Cheap Stocks, 5/25/2012 Update

We went backwards last week, down 1% while all the averages were up. Our overall 2012 gain is 9.9%, more than double than the market averages except NASDAQ where our lead narrowed to just 1%.

Some of our stocks are just stupid cheap—compared to their net cash on hand per share divided by their stock price.

Check this list:

RIMG 83%
EXTR 43%
PTIX 71%
GRVY 94%
CCUR 76%
MTSL 53%
SIGM 74%
ASTX 67%
CTIG 49%
MRVC 62%
ANGN 41%
AVNT 62%

Plus EXTR, RIMG, 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 .7% last week, NASDAQ was up 2.1% and the S+P 500 was up 1.7%. The Russell 3000 was up 2%.

AVNW, CBEY, MTSL, GRVY and MITL are our favorites.

SIGM earnings last week.

For the year, the DOW is up 1.9%, NASDAQ is up 9%, S+P 500 is up 4.8%, and the Russell 3000 is up 5%

Last week we went 12 stocks up, 9 down and 2 unchanged. Since inception we are now 55 stocks up and 18 down for a 75.3% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:

2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR +19%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%
2009-MBRK +67%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%
2009-NED +46%
2009-CUTR +13%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%
2012-BVSN +30%
2012-TISA +137%

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 50 stocks that we closed out since 2006 (45 were winners) the average net gain was 38%.

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $8.85 (Was $8.31)
Closed up $.04 at $2.46
Zacks added AVNW to their #1 ranking list.
Earnings out in May. Revenues were down $4 million to $111.6 million, but they made $2.2 million on a Non-GAAP basis versus losing $.4 million last year.
Our valuation rose to $8.85 and cash per share rose to $1.53.
Down 6%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17- ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.58 (Was $29.21)
Closed up $.81 at $5.70
Earnings out in May Revenues were up $5 million to $124 million and they lost $1.2 million versus $.14 million last year. EBITDA was up $4 million to $23 million. We continue to think this is way undervalued and are adding another $10,000 here.
Our valuation inched up to $29.58.
Down 21%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $2.36, $2.46 (after $.0475 special dividend), $2.92, $3.09)
Buy Price October 7, 2011- $.80 ($1.27 before special dividend)
Closed at $.96 up $.02
We should collect the $.30 per share dividend next week and the stock should drop about the same.
Earnings announced in May. All numbers have been restated for the CES sale in Q1.
Sales fell from $53 million to $48 million and the lost about $3.5 million pre-tax (after taking out stock compensation and a CFO severance charge). MRV declared another special dividend last week. $.30 a share this time. This will leave them with about $47 million of cash or another $.29 a share. Our valuation fell to $1.73 per share. Cash was $.59 per share. After the special dividend payable this month, our adjusted valuation will be $1.43 and assuming the stock price falls by the same amount, the stock will be trading at about 50% of our valuation.
Up 13% HOLD

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
NEW Valuation $10.67 (Was $8.41 $12.10, $13.40, $16.02)
Closed up $.20 at $5.84
Earnings announced last week. Still losing money but sales were up to $40 million from $36 million last quarter. They lost $8.5 million on a non-GAAP basis versus $14 million last quarter. Net cash per share fell a bit to $4.32. Over all our valuation increased about 25% to $10.67. Not bad, but not good enough to buy any more here.
They are projecting sales for next quarter (Q2) to be between $61-$67 million with 45% GAAP margins. Operating breakeven is expected in Q4 including the Trident acquisition which is expected to contribute about $24 million of sales per quarter.
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 $$200 million a year chip company with 50% margins. Still pretty stupid we think. We plan to hold on for another couple of quarters to see if they can turn this around.
Down 31%, 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 $12.81 (Was $15.28, $14.04, $10.39)
Closed up $.03 at $3.90
Earnings announced in March. Revenues from continuing operations were up 5% to $150 million and they made a profit of $.08 on a GAAP basis and $.22 a share on a non-GAAP basis. MITL is selling it’s DataNet/CommSource units which contributed about $14 million in sales during the quarter but are not included in their sales figures and therefore our valuation. Due to this reclassification to “discontinued operations” our valuation fell to $12.81 per share, still more than 3 times its current trading price. Overall we think this is a great earnings report, and this is a buying opportunity.
Up 28%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $$19.81 (Was $22.23, $25.63, $26.45)
Closed up $.05 at $7.86
Pays $.68 a share annual dividend.
We have collected $.54 of dividends since we recommended RIMG.
Another lousy quarter. Sales down 9% to $19.5 million and they lost $3 million on an operating basis. Cash fell to $66.8 million or $6.52 and our valuation fell again to $16.73.
This is the worst case of management squandering its assets on an acquisition to escape being bought out and fired. We have lost almost $10 on our valuation and the stock is down almost 40%. Qumu sales were $1.4 million. Spent over $40 million to buy this paltry revenue stream.
Guidance for 2012 is low double digit sales growth and the same level cash flow. Teetering on selling here despite the yield.
Down 45%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $62.59 (Was $63.94, $63.84, $79.12, $63.99)
Closed down $.30 at $25.83
We have also collected $.50 a share in dividends here.
LXK upped their dividend to $.30 a quarter.
Earnings announced in April. Revenues were $992 million and they made $1.05 per share on a non-GAAP basis. Net cash fell to $4.31 per share due to acquisitions, dividends and stock buybacks of $260 million. Fully diluted shares outstanding were 72.3 million compared to 79.8 million when we recommended LXK. Our valuation fell to $62.59. Analysts were disappointed, so down went the stock.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases. The vagaries of the stock analysts make us cautious but we are back down below our original buy price so we are making this a Buy again.
Down 10%, BUY

