Cheap Stocks, 6/29/2012 Update

We were up 2.9% last week and are now up 16.4% for the year

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 81%
EXTR 45%
PTIX 62%
GRVY 99%
CCUR 63%
MTSL 45%
SIGM 68%
ASTX 58%
CTIG 51%
MRVC 62%
ANGN 43%
AVNT 55%

Plus EXTR, RIMG, ANGN, SIGM 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 1.9% last week, NASDAQ was up 1.5% and the Russell 3000 was up 2.1%.

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

For the year, the DOW is now back up 5.4%, NASDAQ is up 12.7%,, and the Russell 3000 is up 8.2%

Last week we went 13 stocks up, 8 down and 3 unchanged. Since inception we are now 56 stocks up and 18 down for a 75.7% 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%.

Telecommunications Systems Inc. (NASDAQ-AVNW)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $5.49
Closed down $.11 at $1.23
TSYS announced in June that they were writing off $126 million of goodwill. No cash impact to this although they will show a big loss for Q2.
Down 10%, BUY

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $8.85 (Was $8.31)
Closed down $.12 at $2.80
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 7%, 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 $.50 at $6.77
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 6%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $2.06, $2.16 (after $.0475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.66 unchanged
MRV announced that they had settled a lawsuit related to a past acquisition and will pay $2.3 million, but get a $2.2 million gain this quarter as the settlement was less than they had booked.
The $.30 special dividend was paid in June
Raging Capital continues to buy shares. They now own over 27 million shares or 17.6% of MRV.
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
Valuation $10.67 (Was $8.41 $12.10, $13.40, $16.02)
Closed up $.04 at $6.38
Sigma and Potomac continue their war of words as Potomac wants Board seats and Sigma is fighting.
Good news, SIGM terminated its shareholder rights agreements and named a new Chairman of the Board. Maybe they are clearing the way to be sold?
Earnings announced in May. 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.
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 25%, 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 $13.92 (Was $12.81, $15.28, $14.04, $10.39)
Closed up $.03 at $4.42
Earnings announced in June. Another very good quarter. Sales were up about 4% to $158 million and they made $17.1 million of income on a Non-GAAP basis. Our valuation rose to $13.92. MITL appears to be running on all eight cylinders now.
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 up $.21 at $8.00
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 44%, 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 up $.67 at $26.58
We have also collected $.80 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 8%, 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 up $.09 at $1.77
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 25% 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 $1.13, down $.09
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 23%, 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 $.33 at $4.21
Another 13D filed last week by what looks like another disgruntled shareholder (Stephen D. Baksa). Owns 435,000 shares or 5%.
13D/A filed in June disclosing another 100,000 shares purchased on June 13th by the Singer/Miller group for $3.75. Their combined ownership is now 11.7%.
Singer is also involved in MRV and was involved with Evolving Systems (which we owned personally even though we didn’t recommend it—it was a huge winner).
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 17%, 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 $.01 at $2.09
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 9%, 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 $.20 at $2.23
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 17%, 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 $3.44 down $.06.
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 up $.02 at $1.77
Now trading at cash value again.
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 20%, 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 $.51 up $.04
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 64%, 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 –$14.00 (was $12, $10)
Closed up $.53 at $11.42
A Board member bought 6,000 shares on May 25th, at just over $9.90. Good show of support at this level.
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 101%, 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 $.83 at $14.6
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 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 $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 $.66 unchanged
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.
Down 88% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.95 (was $13.36 $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 $.12 at $5.71
The CEO bought 3,400 shares at $5.73 on June 13th.
Earnings announced in June. Hmmm. Sales were down from $6.8 million last year to $6.3 million. They lost $.4 million versus $.1 million last year. Not great, but they blamed it on a few large customers pushing out some orders into the current quarter. We’ll see soon, cause then this quarter should be a barn burner. Our valuation slipped to $11.95 ($13.19 last year). Cash was $2.45 per share versus $2.42 last quarter. They also disclosed that they had entered into a Letter of Intent (LOI) to sell their New Leaf business and were going to change their name to MGC Diagnostics Corporation. Well at least that sounds like a medical company.
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 49%, 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 $6.13 (was $5.82, $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 $1.50 down $.05
Earnings announced in June. Not bad. Sales were up 7% to $5.7 million and they made $.03 a share down from $.07 last year as they spent more on technology infrastructure, investor relations and product development.
Our valuation moved up to $6.13—the highest ever since we have been following the stock. No one cared as the stock didn’t trade after the earnings announcement. Looks like they need to even spend more on investor relations and PR.
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 $2.55 (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 $.84, up $.04
Earnings announced 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 6%, 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 $.25 closed at $.23.
CTIG announced a product deal with Mitel in June. Any PR is good news here.
A Director purchased 30,000 shares on May 23rd at $.25 a share. Not a lot of money but a good sign that things are going well.
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 an $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 7%. 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 less than 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, 6/22/2012 Update

