their attention back to acquiring MEDW? We can dream.
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 128%, 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 $8.04 (was $10.91, $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 up $.11 at $1.50
Inuvo and Vetro announced in January that the shareholder votes on the merger will be on February 29th and that the merger will take effect shortly thereafter (assuming shareholders vote “FOR” the merger. They expect merger cost savings to be more than $2.4 million a year.
“Earnings” announced in November. Not good. Revenue fell to $6.3 million from $9.8 million last year and they lost about $1.6 million from operations compared to a profit of $368,000 last year. Cash fell to $.53 per share (about $4 million in total) and our valuation plunged to $8.04.
Inuvo (AMEX–INUV) announced in October they had agreed to buy VTRO in an all stock deal. The price is 1.546 shares of INUV for each share of VTRO. INUV was $1.75 when the deal was announced indicating a value of $2.71, but INUV shares have fallen to $.96 making the value about $1.49. INUV has about $50 million in sales, 40% gross margins and is slightly EBITDA positive. Maybe 1 and 1 can make 3 here. Our valuation of INUV is $4.32. VTRO’s largest shareholder filed a 13D/a indicating he is not happy with this deal and included calculations indicating that VTRO could return $3.38-$4.39 a share to shareholders on a liquidation of the company.
Should have sold this when it traded over $6.
Down 82% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $15.90 (was $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.18 at $5.68
Next earnings due out Tuesday, February 28th after the market close.
ANGN inked another group purchasing deal in February.
Angeion disclosed in an SEC filing in December that they had retained an investment banker to look at “strategic alternatives” that may also involve the sale of its New Leaf product line. Company could be for sale, or just a part of it. In any event this should be good news for us shareholders and ANGN continues to be significantly undervalued.
Earnings out in December. Sales were flat at about $8.4 million as was net income at about $400,000 or $.10 a share. Cash per share rose to $2.40 and our valuation rose to $15.90 in this seasonally good quarter, still up from $15.00 last year this time.
CEO bought 10,000 shares in September at $4.25. Good sign.
If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 49%, 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 $5.81 (was $5.72, $5.65, $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 $1.45 down $.05.
ARI announced a reseller win last week in addition to one in January for a 160 dealer outfit.
Earnings out in December. Revenues were up slightly to $5.410 million from $5.324 last year. Net income rose to $272,000 from $99,000 and EPS rose to $.03 from $.01 (fully taxed). Our valuation rose to $5.81 per share.
Looks like they may be serious about getting the stock price up and more visibility for the company.
Hmm, in addition to earnings and all the other recent announcements, the CEO got an amendment to his “change of control” agreement. Wonder why they are reviewing these kind of agreements right now?
ARIS announced in October that they had engaged a PR firm, saying their stock was undervalued and the business had great opportunities ahead.
ARIS filed an 8k in September with presentation materials for a “potential investor”.
Management finally looks like it is waking up and trying to increase the share price. Got a long way to go yet though.
Now down 10%, 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 $2.08 (was $2.09, $2.12, $2.60, $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 $.65, down $.02
Earnings announced last week. Decent. Sales were $22.5 million up from $21.7 million last year, gross margin was 47% and they made $1 million or $.02 per share. Our valuation dropped $.01 to $2.08 as there were 3 million more fully diluted shares outstanding. Cash was still a net negative, but getting close to even. Apparently this did not impress anyone as the stock fell on the earnings report.
Market cap of $34 million for an $80 million in sales company with almost 50% margins and not losing money, just too cheap.
Down 19%, BUY

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.37 (Was $1.23, $.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 $.10, closed at $.08.
CEO reported another 44,000 of stock purchases in late 2011 at $.095 to $.10 per share.
Earnings announced in November. Revenues were up 30% to $4,379,000 and they made $200,000 excluding a $289,000 severance charge. Yikes. Not bad. VOIP revenues were $475,000 up from $170,000 in the prior year and up slightly from the June quarter ($461,000). VOIP still lost $481,000 but this is down from $667,000 last year and $545,000 last quarter. Cash per share fell to $.13 (still more than the current market price) and our valuation rose again to $1.37 per share.
One of their Directors, Michael Reinarts, filed a 13D in November disclosing a 9.5% ownership stake. There were no specific proposals in the filing. We’ll have to wait and see what happens here. We know the stock is ridiculously cheap, and filing a 13D usually precedes some type of activist position.
At a $2.6 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 63%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$.85 (Was $1.05, $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 $.21, down $.02.
Oiy! Lotus announced in January that they had “sold” their Mongolian land. They get nothing for it and give up 3 drugstores in Bejing and $7 million of receivables. Not good as reflected on the huge (percentage wise at least) drop in the stock. This has indeed become a cheap lottery ticket. 5 shares for a buck. We are licking our wounds on this one, but will just wait it out. It may go to $0, or may hang around in the penny stock range for a while. The move into the new building has commenced and the warehouse (supposedly critical to selling in Bejing) will be functional by March and production to start by September.
Earnings announced in November. Revenues were up slightly over last year at $19 million versus $18.3 last year, but gross margins remained low and they made $2.1 million of $.04 per share compared to $.25 last year. Our valuation fell again to $.85.
Down 88%, HOLD

Cheap Stocks, Cheap Stocks 2/10/2012

Well the market finally paused last week. We were down 1% and are now up 11.5% for 2012.