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.77 (Was $5.55, $6.28 $5.61, $5.11)
Closed down $.15 at $1.51
Earnings announced in May. Sales were up from $2.8 million to $3 million and they made $.07 per share versus $.03 last year. With $.80 a share in cash, this is trading at about 4X annualized earnings. Way too cheap. Our valuation rose to $5.77 per share.
Up 6% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $3.15 (Was $3.05, $2.90, $3.11, $2.63, $2.97)
Closed at $1.14, down $.04
Earnings announced in May. Sales dropped $3 million from $37 million to $34 million. Their loss was slashed from $2.3 million to $.3 million. Not bad. Our valuation rose to $3.15 per share. If they can get some sales momentum over the next couple of quarters we could see $2 plus. If……..
EVP purchased 12,500 shares in March at $1.03 and interim CFO bought 11,000 shares at $1.02.
Up 24%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $15.85 (was $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.10 at $3.50
Earnings announced in May. Not bad. Revenues were down $2 million to $16.3 million but they made $.04 per share. Cash fell to $2.61 per share as receivables rose. Our valuation rose to $15.85, the second quarter of rising valuation and just about back to when we recommended it. Now the price just needs to reflect the improvement.
Down 31%, 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 $3.44 (was $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.31 at $1.80
Earnings announced in May. Pretty good. Cash was $1.21 per share. Revenues spiked to $22 million from $17 million last year and they made $.04 per share on a GAAP basis compared to $.09 last year. They are still forecasting $65- $68 million in revenues for the year and losing $13-$15 million on a GAAP basis. Cash burn looks like about $5 million for the year.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $70 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
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 22%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $6.01-(was $6.17, $5.94, $4.87, $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.02 at $1.96
Earnings announced in May. Sales were down to $8.4 million from $9.7 million last year, but they made money this year, $.03 a share versus a loss of $.10 last year. Margins expanded to 55% and cash and investments were $1.40 per share. Our valuation fell to $6.01. Still trading at 38% of our valuation and has 60% of its market cap in cash.
Down 27%, BUY

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.31 (was $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.58 up $.15
Earnings announced in May. Sales fell to $73.4 million from $75.7 million, but they earned $2.3 million versus a $6.8 million loss last year. Cash per share stayed at $1.56 and our valuation fell to $6.31 on the sales decline. They are projecting next quarter at sales of $82-$90 million and EPS over $.10.
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 13%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $5.52-(Was $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.09 at $1.86
Q1 earnings announced in May. Nice. Revenues were $14.4 million and they made $1 million or $.04 per ADS. Cash was $48 million or $1.74 per share. No update on how Ragnarok 2 was doing or rumored Face Book games. Short term holders were disappointed as the stock fell. We are thrilled that cash and revenues went up from last quarter and our valuation rose to $5.52.
Ragnarok was commercially released in Korea on March 26th.
Up 28%, 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 at $.47 up $.01
AEZS announced that Perifosine failed in April. Carnage followed. Hmm, this will teach us a lesson to not recommend speculations any more. We are still holding ours as a lottery ticket.
Earnings out in March. Revenues for the quarter were $12.6 million, up from $10 million last year. Net loss was $7.5 million compared to $6.6 million last year. The net loss for the year was $29 million. Cash stood at $47 million and they continue to sell more stock. They sold another 3.6 million in 2012 so far and raised $6.4 million.
Speculative for sure.
Down 67%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),
Valuation –$13.00 (was $12, $10)
Closed up $.29 at $9.95
Earnings announced in May. Sales up 10% to $33.3 million and they broke even. Gross margins improved to 73%. SPNC also received FDA approval on the GlideLight laser Sheath which makes it easier to extract pacemaker leads.
Guidance for 2012 is unchanged– 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.
Up 75%, 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 $19.24 (was $18.15, $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 $.01 at $14.69
Earnings announced in May. Another good report. Revenues increased 22% and they made $.22 per share compared to $.17 last year. Cash is closing in on $4.50 a share ($4.42). Our valuation rose to $19.24.
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 132%, HOLD

Inuvo (INUV (was-VTRO, 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 $1.84 (was $8.04, $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 at $.65 up $.05
Earnings announced in May. The quarter only contained 1 month of combined operations after the merger. Sales for the quarter were $8.8 million and they reported $.2 million of adjusted EBITDA. The actual loss was $1.8 million. Our valuation plummeted to $1.84 a share based on the reported numbers. Our “guesstimate” valuation for a full quarter of combined operations is $3.59.
The Inuvo/VTRO merger closed in March and we now have 1.546 shares of INUV for each VTRO share we had before. We will wait a bit to see it .5 plus .5 can make 2.
They expect merger cost savings to be more than $2.4 million a year.
Down 87% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.36 (was $15.90, $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 $.06 at $5.85
Next earnings due out Thursday, May 31, before the market opens.
Earnings announced in March. Ok, but certainly not great. Revenues were flat at $7.1 million and they lost $249,000 or $.07 per share, slightly better than last years $.09 per share loss. Cash rose slightly to $2.42 per share and our valuation fell to $13.36 compared to $13.60 in the same quarter last year.
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.
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.
While ANGN is still trading at less than ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 53%, HOLD

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 $5.82 (was $5.81, $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 $1.25 down $.20
Earnings announced in March. Not bad. Sales were up to $5.5 million from $5.2 million last year. They only made $61,000 ($.01) of income versus last years $123,000 ($.02). Their net cash position improved a tad to minus $3.7 million from minus $3.8 million last year. Our valuation stayed about the same at $5.82.
ARI announced a reseller win in February in addition to one in January for a 160 dealer outfit.
Now down 22%, 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 $2.55 (was $2.08, $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 $.82, down $.02
Earnings in May. Not bad. While sales were down to $22 million from $27 million last year (last year included a one big order), they made $.03 a share compared to $.04 last year. Margins increased to just over 50% from 47% last quarter. Our new valuation is $2.55 a share, down $.05 from last year.
Peter Kamin the new Chairman of the Board filed a 13d in March disclosing an 11% ownership state. Interesting as one would file a 13G if their intention was to just be a passive investor. Maybe as Chairman he will do SOMETHING to get the share price up.
RWWI announced an acquisition in March, but gave no financial details. “If a tree falls in the forest but there is no one around to hear it, dies it make a sound”? Seems like the company is making no effort to get this company known to the investment community. We have been in this one a LONG time and are getting impatient.
Market cap of $41 million for an $90 million in sales company with 50% margins and not losing money, just too cheap.
Our valuation is 3X the current price.
Up 3%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.34 (Was $1.37, $1.36, $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 $.26, closed at $.255.
Earnings announced in May. Sales were up $250k over last year to $4.4 million and they made $113k versus a loss of $342k last year. Cash rose to $3.7 million or $.13 per share. Our valuation fell $.03 to $1.34 but this is up from $.91 a year ago. Three profitable quarters in a row.
At a $8 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
Down 4%. 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 $.04, unchanged.
Now LTUS announced in April that they have no money for audits and SEC filings. Hammered down to a nickel a share. Can you spare them some money? Not worth selling at this point until we need tax losses. Maybe something good will happen. What a disaster. No more Chinese stocks for us, no matter how compelling the valuation.
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. 25 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 98%, HOLD

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Cheap Stocks, 5/18/2012 Update

Nasty, brutal week. No bad news for any of our company’s but we were down almost 7%. All the averages were almost as bad. Our overall 2012 gain is 10.9%, well above all of the market averages.