We were up .6% last week and are now up 13.5% for the year

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 84%
EXTR 44%
PTIX 69%
GRVY 101%
CCUR 69%
MTSL 48%
SIGM 68%
ASTX 58%
CTIG 49%
MRVC 62%
ANGN 44%
AVNT 52%

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% last week, NASDAQ was up .7% and the S+P 500 was down .6%. The Russell 3000 was down .5%.

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

MITL earnings last week.

For the year, the DOW is now back up 3.5%, NASDAQ is up 11%, S+P 500 is up 6.2%, and the Russell 3000 is up 6%

Last week we went 10 stocks up, 12 down and 2 unchanged. Since inception we are now 56 stocks up and 18 down for a 75.7% 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%.

Telecommunications Systems Inc. (NASDAQ-AVNW)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $5.49
Closed down $.04 at $1.34
TSYS announced in June that they were writing off $126 million of goodwill. No cash impact to this although they will show a big loss for Q2.
Down 2%, BUY

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $8.85 (Was $8.31)
Closed up $.04 at $2.92
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 12%, 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 $.22 at $6.27
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 13%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $2.06, $2.16 (after $.0475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.66 up $.02
MRV announced that they had settled a lawsuit related to a past acquisition and will pay $2.3 million, but get a $2.2 million gain this quarter as the settlement was less than they had booked.
The $.30 special dividend was paid in June
Raging Capital continues to buy shares. They now own over 27 million shares or 17.6% of MRV.
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
Valuation $10.67 (Was $8.41 $12.10, $13.40, $16.02)
Closed up $.06 at $6.34
Good news, SIGM terminated its shareholder rights agreements and named a new Chairman of the Board. Maybe they are clearing the way to be sold?
Earnings announced in May. 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.
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 25%, 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)
NEW Valuation $13.92 (Was $12.81, $15.28, $14.04, $10.39)
Closed up $.19 at $4.39
Earnings announced last week. Another very good quarter. Sales were up about 4% to $158 million and they made $17.1 million of income on a Non-GAAP basis. Our valuation rose to $13.92. MITL appears to be running on all eight cylinders now.
Up 45%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $$19.81 (Was $22.23, $25.63, $26.45)
Closed down $.47 at $7.79
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 up $.37 at $25.91
We have also collected $.80 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 $.03 at $1.68
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 18% 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 $1.22, up $.14
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 33%, 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 $.12 at $3.88
13D/A filed last week disclosing another 100,000 shares purchased on June 13th by the Singer/Miller group for $3.75. Their combined ownership is now 11.7%.
Singer is also involved in MRV and was involved with Evolving Systems (which we owned personally even though we didn’t recommend it—it was a huge winner).
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 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 $3.44 (was $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.15 at $2.10
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 9%, 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 $.14 at $2.03
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 25%, 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 $3.50 down $.09.
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 10%, 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 up $.01 at $1.73
Now trading below cash value again.
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 19%, 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 $.02
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 –$14.00 (was $12, $10)
Closed down $.10 at $10.89
A Board member bought 6,000 shares on May 25th, at just over $9.90. Good show of support at this level.
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 92%, 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 $.14 at $13.77
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 117%, 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 $.66 down $.03
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.
Down 88% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.95 (was $13.36 $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 $.22 at $5.59
The CEO bought 3,400 shares at $5.73 on June 13th.
Earnings announced in June. Hmmm. Sales were down from $6.8 million last year to $6.3 million. They lost $.4 million versus $.1 million last year. Not great, but they blamed it on a few large customers pushing out some orders into the current quarter. We’ll see soon, cause then this quarter should be a barn burner. Our valuation slipped to $11.95 ($13.19 last year). Cash was $2.45 per share versus $2.42 last quarter. They also disclosed that they had entered into a Letter of Intent (LOI) to sell their New Leaf business and were going to change their name to MGC Diagnostics Corporation. Well at least that sounds like a medical company.
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 46%, 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 $6.13 (was $5.82, $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 $1.55 up $.25
Earnings announced in June. Not bad. Sales were up 7% to $5.7 million and they made $.03 a share down from $.07 last year as they spent more on technology infrastructure, investor relations and product development.
Our valuation moved up to $6.13—the highest ever since we have been following the stock. No one cared as the stock didn’t trade after the earnings announcement. Looks like they need to even spend more on investor relations and PR.
Now down 4%, 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 $.80, down $.02
Earnings announced 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 1%, 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 $.23.
CTIG announced a product deal with Mitel in June. Any PR is good news here.
A Director purchased 30,000 shares on May 23rd at $.25 a share. Not a lot of money but a good sign that things are going well.
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 less than 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, 6/15/2012 Update