Some of our stocks are just stupid cheap—compared to their net cash on hand. Check this list:

Cash as % of Stock Price:

RIMG 58%
EXTR 46%
PTIX 56%
GRVY 97%
CCUR 84%
MTSL 34%
SIGM 88%
ASTX 68%
CTIG 131%
MRVC 42%
ANGN 44%

Plus EXTR, RIMG, VTRO, ANGN and MRVC.PK are all in “play” with activist shareholders either trying to get them to pay out special dividends or take them over, or they are pursuing “strategic alternatives”.

The DOW was down .5% last week, NASDAQ was down .1% and the S+P 500 was down .2%. The Russell 3000 was down .4%.

RWWI, EXTR, MTSL, and MITL are our favorites.

MEDW announced earnings last week.

For the year, the DOW is up 4.8%, NASDAQ is up 11.5%, S+P 500 is up 6.8, and the Russell 3000 is up 7.5%

Last week we went 11 stocks up, 9 down and 2 unchanged. Since inception we are now 54 stocks up and 17 down for a 76% 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%
2012-BVSN +30%

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 49 stocks that we closed out since 2006 (44 were winners) the average net gain was 37%.

Top Image Systems. (NASDAQ-TISA)-Recommended 12/7/2011)
Buy Price-$2.03
Valuation $4.89
Closed down $.04 at $2.65
TISA announced a $2 million order to do the Italian census in January. Good news just keeps coming here.
TISA published a letter to shareholders in January, noting all the positives about the company and stating that they still believe the shares are still undervalued. Seemed to get some attention as the trading volume and price are up. These small Israeli software stocks can be a “value trap” if nobody knows about them, so we view this type of PR activity as a big plus.
Up 33%, HOLD