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

Check this list:

RIMG 83%
EXTR 45%
PTIX 72%
GRVY 89%
CCUR 74%
MTSL 48%
SIGM 82%
ASTX 76%
CTIG 47%
MRVC 63%
ANGN 42%
AVNT 63%

Plus EXTR, RIMG, 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 3.5% last week, NASDAQ was down 5.3% and the S+P 500 was down 4.3%. The Russell 3000 was down 4.6%.

AVNW, CBEY, MTSL, GRVY and MITL are our favorites.

INUV, RWWI, CTIG and GRVY earnings last week.

For the year, the DOW is up 4.9%, NASDAQ is up 12.6%, S+P 500 is up 7.6%, and the Russell 3000 is up 7.9%

Last week we went 5 stocks up, 16 down and 2 unchanged. Since inception we are now 56 stocks up and 17 down for a 76.7% 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%
2012-TISA +137%

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 50 stocks that we closed out since 2006 (45 were winners) the average net gain was 38%.

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $8.85 (Was $8.31)
Closed down $.29 at $2.42
Earnings out in May. Revenues were down $4 million to $111.6 million, but they made $2.2 million on a Non-GAAP basis versus losing $.4 million last year.
Our valuation rose to $8.85 and cash per share rose to $1.53.
Down 8%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17- ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.58 (Was $29.21)
Closed up $.05 at $6.51
Earnings out in May Revenues were up $5 million to $124 million and they lost $1.2 million versus $.14 million last year. EBITDA was up $4 million to $23 million. We continue to think this is way undervalued and are adding another $10,000 here.
Our valuation inched up to $29.58.
Down 9%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $2.36, $2.46 (after $.0475 special dividend), $2.92, $3.09)
Buy Price October 7, 2011- $.80 ($1.27 before special dividend)
Closed at $.94 down $.12
Not sure if it was the market, or the confusion again about the dividend payment. If you want the dividend, you need to hold the stock through the payment date. Usually it would be the ex-dividend date which was last week. A lot of people were expecting the stock to drop $.30, so there may have been some selling last week thinking that they would get the dividend too.
Earnings announced in May. All numbers have been restated for the CES sale in Q1.
Sales fell from $53 million to $48 million and the lost about $3.5 million pre-tax (after taking out stock compensation and a CFO severance charge). MRV declared another special dividend last week. $.30 a share this time. This will leave them with about $47 million of cash or another $.29 a share. Our valuation fell to $1.73 per share. Cash was $.59 per share. After the special dividend payable this month, our adjusted valuation will be $1.43 and assuming the stock price falls by the same amount, the stock will be trading at about 50% of our valuation.
Up 11% HOLD

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $8.41 (Was $12.10, $13.40, $16.02)
Closed down $.02 at $5.64
Well SIGM tightened their anti-takeover provisions in early April. Entrenched management for sure. Must be getting scared of Potomac.
SIGM was selected to buy Trident Microsystems assets out of bankruptcy. They are paying just over $28 million for what they project to be $120 million of annual sales that will be EBITDA positive in the first year. Sounds good, but no one is impressed enough to bid up the stock price.
Potomac Capital filed another 13D/A last week as they raised their stake in SIGM to 6.9% with purchases in the $4.80’s of about 44,000 shares.
“Earnings” announced in March. Not good. Revenues down 50% from last year and down 10% from the previous quarter. They lost $18 million $.58 per share ($14 million non-GAAP loss) for the quarter. Cash was $150 million or $4.60 per share but down $1.06 per share for the year. They are saying they expect to reach profitability and cash flow positive operations by the end of this fiscal year (January 2013). Our valuation plunged to $8.41 per share.
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 $20 million (excluding cash) for a $150- $200 million a year chip company with 50% margins. Still pretty stupid we think. With the falling valuation we are thinking of selling, but will hold on for another couple of quarters to see if they can turn this around.
Down 34%, Weak-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 $12.81 (Was $15.28, $14.04, $10.39)
Closed down $.56 at $3.87
Earnings announced in March. Revenues from continuing operations were up 5% to $150 million and they made a profit of $.08 on a GAAP basis and $.22 a share on a non-GAAP basis. MITL is selling it’s DataNet/CommSource units which contributed about $14 million in sales during the quarter but are not included in their sales figures and therefore our valuation. Due to this reclassification to “discontinued operations” our valuation fell to $12.81 per share, still more than 3 times its current trading price. Overall we think this is a great earnings report, and this is a buying opportunity.
Up 27%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $$19.81 (Was $22.23, $25.63, $26.45)
Closed down $.77 at $7.81
Pays $.68 a share annual dividend.
We have collected $.54 of dividends since we recommended RIMG.
Another lousy quarter. Sales down 9% to $19.5 million and they lost $3 million on an operating basis. Cash fell to $66.8 million or $6.52 and our valuation fell again to $16.73.
This is the worst case of management squandering its assets on an acquisition to escape being bought out and fired. We have lost almost $10 on our valuation and the stock is down almost 40%. Qumu sales were $1.4 million. Spent over $40 million to buy this paltry revenue stream.
Guidance for 2012 is low double digit sales growth and the same level cash flow. Teetering on selling here despite the yield.
Down 45%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $62.59 (Was $63.94, $63.84, $79.12, $63.99)
Closed down $2.18 at $26.13
We have also collected $.50 a share in dividends here.
LXK upped their dividend to $.30 a quarter.
Earnings announced in April. Revenues were $992 million and they made $1.05 per share on a non-GAAP basis. Net cash fell to $4.31 per share due to acquisitions, dividends and stock buybacks of $260 million. Fully diluted shares outstanding were 72.3 million compared to 79.8 million when we recommended LXK. Our valuation fell to $62.59. Analysts were disappointed, so down went the stock.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases. The vagaries of the stock analysts make us cautious but we are back down below our original buy price so we are making this a Buy again.
Down 9%, BUY