We were up 3% last week and are now up 12.9% for the year

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 79%
EXTR 43%
PTIX 64%
GRVY 101%
CCUR 67%
MTSL 47%
SIGM 69%
ASTX 62%
CTIG 49%
MRVC 63%
ANGN 42%
AVNT 53%

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 1.7% last week, NASDAQ was up .5% and the S+P 500 was up 1.3%. The Russell 3000 was up 1%.

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

ARIS earnings last week.

For the year, the DOW is now back up 4.5%, NASDAQ is up 10.3%, S+P 500 is up 6.8%, and the Russell 3000 is up 6.5%

Last week we went 15 stocks up, 6 down and 3 unchanged. Since inception we are now 57 stocks up and 17 down for a 77% winning percentage (80% is our target win %).

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

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

Telecommunications Systems Inc. (NASDAQ-AVNW)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $5.49
Closed up $.01 at $1.38
TSYS announced on Friday that they were writing off $126 million of goodwill. No cash impact to this although they will show a big loss for Q2. No impact on our valuation.
Up 1%, BUY

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $8.85 (Was $8.31)
Closed up $.20 at $2.88
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 10%, 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 $.12 at $6.49
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 $2.06, $2.16 (after $.0475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.64 down $.02
MRV announced that they had settled a lawsuit related to a past acquisition and will pay $2.3 million, but get a $2.2 million gain this quarter as the settlement was less than they had booked.
The $.30 special dividend was paid in June
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 $10.67 (Was $8.41 $12.10, $13.40, $16.02)
Closed up $.01 at $6.28
Good news, SIGM terminated its shareholder rights agreements and named a new Chairman of the Board. Maybe they are clearing the way to be sold?
Earnings announced in May. 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.
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 26%, 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 $.04 at $4.20
Q4 earnings due out Tuesday, June 19th after the market close.
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 38%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $$19.81 (Was $22.23, $25.63, $26.45)
Closed up $.39 at $8.26
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 42%, 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 $.29 at $25.54
We have also collected $.80 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 11%, 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 up $.21 at $1.71
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 20% 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 $1.08, down $.01
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 17%, 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 $.20 at $4.00
13D filed in May by Karen Singer (Lloyd Miller group) disclosing a 5.7% stake (494,000 shares) purchased between April 16th and May 24th at prices ranging from $3.40 to $3.62.
Singer is also involved in MRV and was involved with Evolving Systems (which we owned personally even though we didn’t recommend it—it was a huge winner). Good news.
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 21%, 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 $.14 at $1.95
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 15%, 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 $.22 at $2.17
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 20%, 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 $3.59 unchanged.
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 $.21 at $1.72
Now trading below cash value again.
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 18%, 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 $.45 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 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 –$14.00 (was $12, $10)
Closed up $.77 at $10.99
A Board member bought 6,000 shares on May 25th, at just over $9.90. Good show of support at this level.
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 94%, 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 $.25 at $13.91