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $2.45 (after $.0475 special dividend)-(Was $2.92, $3.09)
Buy Price October 7, 2011- $.80 ($1.27 before special dividend)
Closed up $.02 at $1.00
MRV announced a new CEO in February, an internal guy. At least we have a leader to sell the company now.
Raging Capital has bought more than 6 million more shares in January. They now own over 23 million shares or 14.98%. Looks like the massive number of shares came from Wells Fargo (13G/a) selling some of their large position.
CFO and VP of Finance has resigned and gotten lucrative “stay” bonuses if they stay through March 31, 2012 and get the 10K filed. We think the “stay” bonus is really to get the company sold by then.
Now it looks like all the directors are resigning from MRV. Pretty odd, but they approved the sale of CES. There might be some kind of buy-out in the works that all the directors disagree with-just speculation on our part.
MRV announced in December that it was selling it’s CES subsidiary to a private equity group for net cash proceeds of about $20 million (net of $4.1 million of escrow hold backs). This will add another $.13 to the remaining hoard of about $.42. CES’s sales, margins are not disclosed in any of their SEC filing so it is not possible to adjust our valuation for this transaction yet. The transaction is expected to close by the end of January.
Earnings announced in November. Revenue was $62.5 million down from $66.1 million last year. Net income was $2.1 million or $.01 per share comparer to $3.6 million last year ($.02 per share). Cash before the $75 dividend dropped slightly to $150 million or $.90 per share. Our valuation dropped to $2.45 per share which is still more than double the current price.
Up 14% BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $12.10 (Was $13.40, $16.02)
Closed down $.32 at $5.74
Earnings announced in November. Not great. Revenues down 50% from last year to $40 million and they lost $2.8 million on a non-GAAP basis (they reported a $122 million loss which had $111 million goodwill write down in it). Cash fell a bit to $5.03 per share and our valuation fell again to $12.10 a share. Cash was $159 million.
Mak Capital One LLC filed a 13G in November disclosing a 6.6% (2,110,000 shares) stake in SIGM.
So we are trading at a market cap of about $12 million (excluding cash) for a $150- $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation keeps falling, so we need to keep our eye on this one.
Down 32%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $15.28 (Was $14.04, $10.39)
Closed down $.13 at $3.03.
Earnings announced in November. Pretty good. Revenues were up to $169 million from $161 million last year and they made $13.3 million on a Non-GAAP basis ($.24 per share) compared to $9.1 million ($.16 per share. Our valuation rose to $15.28.
EVEN, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.67 (Was $25.63, $26.45)
Closed down $.81 at $12.25
Pays $.68 a share annual dividend.
After climbing back to within $1 of our buy price, RIMG announced they would miss Q4 sales and earnings last week. Wham. Sales are expected to be $22 million and not the $24-$26 million anticipated. They blamed the entire shortfall on “delayed deals” for Qumu. The expected GAAP loss is estimated at $.15-$.17 per share including the Qumu transaction costs of $1.7 million, Nice start.
Earnings announced in November. Revenues down from $23.4 million to $20.3 million. They made $1.5 million ($.16 per share vs. $.24 last year). Cash was $115 million or $12.14 per share (before the Qumu $39 million payment after the quarter end). Our valuation just on their Q3 performance actually increased a bit to $25.67. Looking at their guidance we estimate that our valuation will fall to about $22 next year. This is still a big enough value gap to hang onto the stock, collect the 6% dividend and see what this Qumu acquisition does.
They are projecting the combined company will generate more than 15% sales growth in 2012 and that cash flows will be about the same as 2011. Accordingly they upped the quarterly dividend to $.17 per share.
After the Qumu payment they will have about $75 million in cash, or over $7 a share.
Down 14%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $67.94 (Was $63.84, $79.12, $63.99)
Closed up $.38 at $37.32
Pays $1.00 per share annual dividend.
Earnings announced in February. Good as expected. Revenues were $1.06 billion and they made $1.25 per share on a Non-GAAP basis. They ended the year with $6.91 per share in net cash and our valuation rose to $67.94. They repurchased 7.9 million shares over the last couple of quarters and ended up with 74 million fully diluted shares used in the EPS calculation in Q4. They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases and then they announced another $30 million (730,000 share) repurchase on Friday. They have just over $200 million left on their stock repurchase authorization.
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 30%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $6.28 (Was $5.61, $5.11)
Closed up $.19 at $1.99
MER announced a joint venture in January, but with a tiny company. It was not enough to even get 100 shares traded after the announcement.
Last earnings out in November. Sales were up from $2.7 million to $3 million and they made $226,000 ($.05 a share) versus $14,000 last year. Cash per share rose to $.68 from $.63 last quarter and our valuation rose to $6.28 per share. Overall a very good report, but no reaction in the stock price. For the 9 months ended September 30th, they have made $.13 per share compared to $.01 last year.
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap. .
Up 40% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $3.05 (Was $2.90, $3.11, $2.63, $2.97)
Closed at $.88, unchanged
Earnings announced in February. Things are looking up! Although revenues were down from $45 million last year to $39 million, operating income more than doubled to $2.1 million from $.9 million and net income rose to $1.6 million from $.3 million last year. Net cash also rose to over $5 million or $.10 per share. Our valuation jumped to $3.05.
Down 4%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $14.13 (was $11.38, $14.04, $18.54, $15.99)
Closed up $.09 at $3.69
Earnings announced in February. Better than the previous quarter for sure, but just ok. Sales were down from $17.9 million last year to $16.4 million, but well above the $12.9 in Q3. They lost $833,000 compared to $1,189,000 last year and $2.6 million in Q3. Cash fell from $3.50 to $3.10 per share as receivables increased by $3.2 million ($.37 per share). Overall our valuation rose to $14.13.
Down 27%, HOLD

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.42 (was $3.11, $5.21, $4.89, $4.37, $3.48)
Closed down $.77 at $2.04
Well an FDA panel turned down Astx’s application for a new indication for Dacogen. The game is not over yet until the FDA turns it down, but the panel vote was 10-3 against approval. Many more drugs in the pipeline and 60% of the market cap in cash, so we will hold onto this one longer.
Earnings announced in November. Sales rose to almost $17 million from $13.4 million last year and they lost $3.4 million before taxes. But this loss was after almost $8 million of acquisition expenses and stock based compensation. Cash ended up at $128 million or $1.28 a share. Our valuation rose to $3.42 a share.
As we said before, 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, 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 12%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $5.94-(was $4.87, $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.16 at $1.99
Earnings announced in November. Not bad at all. Revenues were $9 million, up from $6.3 million last year and they made $.07 on a non-GAAP basis. On a GAAP basis they lost $86,000. Cash per share was $1.12 and our valuation rose to $5.94 on increased sales, margins and reduced losses.
Down 26%, BUY

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$7.01 (was $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed up $.06 at $3.37
Earnings announced in February. Revenues dropped a tad from $85 million last year to $83 million and they made $5.8 million of net income on a Non-GAAP basis versus $5.1 million last year. Cash per share rose to $1.56 per share from $1.50 and our valuation rose to $7.01 per share. The company also announced last week that they have sold an option to a possible buyer of their corporate headquarters in California for $48.5 million. The option lasts until the end of 2012. That would add another $.50 a share (pre-closing costs and taxes) to the cash till.
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%.
Up 6%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $5.39-(Was $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed up $.14 at $2.10
Ragnarok 2’s final test began 12/26/2011. We have our fingers crossed that this really is the final test. Final product release is supposed to be in March.
Earnings announced in November. Not bad at all. Revenues rose 8% to $13.4 million and they made $3.1 million or $.11 per ADS. For the nine months ended September 30th, they have made $.25 per ADS. Cash fell about $1.5 million to $2.05 per ADS.
Our valuation rose a bit to $5.39, and at less than cash value and way below our valuation this is one good lottery ticket if they ever commercially release Ragnarok 2.
Up 45%, BUY