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.77 (Was $5.55, $6.28 $5.61, $5.11)
Closed down $.24 at $1.66
Earnings announced in May. Sales were up from $2.8 million to $3 million and they made $.07 per share versus $.03 last year. With $.80 a share in cash, this is trading at about 4X annualized earnings. Way too cheap. Our valuation rose to $5.77 per share.
Up 17% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $3.15 (Was $3.05, $2.90, $3.11, $2.63, $2.97)
Closed at $1.18, up $.08
Earnings announced in May. Sales dropped $3 million from $37 million to $34 million. Their loss was slashed from $2.3 million to $.3 million. Not bad. Our valuation rose to $3.15 per share. If they can get some sales momentum over the next couple of quarters we could see $2 plus. If……..
EVP purchased 12,500 shares in March at $1.03 and interim CFO bought 11,000 shares at $1.02.
Up 28%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $15.85 (was $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.08 at $3.60
Earnings announced in May. Not bad. Revenues were down $2 million to $16.3 million but they made $.04 per share. Cash fell to $2.61 per share as receivables rose. Our valuation rose to $15.85, the second quarter of rising valuation and just about back to when we recommended it. Now the price just needs to reflect the improvement.
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 $3.44 (was $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed down $.04 at $1.59
Earnings announced in May. Pretty good. Cash was $1.21 per share. Revenues spiked to $22 million from $17 million last year and they made $.04 per share on a GAAP basis compared to $.09 last year. They are still forecasting $65- $68 million in revenues for the year and losing $13-$15 million on a GAAP basis. Cash burn looks like about $5 million for the year.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $70 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
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 31%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $6.01-(was $6.17, $5.94, $4.87, $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.03 at $1.94
Earnings announced in May. Sales were down to $8.4 million from $9.7 million last year, but they made money this year, $.03 a share versus a loss of $.10 last year. Margins expanded to 55% and cash and investments were $1.40 per share. Our valuation fell to $6.01. Still trading at 38% of our valuation and has 60% of its market cap in cash.
Down 28%, BUY

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.31 (was $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.43 down $.18
Earnings announced in May. Sales fell to $73.4 million from $75.7 million, but they earned $2.3 million versus a $6.8 million loss last year. Cash per share stayed at $1.56 and our valuation fell to $6.31 on the sales decline. They are projecting next quarter at sales of $82-$90 million and EPS over $.10.
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 8%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $5.52-(Was $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.28 at $1.95
Q1 earnings announced last week. Nice. Revenues were $14.4 million and they made $1 million or $.04 per ADS. Cash was $48 million or $1.74 per share. No update on how Ragnarok 2 was doing or rumored Face Book games. Short term holders were disappointed as the stock fell. We are thrilled that cash and revenues went up from last quarter and our valuation rose to $5.52.
Ragnarok was commercially released in Korea on March 26th.
Up 34%, 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 $.10 at $.46
AEZS announced that Perifosine failed in April. Carnage followed. Hmm, this will teach us a lesson to not recommend speculations any more. We are still holding ours as a lottery ticket.
Earnings out in March. Revenues for the quarter were $12.6 million, up from $10 million last year. Net loss was $7.5 million compared to $6.6 million last year. The net loss for the year was $29 million. Cash stood at $47 million and they continue to sell more stock. They sold another 3.6 million in 2012 so far and raised $6.4 million.
Speculative for sure.
Down 68%, 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 $1.54 at $9.66
Earnings announced in May. Sales up 10% to $33.3 million and they broke even. Gross margins improved to 73%. SPNC also received FDA approval on the GlideLight laser Sheath which makes it easier to extract pacemaker leads.
Guidance for 2012 is unchanged– 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.
Up 70%, 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 $19.24 (was $18.15, $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 down $.37 at $14.68
Earnings announced in May. Another good report. Revenues increased 22% and they made $.22 per share compared to $.17 last year. Cash is closing in on $4.50 a share ($4.42). Our valuation rose to $19.24.
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 132%, HOLD

Inuvo (INUV (was-VTRO, MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
NEW Valuation $1.84 (was $8.04, $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 at $.60 down $.09
Earnings announced last week. The quarter only contained 1 month of combined operations after the merger. Sales for the quarter were $8.8 million and they reported $.2 million of adjusted EBITDA. The actual loss was $1.8 million. Our valuation plummeted to $1.84 a share based on the reported numbers. Our “guesstimate” valuation for a full quarter of combined operations is $3.59.
The Inuvo/VTRO merger closed in March and we now have 1.546 shares of INUV for each VTRO share we had before. We will wait a bit to see it .5 plus .5 can make 2.
They expect merger cost savings to be more than $2.4 million a year.
Down 87% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.36 (was $15.90, $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 $.19 at $5.79
Next earnings due out Thursday, May 31, before the market opens.
Earnings announced in March. Ok, but certainly not great. Revenues were flat at $7.1 million and they lost $249,000 or $.07 per share, slightly better than last years $.09 per share loss. Cash rose slightly to $2.42 per share and our valuation fell to $13.36 compared to $13.60 in the same quarter last year.
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.
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.
While ANGN is still trading at less than ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 51%, HOLD

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 $5.82 (was $5.81, $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 $.15
Earnings announced in March. Not bad. Sales were up to $5.5 million from $5.2 million last year. They only made $61,000 ($.01) of income versus last years $123,000 ($.02). Their net cash position improved a tad to minus $3.7 million from minus $3.8 million last year. Our valuation stayed about the same at $5.82.
ARI announced a reseller win in February in addition to one in January for a 160 dealer outfit.
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 $.84, up $.06
Earnings out last week. Not bad. While sales were down to $22 million from $27 million last year (last year included a one big order), they made $.03 a share compared to $.04 last year. Margins increased to just over 50% from 47% last quarter. While they did not include detailed balance sheet data in their press release so that we could complete our valuation, based on these results, we estimate our valuation will rise by 20% or more to over $2.50. We will update when the 10Q is filed.
Peter Kamin the new Chairman of the Board filed a 13d in March disclosing an 11% ownership state. Interesting as one would file a 13G if their intention was to just be a passive investor. Maybe as Chairman he will do SOMETHING to get the share price up.
RWWI announced an acquisition in March, but gave no financial details. “If a tree falls in the forest but there is no one around to hear it, dies it make a sound”? Seems like the company is making no effort to get this company known to the investment community. We have been in this one a LONG time and are getting impatient.
Market cap of $41 million for an $90 million in sales company with 50% margins and not losing money, just too cheap.
Our valuation is 3X the current price.
Up 6%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
NEW Valuation $1.34 (Was $1.37, $1.36, $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 $.27, closed at $.27.
Earnings announced last week. Sales were up $250k over last year to $4.4 million and they made $113k versus a loss of $342k last year. Cash rose to $3.7 million or $.13 per share. Our valuation fell $.03 to $1.34 but this is up from $.91 a year ago. Three profitable quarters in a row.
At a $8 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
EVEN. 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 $.04, unchanged.
Now LTUS announced in April that they have no money for audits and SEC filings. Hammered down to a nickel a share. Can you spare them some money? Not worth selling at this point until we need tax losses. Maybe something good will happen. What a disaster. No more Chinese stocks for us, no matter how compelling the valuation.
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. 25 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 98%, HOLD