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 120%, 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 $.69 down $.02
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.
Down 87% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.95 (was $13.36 $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 $.37 at $5.81
The CEO bought 3,400 shares at $5.73 on June 13th.
Earnings announced in June. Hmmm. Sales were down from $6.8 million last year to $6.3 million. They lost $.4 million versus $.1 million last year. Not great, but they blamed it on a few large customers pushing out some orders into the current quarter. We’ll see soon, cause then this quarter should be a barn burner. Our valuation slipped to $11.95 ($13.19 last year). Cash was $2.45 per share versus $2.42 last quarter. They also disclosed that they had entered into a Letter of Intent (LOI) to sell their New Leaf business and were going to change their name to MGC Diagnostics Corporation. Well at least that sounds like a medical company.
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 52%, 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),
NEW Valuation $6.13 (was $5.82, $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 $1.30 up $.15
Earnings announced last week. Not bad. Sales were up 7% to $5.7 million and they made $.03 a share down from $.07 last year as they spent more on technology infrastructure, investor relations and product development.
Our valuation moved up to $6.13—the highest ever since we have been following the stock. No one cared as the stock didn’t trade after the earnings announcement. Looks like they need to even spend more on investor relations and PR.
Now down 19%, 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, up $.02
Earnings announced 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 $.26.
CTIG announced a product deal with Mitel in June. Any PR is good news here.
A Director purchased 30,000 shares on May 23rd at $.25 a share. Not a lot of money but a good sign that things are going well.
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 less than 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

BUY TSYS

Telecommunications Systems Inc. (NASDAQ-TSYS)

Valuation-$5.49
Price June 13, 2012-$1.37

TSYS is trading at a huge discount to our valuation.

Their last quarter (3/31/2012) sales were up 11% from the prior year to about $100 million, gross margins were 34% and they lost $.01 per share ($.4 million) compared to $.06 profit last year. They made $.06 per share on a Non-GAAP basis. Their net cash position is negative $83 million or $1.44 per share which is reflected in out valuation

The average analyst estimates for 2012 is about $450 million in sales, and $.22 in Non-GAPP earnings.

TSYS also has over 200 patents which they are working on monetizing.

Over 55% of CBEY’s shares are owned by institutions.

With over $400 million in annual sales, 200 patents, trading at a market cap of $80 million and at about a 77% discount to our valuation, we think this is a BUY.

Average trading volume is about 380,000 shares a day. There are about 58 million shares outstanding.

About Telecommunications Systems
TeleCommunication Systems, Inc. (TCS) (TSYS) is a world leader in highly reliable and secure mobile communication technology. TCS infrastructure forms the foundation for market leading solutions in E9-1-1, text messaging, commercial location and deployable wireless communications. TCS is at the forefront of new mobile cloud computing services providing wireless applications for navigation, hyper-local search, asset tracking, social applications and telematics. Millions of consumers around the world use TCS wireless apps as a fundamental part of their daily lives. Government agencies utilize TCS’ cyber security expertise, professional services, and highly secure deployable satellite solutions for mission-critical communications..

Cheap Stocks, 6/8/2012 Update

We lagged the averages last week as we were up only 1.6% and are now up 10% for the year.

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 72%
GRVY 90%
CCUR 70%
MTSL 54%
SIGM 69%
ASTX 67%
CTIG 49%
MRVC 62%
ANGN 45%
AVNT 57%

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 3.6% last week, NASDAQ was up 4% and the S+P 500 was up 3.7%. The Russell 3000 was up 3.7%.

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

No earnings last week.