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 $.19 at $1.64
OMG! Zacks ranks AEZS #1. Will wonders never cease. Updated interim results on AEZ-108 were announced at ASCO in February—they were positive, but this is still Phase 1. AEZS also announced they were selling another 10 million shares under their “at the market” program.
AEZS announced a collaboration deal in January with a division of Roche on AEZ-108.
Earnings announced in November. Revenues rose to $9.5 million from $7.5 million and they lost $8.2 million versus $5.5 million from operations. They continue to sell stock under their “at the market” program and raised $15.8 million during and just after the quarter. They had $48 million of cash at September 30th and about $54 million after their latest stock sales. Shares outstanding are up over 100 million now.
This is pretty normal for a developing drug company.
Speculative for sure.
Up 15%, 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 –$12.00 (was $10)
Closed down $.54 at $8.33
SPNC had to book another $2 million of potential legal fees for their 2008 run in with ICE. They indemnified certain ex-officers/employees for legal fees. Will this never end.
Next earnings due out Thursday, February 16th before the market opens. We don’t expect anything dramatic here, but hopefully they will continue to show incremental sales and profit growth (excluding litigation charges).
CFO exercised 145,000 $2+ options on 11/3/2011 and sold 86,000 shares at $7.50 to cover the option exercise price and taxes.
Earnings announced in October. Mediocre again. Revenues were up nicely to $32.1 million (up 9% YOY), but they again made no money (ok, $109,000 or $0 per share). Included in net income was the charge for the recently lost litigation of over $800,000.
Cash rose to $36.2 million. We upped our valuation to $12.
This company needs to be sold so that someone can take advantage of their 70%+ gross margins and enjoy some profits.
Paragon filed a 13D/A in May 2011 disclosing they had upped their stake to 7%.
Up 47%, HOLD

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
NEW Valuation $18.15 (was $17.96, $18.34, $16.07, $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 $.59 at $13.94
Earnings announced last week. Another good report. Sales were up 18%, pre-tax income was up 30%, but due to a higher tax rate EPS was flat at $.21 per share. Cash rose to $4.27 per share and our valuation moved up again to $18.15.
MEDW announced an acquisition in January. The acquired company sells software into the same customers as MEDW but in the adult stem cell and cord blood management area. No financial information about the acquisition or its revenues was disclosed. Looks like another growth area for the company. Constellation Software, who owns over 20% of MEDW announced in January that they had concluded their analysis of strategic alternatives. This is the code for they couldn’t find a buyer. Good company but already overvalued. Maybe they will turn their attention back to acquiring MEDW? We can dream.
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 120%, 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 $8.04 (was $10.91, $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 up $.07 at $1.39
Inuvo and Vetro announced in January that the shareholder votes on the merger will be on February 29th and that the merger will take effect shortly thereafter (assuming shareholders vote “FOR” the merger. They expect merger cost savings to be more than $2.4 million a year.
“Earnings” announced in November. Not good. Revenue fell to $6.3 million from $9.8 million last year and they lost about $1.6 million from operations compared to a profit of $368,000 last year. Cash fell to $.53 per share (about $4 million in total) and our valuation plunged to $8.04.
Inuvo (AMEX–INUV) announced in October they had agreed to buy VTRO in an all stock deal. The price is 1.546 shares of INUV for each share of VTRO. INUV was $1.75 when the deal was announced indicating a value of $2.71, but INUV shares have fallen to $.96 making the value about $1.49. INUV has about $50 million in sales, 40% gross margins and is slightly EBITDA positive. Maybe 1 and 1 can make 3 here. Our valuation of INUV is $4.32. VTRO’s largest shareholder filed a 13D/a indicating he is not happy with this deal and included calculations indicating that VTRO could return $3.38-$4.39 a share to shareholders on a liquidation of the company.
Should have sold this when it traded over $6.
Down 83% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $15.90 (was $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.10 at $5.50
ANGN inked another group purchasing deal last week.
Angeion disclosed in an SEC filing in December that they had retained an investment banker to look at “strategic alternatives” that may also involve the sale of its New Leaf product line. Company could be for sale, or just a part of it. In any event this should be good news for us shareholders and ANGN continues to be significantly undervalued.
Earnings out in December. Sales were flat at about $8.4 million as was net income at about $400,000 or $.10 a share. Cash per share rose to $2.40 and our valuation rose to $15.90 in this seasonally good quarter, still up from $15.00 last year this time.
CEO bought 10,000 shares in September at $4.25. Good sign.
If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 44%, 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 $5.81 (was $5.72, $5.65, $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 $1.50 unchanged.
ARI announced a reseller win last week in addition to one in January for a 160 dealer outfit.
Earnings out in December. Revenues were up slightly to $5.410 million from $5.324 last year. Net income rose to $272,000 from $99,000 and EPS rose to $.03 from $.01 (fully taxed). Our valuation rose to $5.81 per share.
Looks like they may be serious about getting the stock price up and more visibility for the company.
Hmm, in addition to earnings and all the other recent announcements, the CEO got an amendment to his “change of control” agreement. Wonder why they are reviewing these kind of agreements right now?
ARIS announced in October that they had engaged a PR firm, saying their stock was undervalued and the business had great opportunities ahead.
ARIS filed an 8k in September with presentation materials for a “potential investor”.
Management finally looks like it is waking up and trying to increase the share price. Got a long way to go yet though.
Now down 7%, 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 $2.09 (was $2.12, $2.60, $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 $.67, up $.02
Next earnings due out Tuesday, February 14th before the market opens.
Earnings announced in November. Not bad. Revenues were $21.9 million up from $16.8 million last year and they made $363,000 ($.01 per share) versus a loss of $2.6 million ($.06 per share) last year. Cash was still net negative and our valuation fell $.03 to $2.09 per share.
Still more than 2X the current price.
Down 16%, BUY