Cheap Stocks, 5/11/2012 Update

Another down week in the market but we were only down .3%. Our overall 2012 gain is 17.8%

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

Cash as % of Stock Price:

RIMG 76%
EXTR 43%
PTIX 73%
GRVY 81%
CCUR 72%
MTSL 42%
SIGM 82%
ASTX 74%
CTIG 38%
MRVC 46%
ANGN 43%
AVNT 56%

Plus EXTR, RIMG, 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 1.7% last week, NASDAQ was down .8% and the S+P 500 was down 1.2%. The Russell 3000 was down 1.%.

AVNW, CBEY, MTSL, and MITL are our favorites.

MEDW, MRVC, MTSL and PTIX earnings last week.

For the year, the DOW is up 4.9%, NASDAQ is up 12.6%, S+P 500 is up 7.6%, and the Russell 3000 is up 7.9%

Last week we went 6 stocks up, 15 down and 2 unchanged. Since inception we are now 56 stocks up and 15 down for a 76.7% 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%
2012-TISA +137%

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 50 stocks that we closed out since 2006 (45 were winners) the average net gain was 38%.

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $8.85 (Was $8.31)
Closed down $.07 at $2.71
Earnings out in May. Revenues were down $4 million to $111.6 million, but they made $2.2 million on a Non-GAAP basis versus losing $.4 million last year.
Our valuation rose to $8.85 and cash per share rose to $1.53.
Up 3%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17- ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.58 (Was $29.21)
Closed down $.07 at $6.46
Earnings out in May Revenues were up $5 million to $124 million and they lost $1.2 million versus $.14 million last year. EBITDA was up $4 million to $23 million. We continue to think this is way undervalued and are adding another $10,000 here.
Our valuation inched up to $29.58.
Down 10%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
NEW Valuation $1.73 (Was $2.36, $2.46 (after $.0475 special dividend), $2.92, $3.09)
Buy Price October 7, 2011- $.80 ($1.27 before special dividend)
Closed at $1.06 unchanged
Earnings announced last week. All numbers have been restated for the CES sale in Q1.
Sales fell from $53 million to $48 million and the lost about $3.5 million pre-tax (after taking out stock compensation and a CFO severance charge). MRV declared another special dividend last week. $.30 a share this time. This will leave them with about $47 million of cash or another $.29 a share. Our valuation fell to $1.73 per share. Cash was $.59 per share. After the special dividend payable this month, our adjusted valuation will be $1.43 and assuming the stock price falls by the same amount, the stock will be trading at about 50% of our valuation.
Up 21% HOLD

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $8.41 (Was $12.10, $13.40, $16.02)
Closed down $.02 at $5.66
Well SIGM tightened their anti-takeover provisions in early April. Entrenched management for sure. Must be getting scared of Potomac.
SIGM was selected to buy Trident Microsystems assets out of bankruptcy. They are paying just over $28 million for what they project to be $120 million of annual sales that will be EBITDA positive in the first year. Sounds good, but no one is impressed enough to bid up the stock price.
Potomac Capital filed another 13D/A last week as they raised their stake in SIGM to 6.9% with purchases in the $4.80’s of about 44,000 shares.
“Earnings” announced in March. Not good. Revenues down 50% from last year and down 10% from the previous quarter. They lost $18 million $.58 per share ($14 million non-GAAP loss) for the quarter. Cash was $150 million or $4.60 per share but down $1.06 per share for the year. They are saying they expect to reach profitability and cash flow positive operations by the end of this fiscal year (January 2013). Our valuation plunged to $8.41 per share.
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 $20 million (excluding cash) for a $150- $200 million a year chip company with 50% margins. Still pretty stupid we think. With the falling valuation we are thinking of selling, but will hold on for another couple of quarters to see if they can turn this around.
Down 33%, Weak-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 $12.81 (Was $15.28, $14.04, $10.39)
Closed down $.23 at $4.43
Earnings announced in March. Revenues from continuing operations were up 5% to $150 million and they made a profit of $.08 on a GAAP basis and $.22 a share on a non-GAAP basis. MITL is selling it’s DataNet/CommSource units which contributed about $14 million in sales during the quarter but are not included in their sales figures and therefore our valuation. Due to this reclassification to “discontinued operations” our valuation fell to $12.81 per share, still more than 3 times its current trading price. Overall we think this is a great earnings report, and this is a buying opportunity.
Up 46%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $$19.81 (Was $22.23, $25.63, $26.45)
Closed down $.12 at $8.58
Pays $.68 a share annual dividend.
We have also collected $.54 of dividends since we recommended RIMG.
Another lousy quarter. Sales down 9% to $19.5 million and they lost $3 million on an operating basis. Cash fell to $66.8 million or $6.52 and our valuation fell again to $16.73.
This is the worst case of management squandering its assets on an acquisition to escape being bought out and fired. We have lost almost $10 on our valuation and the stock is down almost 40%. Qumu sales were $1.4 million. Spent over $40 million to buy this paltry revenue stream.
Guidance for 2012 is low double digit sales growth and the same level cash flow. Teetering on selling here despite the yield.
Down 40%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $62.59 (Was $63.94, $63.84, $79.12, $63.99)
Closed down $1.04 at $28.31
We have also collected $.50 a share in dividends here.
LXK upped their dividend to $.30 a quarter.
Earnings announced in April. Revenues were $992 million and they made $1.05 per share on a non-GAAP basis. Net cash fell to $4.31 per share due to acquisitions, dividends and stock buybacks of $260 million. Fully diluted shares outstanding were 72.3 million compared to 79.8 million when we recommended LXK. Our valuation fell to $62.59. Analysts were disappointed, so down went the stock.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases. The vagaries of the stock analysts make us cautious but we are back down slightly below our original buy price so we are making this a Buy again.
Down 2%, BUY