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.37 (Was $1.23, $.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 $.10, closed at $.08.
CEO reported another 44,000 of stock purchases in late 2011 at $.095 to $.10 per share.
Earnings announced in November. Revenues were up 30% to $4,379,000 and they made $200,000 excluding a $289,000 severance charge. Yikes. Not bad. VOIP revenues were $475,000 up from $170,000 in the prior year and up slightly from the June quarter ($461,000). VOIP still lost $481,000 but this is down from $667,000 last year and $545,000 last quarter. Cash per share fell to $.13 (still more than the current market price) and our valuation rose again to $1.37 per share.
One of their Directors, Michael Reinarts, filed a 13D in November disclosing a 9.5% ownership stake. There were no specific proposals in the filing. We’ll have to wait and see what happens here. We know the stock is ridiculously cheap, and filing a 13D usually precedes some type of activist position.
At a $2.6 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 63%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$.85 (Was $1.05, $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 $.23, up $.05.
Oiy! Lotus announced in January that they had “sold” their Mongolian land. They get nothing for it and give up 3 drugstores in Bejing and $7 million of receivables. Not good as reflected on the huge (percentage wise at least) drop in the stock. This has indeed become a cheap lottery ticket. 5 shares for a buck. We are licking our wounds on this one, but will just wait it out. It may go to $0, or may hang around in the penny stock range for a while. The move into the new building has commenced and the warehouse (supposedly critical to selling in Bejing) will be functional by March and production to start by September.
Earnings announced in November. Revenues were up slightly over last year at $19 million versus $18.3 last year, but gross margins remained low and they made $2.1 million of $.04 per share compared to $.25 last year. Our valuation fell again to $.85.
Down 87%, HOLD

Cheap stocks, 2/3/2012 Update

This market just won’t let up. It is making us a bit nervous. We were up 4.8% last week and are now up 12.5% for the year..

Some of our stocks are just stupid cheap—compared to their cash on hand. Check this list:

Cash as % of Stock Price:

RIMG 55%
EXTR 47%
PTIX 61%
GRVY 104%
CCUR 86%
MTSL 38%
SIGM 83%
ASTX 49%
CTIG 110%
MRVC 43%
ANGN 43%

Plus EXTR, RIMG, VTRO, ANGN and MRVC.PK are all in “play” with activist shareholders either trying to get them to pay out special dividends or take them over, or they are pursuing “strategic alternatives”.

The DOW was up 1.6% last week, NASDAQ was up 3.2% and the S+P 500 was up 2.2%. The Russell 3000 was up 2.4%.

RWWI, EXTR, MTSL, TISA and MITL are our favorites.

CCUR, HPOL, EXTR and LXK earnings last week. None of them were bad.

For the year, the DOW is up 5.3%, NASDAQ is up 11.5%, S+P 500 is up 6.9, and the Russell 3000 is up 7.9%

Last week we went 16 stocks up, 5 down and 1 unchanged. Since inception we are now 56 stocks up and 15 down for a 79% 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%
2012-BVSN +30%

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 49 stocks that we closed out since 2006 (44 were winners) the average net gain was 37%.

Top Image Systems. (NASDAQ-TISA)-Recommended 12/7/2011)
Buy Price-$2.03
Valuation $4.89
Closed up $.09 at $2.69
TISA announced a $2 million order to do the Italian census in January. Good news just keeps coming here.
TISA published a letter to shareholders in January, noting all the positives about the company and stating that they still believe the shares are still undervalued. Seemed to get some attention as the trading volume and price are up. These small Israeli software stocks can be a “value trap” if nobody knows about them, so we view this type of PR activity as a big plus.
Up 33%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $2.45 (after $.0475 special dividend)-(Was $2.92, $3.09)
Buy Price October 7, 2011- $.80 ($1.27 before special dividend)
Closed up $.01 at $.98
MRV announced a new CEO on Friday, an internal guy. At least we have a leader to sell the company now.
Raging Capital has bought more than 6 million more shares in January. They now own over 23 million shares or 14.98%. Looks like the massive number of shares came from Wells Fargo (13G/a) selling some of their large position.
CFO and VP of Finance has resigned and gotten lucrative “stay” bonuses if they stay through March 31, 2012 and get the 10K filed. We think the “stay” bonus is really to get the company sold by then.
MRV announced in December that it was selling it’s CES subsidiary to a private equity group for net cash proceeds of about $20 million (net of $4.1 million of escrow hold backs). This will add another $.13 to the remaining hoard of about $.42. CES’s sales, margins are not disclosed in any of their SEC filing so it is not possible to adjust our valuation for this transaction yet. The transaction is expected to close by the end of January.
Earnings announced in November. Revenue was $62.5 million down from $66.1 million last year. Net income was $2.1 million or $.01 per share comparer to $3.6 million last year ($.02 per share). Cash before the $75 dividend dropped slightly to $150 million or $.90 per share. Our valuation dropped to $2.45 per share which is still more than double the current price.
Up 14% BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $12.10 (Was $13.40, $16.02)
Closed up $.14 at $6.06
Earnings announced in November. Not great. Revenues down 50% from last year to $40 million and they lost $2.8 million on a non-GAAP basis (they reported a $122 million loss which had $111 million goodwill write down in it). Cash fell a bit to $5.03 per share and our valuation fell again to $12.10 a share. Cash was $159 million.
Mak Capital One LLC filed a 13G in November disclosing a 6.6% (2,110,000 shares) stake in SIGM.
So we are trading at a market cap of about $45 million (excluding cash) for a $150- $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation keeps falling, so we need to keep our eye on this one.
Down 29%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $15.28 (Was $14.04, $10.39)
Closed up $.09 at $3.16.
Earnings announced in November. Pretty good. Revenues were up to $169 million from $161 million last year and they made $13.3 million on a Non-GAAP basis ($.24 per share) compared to $9.1 million ($.16 per share. Our valuation rose to $15.28.
Up 4%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.67 (Was $25.63, $26.45)
Closed up $.26 at $13.06
Pays $.68 a share annual dividend.
RIMG announced they would miss Q4 sales and earnings in January. Sales are expected to be $22 million and not the $24-$26 million anticipated. They blamed the entire shortfall on “delayed deals” for Qumu. The expected GAAP loss is estimated at $.15-$.17 per share including the Qumu transaction costs of $1.7 million, Nice start.
Earnings announced in November. Revenues down from $23.4 million to $20.3 million. They made $1.5 million ($.16 per share vs. $.24 last year). Cash was $115 million or $12.14 per share (before the Qumu $39 million payment after the quarter end). Our valuation just on their Q3 performance actually increased a bit to $25.67. Looking at their guidance we estimate that our valuation will fall to about $22 next year. This is still a big enough value gap to hang onto the stock, collect the 6% dividend and see what this Qumu acquisition does.
They are projecting the combined company will generate more than 15% sales growth in 2012 and that cash flows will be about the same as 2011. Accordingly they upped the quarterly dividend to $.17 per share.
After the Qumu payment they will have about $75 million in cash, or over $7 a share.
Down 8%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
NEW Valuation $67.94 (Was $63.84, $79.12, $63.99)
Closed up $.95 at $36.94
Pays $1.00 per share annual dividend.
Earnings announced last week. Good as expected. Revenues were $1.06 billion and they made $1.25 per share on a Non-GAAP basis. They ended the year with $6.91 per share in net cash and our valuation rose to $67.94. They repurchased 7.9 million shares over the last couple of quarters and ended up with 74 million fully diluted shares used in the EPS calculation in Q4. They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases and then they announced another $30 million (730,000 share) repurchase on Friday. They have just over $200 million left on their stock repurchase authorization.
Up 28%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $6.28 (Was $5.61, $5.11)
Closed up $.08 at $1.80
MER announced a joint venture in January, but with a tiny company. It was not enough to even get 100 shares traded after the announcement.
Last earnings out in November. Sales were up from $2.7 million to $3 million and they made $226,000 ($.05 a share) versus $14,000 last year. Cash per share rose to $.68 from $.63 last quarter and our valuation rose to $6.28 per share. Overall a very good report, but no reaction in the stock price. For the 9 months ended September 30th, they have made $.13 per share compared to $.01 last year.
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap. .
Up 27% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
NEW Valuation $3.05 (Was $2.90, $3.11, $2.63, $2.97)
Closed at $.88, up $.18
Earnings announced last week. Things are looking up! Although revenues were down from $45 million last year to $39 million, operating income more than doubled to $2.1 million from $.9 million and net income rose to $1.6 million from $.3 million last year. Net cash also rose to over $5 million or $.10 per share. Our valuation jumped to $3.05.
A Director reported buying 10,000 shares in December at $.65 a share..
Down 4%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
NEW Valuation $14.13 (was $11.38, $14.04, $18.54, $15.99)
Closed down $.30 at $3.60
Earnings announced last week. Better than the previous quarter for sure, but just ok. Sales were down from $17.9 million last year to $16.4 million, but well above the $12.9 in Q3. They lost $833,000 compared to $1,189,000 last year and $2.6 million in Q3. Cash fell from $3.50 to $3.10 per share as receivables increased by $3.2 million ($.37 per share). Overall our valuation rose to $14.13.
Down 29%, HOLD