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
NEW Valuation $5.77 (Was $5.55, $6.28 $5.61, $5.11)
Closed up $.16 at $1.90
Earnings announced last week. Sales were up from $2.8 million to $3 million and they made $.07 per share versus $.03 last year. With $.80 a share in cash, this is trading at about 4X annualized earnings. Way too cheap. Our valuation rose to $5.77 per share.
Up 34% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $3.15 (Was $3.05, $2.90, $3.11, $2.63, $2.97)
Closed at $1.10, down $.10
Earnings announced in May. Sales dropped $3 million from $37 million to $34 million. Their loss was slashed from $2.3 million to $.3 million. Not bad. Our valuation rose to $3.15 per share. If they can get some sales momentum over the next couple of quarters we could see $2 plus. If……..
EVP purchased 12,500 shares in March at $1.03 and interim CFO bought 11,000 shares at $1.02.
Up 20%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $15.85 (was $14.13, $11.38, $14.04, $18.54, $15.99)
Closed up $.08 at $3.68
Earnings announced in May. Not bad. Revenues were down $2 million to $16.3 million but they made $.04 per share. Cash fell to $2.61 per share as receivables rose. Our valuation rose to $15.85, the second quarter of rising valuation and just about back to when we recommended it. Now the price just needs to reflect the improvement.
Down 28%, 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 $3.44 (was $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.02 at $1.63
Earnings announced in May. Pretty good. Cash was $1.21 per share. Revenues spiked to $22 million from $17 million last year and they made $.04 per share on a GAAP basis compared to $.09 last year. They are still forecasting $65- $68 million in revenues for the year and losing $13-$15 million on a GAAP basis. Cash burn looks like about $5 million for the year.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $70 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
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 29%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $6.01-(was $6.17, $5.94, $4.87, $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed down $.22 at $1.91
Earnings announced last week. Sales were down to $8.4 million from $9.7 million last year, but they made money this year, $.03 a share versus a loss of $.10 last year. Margins expanded to 55% and cash and investments were $1.40 per share. Our valuation fell to $6.01. Still trading at 38% of our valuation and has 60% of its market cap in cash.
Down 29%, BUY

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.31 (was $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.61 down $.29
Earnings announced in May. Sales fell to $73.4 million from $75.7 million, but they earned $2.3 million versus a $6.8 million loss last year. Cash per share stayed at $1.56 and our valuation fell to $6.31 on the sales decline. They are projecting next quarter at sales of $82-$90 million and EPS over $.10.
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 14%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $5.00-(Was $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.04 at $2.23
Earning report filed in May. Sales for the year were $50 million and they made almost $13 million ($.47 per ADS). Cash per share fell to $1.82 from $2.05 as they poured some cash into software development.
Ragnarok was commercially released in Korea on March 26th.
Our valuation fell a bit to $5.00.
Up 54%, 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 $.03 at $.56
AEZS announced that Perifosine failed in April. Carnage followed. Hmm, this will teach us a lesson to not recommend speculations any more. We are still holding ours as a lottery ticket.
Earnings out in March. Revenues for the quarter were $12.6 million, up from $10 million last year. Net loss was $7.5 million compared to $6.6 million last year. The net loss for the year was $29 million. Cash stood at $47 million and they continue to sell more stock. They sold another 3.6 million in 2012 so far and raised $6.4 million.
Speculative for sure.
Down 61%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),
Valuation –$13.00 (was $12, $10)
Closed up $.70 at $11.20
Earnings announced in May. Sales up 10% to $33.3 million and they broke even. Gross margins improved to 73%. SPNC also received FDA approval on the GlideLight laser Sheath which makes it easier to extract pacemaker leads.
Guidance for 2012 is unchanged– 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.
Up 97%, 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 $19.24 (was $18.15, $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 $.41 at $15.05
Earnings announced last week. Another good report. Revenues increased 22% and they made $.22 per share compared to $.17 last year. Cash is closing in on $4.50 a share ($4.42). Our valuation rose to $19.24.
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 137%, HOLD

Inuvo (INUV (was-VTRO, 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 at $.69 down $.02
The Inuvo/VTRO merger closed in March and we now have 1.546 shares of INUV for each VTRO share we had before. We will wait a bit to see it .5 plus .5 can make 2.
They expect merger cost savings to be more than $2.4 million a year.
Should have sold this when it traded over $6.
Down 87% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.36 (was $15.90, $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 $.15 at $5.60
Earnings announced in March. Ok, but certainly not great. Revenues were flat at $7.1 million and they lost $249,000 or $.07 per share, slightly better than last years $.09 per share loss. Cash rose slightly to $2.42 per share and our valuation fell to $13.36 compared to $13.60 in the same quarter last year.
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.
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.
While ANGN is still trading at less than ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 47%, HOLD

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 $5.82 (was $5.81, $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 $1.60 down $.06
Earnings announced in March. Not bad. Sales were up to $5.5 million from $5.2 million last year. They only made $61,000 ($.01) of income versus last years $123,000 ($.02). Their net cash position improved a tad to minus $3.7 million from minus $3.8 million last year. Our valuation stayed about the same at $5.82.
ARI announced a reseller win in February in addition to one in January for a 160 dealer outfit.
Now down 1%, 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 $.78, down $.02
Earnings due out Tuesday, May 15th before the market opens.
Peter Kamin the new Chairman of the Board filed a 13d in March disclosing an 11% ownership state. Interesting as one would file a 13G if their intention was to just be a passive investor. Maybe as Chairman he will do SOMETHING to get the share price up.
RWWI announced an acquisition in March, but gave no financial details. “If a tree falls in the forest but there is no one around to hear it, dies it make a sound”? Seems like the company is making no effort to get this company known to the investment community. We have been in this one a LONG time and are getting impatient.
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. 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 2%, HOLD

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 $.27, closed at $.27.
Earnings in April. Sales were up $100k over last quarter to $4.5 million and they made $160k. Cash fell to $2.9 million or $.10 per share. Our valuation fell a penny to $1.36. Two profitable quarters in a row. The CEO expressed confidence that they can continue to grow revenues in the press release.
CEO reported another 44,000 of stock purchases in late 2011 at $.095 to $.10 per share.
At a $7 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
Down 4%. 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 $.04, unchanged.
Now LTUS announced in April that they have no money for audits and SEC filings. Hammered down to a nickel a share. Can you spare them some money? Not worth selling at this point until we need tax losses. Maybe something good will happen. What a disaster. No more Chinese stocks for us, no matter how compelling the valuation.
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. 25 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 98%, HOLD

Cheap Stocks, 5/4/2012 Update

Bad week in the market for all. We were down 2.6% last week overall and our 2012 gain is 18.1%

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

Cash as % of Stock Price:

RIMG 75%
EXTR 40%
PTIX 53%
GRVY 80%
CCUR 74%
MTSL 44%
SIGM 82%
ASTX 75%
CTIG 40%
MRVC 46%
ANGN 42%
AVNT 55%

Plus EXTR, RIMG, 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 1.4% last week, NASDAQ was down 3.7% and the S+P 500 was down 2.4%. The Russell 3000 was down 2.7%.

AVNW, CBEY, MTSL, and MITL are our favorites.

CCUR, HPOL, AVNW, EXTR, GRVY and CBEY earnings last week.

For the year, the DOW is up 6.7%, NASDAQ is up 13.5%, S+P 500 is up 8.9%, and the Russell 3000 is up 9%

Last week we went 4 stocks up, 15 down and 2 unchanged. Since inception we are now 58 stocks up and 15 down for a 79.5% 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%
2012-TISA +137%

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 50 stocks that we closed out since 2006 (45 were winners) the average net gain was 38%.

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
NEW Valuation $8.85 (Was $8.31)
Closed up $.23 at $2.78
Earnings out last week. Revenues were down $4 million to $111.6 million, but they made $2.2 million on a Non-GAAP basis versus losing $.4 million last year.
Our valuation rose to $8.85 and cash per share rose to $1.53.
Up 6%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17- ( Was $7.94 before another $10,000 added at $6.53)
NEW Valuation $29.58 (Was $29.21)
Closed down $.15 at $6.53
Earnings out last week. Revenues were up $5 million to $124 million and they lost $1.2 million versus $.14 million last year. EBITDA was up $4 million to $23 million. We continue to think this is way undervalued and are adding another $10,000 here.
Our valuation inched up to $29.58.
Down 18%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $2.36 (Was $2.46 (after $.0475 special dividend), $2.92, $3.09)
Buy Price October 7, 2011- $.80 ($1.27 before special dividend)
Closed at $1.06 unchanged
MRV declared another special dividend last week. $.30 a share this time. This will leave them with about $47 million of cash or another $.30 a share.
Earnings announced in March. Sales were up slightly to $74.1 million from $73.5 million last year. They lost $6.5 million but this was after a $7.1 million goodwill write off and about $2 million of special charges. Net cash stood at about $76 million or $.48 per share. Our valuation fell a bit to $2.36—still more than double the current stock price.
Raging Capital bought more than 1.3 million more shares in March at $1.03.
Up 21% HOLD

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $8.41 (Was $12.10, $13.40, $16.02)
Closed up $.05 at $5.68
Well SIGM tightened their anti-takeover provisions in early April. Entrenched management for sure. Must be getting scared of Potomac.
SIGM was selected to buy Trident Microsystems assets out of bankruptcy. They are paying just over $28 million for what they project to be $120 million of annual sales that will be EBITDA positive in the first year. Sounds good, but no one is impressed enough to bid up the stock price.
Potomac Capital filed another 13D/A last week as they raised their stake in SIGM to 6.9% with purchases in the $4.80’s of about 44,000 shares.
“Earnings” announced in March. Not good. Revenues down 50% from last year and down 10% from the previous quarter. They lost $18 million $.58 per share ($14 million non-GAAP loss) for the quarter. Cash was $150 million or $4.60 per share but down $1.06 per share for the year. They are saying they expect to reach profitability and cash flow positive operations by the end of this fiscal year (January 2013). Our valuation plunged to $8.41 per share.
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 $20 million (excluding cash) for a $150- $200 million a year chip company with 50% margins. Still pretty stupid we think. With the falling valuation we are thinking of selling, but will hold on for another couple of quarters to see if they can turn this around.
Down 33%, Weak-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 $12.81 (Was $15.28, $14.04, $10.39)
Closed down $.09 at $4.66
Earnings announced in March. Revenues from continuing operations were up 5% to $150 million and they made a profit of $.08 on a GAAP basis and $.22 a share on a non-GAAP basis. MITL is selling it’s DataNet/CommSource units which contributed about $14 million in sales during the quarter but are not included in their sales figures and therefore our valuation. Due to this reclassification to “discontinued operations” our valuation fell to $12.81 per share, still more than 3 times its current trading price. Overall we think this is a great earnings report, and this is a buying opportunity.
Up 53%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $$19.81 (Was $22.23, $25.63, $26.45)
Closed down $.54 at $8.70
Pays $.68 a share annual dividend.
We have also collected $.54 of dividends since we recommended RIMG.
Another lousy quarter. Sales down 9% to $19.5 million and they lost $3 million on an operating basis. Cash fell to $66.8 million or $6.52 and our valuation fell again to $16.73.
This is the worst case of management squandering its assets on an acquisition to escape being bought out and fired. We have lost almost $10 on our valuation and the stock is down almost 40%. Qumu sales were $1.4 million. Spent over $40 million to buy this paltry revenue stream.
Guidance for 2012 is low double digit sales growth and the same level cash flow. Teetering on selling here despite the yield.
Down 39%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $62.59 (Was $63.94, $63.84, $79.12, $63.99)
Closed down $.79 at $29.35
We have also collected $.50 a share in dividends here.
LXK upped their dividend to $.30 a quarter.
Earnings announced in April. Revenues were $992 million and they made $1.05 per share on a non-GAAP basis. Net cash fell to $4.31 per share due to acquisitions, dividends and stock buybacks of $260 million. Fully diluted shares outstanding were 72.3 million compared to 79.8 million when we recommended LXK. Our valuation fell to $62.59. Analysts were disappointed, so down went the stock.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries of the stock analysts make us cautious.
Up 2%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.55 (Was $6.28 $5.61, $5.11)
Closed down $.07 at $1.74
Latest earnings report had sales up YOY to about $3.2 million from $3 million. They reported a loss of $201,000 ($.05 per share) compared to income of $117,000 ($.03 per share) last year, but the results were due to a large patent litigation settlement expense. They did not disclose the amount for the quarter, but these litigation expenses were $640,000 for the year. Net cash rose to $.77 per share. Our valuation (including the litigation charge) fell to $5.55.
Up 22% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
NEW Valuation $3.15 (Was $3.05, $2.90, $3.11, $2.63, $2.97)
Closed at $1.20, down $.02
Earnings last week. Sales dropped $3 million from $37 million to $34 million. Their loss was slashed from $2.3 million to $.3 million. Not bad. Our valuation rose to $3.15 per share. If they can get some sales momentum over the next couple of quarters we could see $2 plus. If……..
EVP purchased 12,500 shares in March at $1.03 and interim CFO bought 11,000 shares at $1.02.
Up 30%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
NEW Valuation $15.85 (was $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.19 at $3.60
Earnings out last week. Not bad. Revenues were down $2 million to $16.3 million but they made $.04 per share. Cash fell to $2.61 per share as receivables rose. Our valuation rose to $15.85, the second quarter of rising valuation and just about back to when we recommended it. Now the price just needs to reflect the improvement.
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 $3.44 (was $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed down $.14 at $1.61
Earnings announced last week. Pretty good. Cash was $1.21 per share. Revenues spiked to $22 million from $17 million last year and they made $.04 per share on a GAAP basis compared to $.09 last year. They are still forecasting $65- $68 million in revenues for the year and losing $13-$15 million on a GAAP basis. Cash burn looks like about $5 million for the year.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $70 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
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 30%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $6.17-(was $5.94, $4.87, $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.08 at $2.13
Next earnings due out Tuesday May 8th, after the market close.
Earnings announced in March. Sales rose 34% to $9.1 million and they made a profit! $473,000 or $.04 per share. On a Non-GAAP basis they made $1 million or $.09 per share. Cash stayed level at $1.12 per share and our valuation rose to $6.17.
Down 21%, BUY