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.42 (was $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.09 at $2.81
Earnings announced in November. Sales rose to almost $17 million from $13.4 million last year and they lost $3.4 million before taxes. But this loss was after almost $8 million of acquisition expenses and stock based compensation. Cash ended up at $128 million or $1.28 a share. Our valuation rose to $3.42 a share.
As we said before, 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, 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.
Up 22%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $5.94-(was $4.87, $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed down $.04 at $1.83
Earnings announced in November. Not bad at all. Revenues were $9 million, up from $6.3 million last year and they made $.07 on a non-GAAP basis. On a GAAP basis they lost $86,000. Cash per share was $1.12 and our valuation rose to $5.94 on increased sales, margins and reduced losses.
Down 34%, BUY

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
NEW Valuation-$7.01 (was $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed up $.07 at $3.31
Earnings announced last week. Revenues dropped a tad from $85 million last year to $83 million and they made $5.8 million of net income on a Non-GAAP basis versus $5.1 million last year. Cash per share rose to $1.56 per share from $1.50 and our valuation rose to $7.01 per share. The company also announced last week that they have sold an option to a possible buyer of their corporate headquarters in California for $48.5 million. The option lasts until the end of 2012. That would add another $.50 a share (pre-closing costs and taxes) to the cash till.
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%.
Up 4%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $5.39-(Was $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed up $.31 at $1.96
Ragnarok 2’s final test began 12/26/2011. We have our fingers crossed that this really is the final test.
Earnings announced in November. Not bad at all. Revenues rose 8% to $13.4 million and they made $3.1 million or $.11 per ADS. For the nine months ended September 30th, they have made $.25 per ADS. Cash fell about $1.5 million to $2.05 per ADS.
Our valuation rose a bit to $5.39, and at less than cash value and way below our valuation this is one good lottery ticket if they ever commercially release Ragnarok 2.
Up 35%, BUY