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
NEW Valuation-$6.31 (was $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.90 unchanged
Earnings last week. Sales fell to $73.4 million from $75.7 million, but they earned $2.3 million versus a $6.8 million loss last year. Cash per share stayed at $1.56 and our valuation fell to $6.31 on the sales decline. They are projecting next quarter at sales of $82-$90 million and EPS over $.10.
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 23%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
NEW Valuation $5.00-(Was $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.21 at $2.27
Earning report filed last week. Sales for the year were $50 million and they made almost $13 million ($.47 per ADS). Cash per share fell to $1.82 from $2.05 as they poured some cash into software development.
Ragnarok was commercially released in Korea on March 26th.
Our valuation fell a bit to $5.00.
Up 56%, 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 $.03 at $.59
AEZS announced that Perifosine failed in April. Carnage followed. Hmm, this will teach us a lesson to not recommend speculations any more. We are still holding ours as a lottery ticket.
Earnings out in March. Revenues for the quarter were $12.6 million, up from $10 million last year. Net loss was $7.5 million compared to $6.6 million last year. The net loss for the year was $29 million. Cash stood at $47 million and they continue to sell more stock. They sold another 3.6 million in 2012 so far and raised $6.4 million.
Speculative for sure.
Down 59%, 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 $.06 at $10.50
Earnings last week. Sales up 10% to $33.3 million and they broke even. Gross margins improved to 73%. SPNC also received FDA approval on the GlideLight laser Sheath which makes it easier to extract pacemaker leads.
Guidance for 2012 is unchanged– 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.
Up 85%, 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 down $.19 at $14.64
Next earnings due out Tuesday, May 8th before the market open.
MEDW announced another small acquisition in March. They are paying $2.2 million for a cancer management software line.
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 131%, HOLD

Inuvo (INUV (was-VTRO, 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 at $.71 down $.05
The Inuvo/VTRO merger closed in March and we now have 1.546 shares of INUV for each VTRO share we had before. We will wait a bit to see it .5 plus .5 can make 2.
They expect merger cost savings to be more than $2.4 million a year.
Should have sold this when it traded over $6.
Down 87% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.36 (was $15.90, $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 $.01 at $5.75
Earnings announced in March. Ok, but certainly not great. Revenues were flat at $7.1 million and they lost $249,000 or $.07 per share, slightly better than last years $.09 per share loss. Cash rose slightly to $2.42 per share and our valuation fell to $13.36 compared to $13.60 in the same quarter last year.
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.
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.
While ANGN is still trading at less than ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 50%, HOLD

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 $5.82 (was $5.81, $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 $1.66 down $.04
Earnings announced in March. Not bad. Sales were up to $5.5 million from $5.2 million last year. They only made $61,000 ($.01) of income versus last years $123,000 ($.02). Their net cash position improved a tad to minus $3.7 million from minus $3.8 million last year. Our valuation stayed about the same at $5.82.
ARI announced a reseller win in February in addition to one in January for a 160 dealer outfit.
Now up 3%, 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 $.80, down $.05
Peter Kamin the new Chairman of the Board filed a 13d in March disclosing an 11% ownership state. Interesting as one would file a 13G if their intention was to just be a passive investor. Maybe as Chairman he will do SOMETHING to get the share price up.
RWWI announced an acquisition in March, but gave no financial details. “If a tree falls in the forest but there is no one around to hear it, dies it make a sound”? Seems like the company is making no effort to get this company known to the investment community. We have been in this one a LONG time and are getting impatient.
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. 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.
Up 1%, HOLD

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 $.26, closed at $.25.
Earnings in April. Sales were up $100k over last quarter to $4.5 million and they made $160k. Cash fell to $2.9 million or $.10 per share. Our valuation fell a penny to $1.36. Two profitable quarters in a row. The CEO expressed confidence that they can continue to grow revenues in the press release.
CEO reported another 44,000 of stock purchases in late 2011 at $.095 to $.10 per share.
At a $7 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
Down 4%. 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 $.04, unchanged.
Now LTUS announced in April that they have no money for audits and SEC filings. Hammered down to a nickel a share. Can you spare them some money? Not worth selling at this point until we need tax losses. Maybe something good will happen. What a disaster. No more Chinese stocks for us, no matter how compelling the valuation.
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. 25 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 98%, HOLD