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 $.19 at $1.83
OMG! Zacks ranks AEZS #1. Will wonders never cease. Updated interim results on AEZ-108 were announced at ASCO last week—they were positive, but this is still Phase 1. AEZS also announced they were selling another 10 million shares under their “at the market” program.
AEZS announced a collaboration deal in January with a division of Roche on AEZ-108.
Earnings announced in November. Revenues rose to $9.5 million from $7.5 million and they lost $8.2 million versus $5.5 million from operations. They had $48 million of cash at September 30th and about $54 million after their latest stock sales. Shares outstanding are up over 100 million now.
This is pretty normal for a developing drug company.
Speculative for sure.
Up 29%, 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 –$12.00 (was $10)
Closed up $.54 at $8.76
CFO exercised 145,000 $2+ options on 11/3/2011 and sold 86,000 shares at $7.50 to cover the option exercise price and taxes.
Earnings announced in October. Mediocre again. Revenues were up nicely to $32.1 million (up 9% YOY), but they again made no money (ok, $109,000 or $0 per share). Included in net income was the charge for the recently lost litigation of over $800,000.
Cash rose to $36.2 million. We upped our valuation to $12.
This company needs to be sold so that someone can take advantage of their 70%+ gross margins and enjoy some profits.
Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.
Up 54%, 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 $17.96 (was $18.34, $16.07, $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 $.35 at $13.35
Next earnings due out Tuesday, February 7th before the market opens.
MEDW announced an acquisition in January. The acquired company sells software into the same customers as MEDW but in the adult stem cell and cord blood management area. No financial information about the acquisition or its revenues was disclosed. Looks like another growth area for the company. Constellation Software, who owns over 20% of MEDW announced in January that they had concluded their analysis of strategic alternatives. This is the code for they couldn’t find a buyer. Good company but already overvalued. Maybe they will turn their attention back to acquiring MEDW? We can dream.
Another good earnings report in November. Revenues up 24% to $15.5 million and they made $.18 per share compared to $.13 last year (up 38%). Cash rose to $4.20 a share. Our valuation fell a bit to $17.96 but up from $14.23 last year.
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 111%, 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 $8.04 (was $10.91, $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 $.05 at $1.32
Inuvo and Vetro announced in January that the shareholder votes on the merger will be on February 29th and that the merger will take effect shortly thereafter (assuming shareholders vote “FOR” the merger. They expect merger cost savings to be more than $2.4 million a year.
“Earnings” announced in November. Not good. Revenue fell to $6.3 million from $9.8 million last year and they lost about $1.6 million from operations compared to a profit of $368,000 last year. Cash fell to $.53 per share (about $4 million in total) and our valuation plunged to $8.04.
Inuvo (AMEX–INUV) announced in October they had agreed to buy VTRO in an all stock deal. The price is 1.546 shares of INUV for each share of VTRO. INUV was $1.75 when the deal was announced indicating a value of $2.71, but INUV shares have fallen to $1.02 making the value about $1.50. INUV has about $50 million in sales, 40% gross margins and is slightly EBITDA positive. Maybe 1 and 1 can make 3 here. Our valuation of INUV is $4.32. VTRO’s largest shareholder filed a 13D/a indicating he is not happy with this deal and included calculations indicating that VTRO could return $3.38-$4.39 a share to shareholders on a liquidation of the company.
Should have sold this when it traded over $6.
Down 84% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $15.90 (was $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.45 at $5.60
Angeion disclosed in an SEC filing in December that they had retained an investment banker to look at “strategic alternatives” that may also involve the sale of its New Leaf product line. Company could be for sale, or just a part of it. In any event this should be good news for us shareholders and ANGN continues to be significantly undervalued.
Earnings out in December. Sales were flat at about $8.4 million as was net income at about $400,000 or $.10 a share. Cash per share rose to $2.40 and our valuation rose to $15.90 in this seasonally good quarter, still up from $15.00 last year this time.
If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 47%, 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 $5.81 (was $5.72, $5.65, $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 $1.50 up $.13
ARI announced a customer win in January for a 160 dealer outfit.
Earnings out in December. Revenues were up slightly to $5.410 million from $5.324 last year. Net income rose to $272,000 from $99,000 and EPS rose to $.03 from $.01 (fully taxed). Our valuation rose to $5.81 per share.
Looks like they may be serious about getting the stock price up and more visibility for the company.
Hmm, in addition to earnings and all the other recent announcements, the CEO got an amendment to his “change of control” agreement. Wonder why they are reviewing these kind of agreements right now?
ARIS announced in October that they had engaged a PR firm, saying their stock was undervalued and the business had great opportunities ahead.
ARIS filed an 8k in September with presentation materials for a “potential investor”.
Management finally looks like it is waking up and trying to increase the share price. Got a long way to go yet though.
Now down 7%, 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 $2.09 (was $2.12, $2.60, $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 $.65, down $.04
Next earnings due out Tuesday, February 14th before the market opens.
Earnings announced in November. Not bad. Revenues were $21.9 million up from $16.8 million last year and they made $363,000 ($.01 per share) versus a loss of $2.6 million ($.06 per share) last year. Cash was still net negative and our valuation fell $.03 to $2.09 per share.
Still more than 2X the current price.
Down 18%, BUY

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.37 (Was $1.23, $.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 $.124, closed at $.09.
CEO reported another 44,000 of stock purchases in late 2011 at $.095 to $.10 per share.
Earnings announced in November. Revenues were up 30% to $4,379,000 and they made $200,000 excluding a $289,000 severance charge. Yikes. Not bad. VOIP revenues were $475,000 up from $170,000 in the prior year and up slightly from the June quarter ($461,000). VOIP still lost $481,000 but this is down from $667,000 last year and $545,000 last quarter. Cash per share fell to $.13 (still more than the current market price) and our valuation rose again to $1.37 per share.
One of their Directors, Michael Reinarts, filed a 13D in November disclosing a 9.5% ownership stake. There were no specific proposals in the filing. We’ll have to wait and see what happens here. We know the stock is ridiculously cheap, and filing a 13D usually precedes some type of activist position.
At a $2.6 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 56%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$.85 (Was $1.05, $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 $.18, down $.02.
Oiy! Lotus announced in January that they had “sold” their Mongolian land. They get nothing for it and give up 3 drugstores in Bejing and $7 million of receivables. Not good as reflected on the huge (percentage wise at least) drop in the stock. This has indeed become a cheap lottery ticket. 5 shares for a buck. We are licking our wounds on this one, but will just wait it out. It may go to $0, or may hang around in the penny stock range for a while. The move into the new building has commenced and the warehouse (supposedly critical to selling in Bejing) will be functional by March and production to start by September.
Earnings announced in November. Revenues were up slightly over last year at $19 million versus $18.3 last year, but gross margins remained low and they made $2.1 million of $.04 per share compared to $.25 last year. Our valuation fell again to $.85.
Down 89%, HOLD