For the year, the DOW is now back up 2.8%, NASDAQ is up 9.7%, S+P 500 is up 5.4%, and the Russell 3000 is up 5.4%

Last week we went 9 stocks up, 10 down and 4 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 up $.27 at $2.68
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.
Up 2%, 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 $.47 at $6.37
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 11%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $2.06, $2.16 (after $.0475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.66 down $.02
The $.30 special dividend was paid in June
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
Valuation $10.67 (Was $8.41 $12.10, $13.40, $16.02)
Closed up $.58 at $6.27
Earnings announced in May. 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.
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 26%, 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 $.30 at $4.16
Q4 earnings due out Tuesday, June 19th after the market close.
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 37%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $$19.81 (Was $22.23, $25.63, $26.45)
Closed up $.36 at $7.87
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 up $.85 at $25.83
We have also collected $.80 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 unchanged at $1.50
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 $1.09, down $.06
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 19%, 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 $.06 at $3.80
13D filed in May by Karen Singer (Lloyd Miller group) disclosing a 5.7% stake (494,000 shares) purchased between April 16th and May 24th at prices ranging from $3.40 to $3.62.
Singer is also involved in MRV and was involved with Evolving Systems (which we owned personally even though we didn’t recommend it—it was a huge winner). Good news.
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 25%, 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 $.15 at $1.81
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 down $.08 at $1.95
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 $3.59 up $.06
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 $.02 at $1.93
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 33%, 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 $.44 down $.03
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 69%, 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 $.67 at $10.22
A Board member bought 6,000 shares on May 25th, at just over $9.90. Good show of support at this level.
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 80%, 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 $.03 at $14.16
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 124%, 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 $.71 down $.07
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 $11.95 (was $13.36 $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 $.36 at $5.44
Earnings announced in June. Hmmm. Sales were down from $6.8 million last year to $6.3 million. They lost $.4 million versus $.1 million last year. Not great, but they blamed it on a few large customers pushing out some orders into the current quarter. We’ll see soon, cause then this quarter should be a barn burner. Our valuation slipped to $11.95 ($13.19 last year). Cash was $2.45 per share versus $2.42 last quarter. They also disclosed that they had entered into a Letter of Intent (LOI) to sell their New Leaf business and were going to change their name to MGC Diagnostics Corporation. Well at least that sounds like a medical company.
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 42%, 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 $1.15 down $.03
Next earnings due out Thursday, June 14th after the market closes.
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 29%, 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 $.80, unchanged
Earnings announced 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 1%, 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 $.26.
A Director purchased 30,000 shares on May 23rd at $.25 a share. Not a lot of money but a good sign that things are going well.
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 less than 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, 6/1/2012 Update

Relentless. Markets seem to be looking for any reason to go down and they found some–Greece, unemployment, Spain, etc.

We were down about half the market averages—1.6% and are up 8.3% for the year.

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 87%
EXTR 44%
PTIX 69%
GRVY 89%
CCUR 69%
MTSL 54%
SIGM 76%
ASTX 73%
CTIG 49%
MRVC 60%
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 2.7% last week, NASDAQ was down 3.2% and the S+P 500 was down 3%. The Russell 3000 was down 3.2%.

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

ANGN earnings last week.

For the year, the DOW is now DOWN .8%, NASDAQ is up 5.5%, S+P 500 is up 1.6%, and the Russell 3000 is up 1.6%

Last week we went 7 stocks up, 13 down and 3 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 down $.05 at $2.41
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 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 $.20 at $5.90
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 18%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $2.06, $2.16 (after $.0475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.68 up $.02
The $.30 special dividend was paid last week.
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 15% HOLD

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $10.67 (Was $8.41 $12.10, $13.40, $16.02)
Closed down $.15 at $5.69
Earnings announced in May. 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 33%, 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 $.04 at $3.86
Q4 earnings due out Tuesday, June 19th after the market close.
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 $.35 at $7.51
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 47%, 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 $.85 at $24.98
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 13%, 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 $.01 at $1.50
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 $1.15, up $.01
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 25%, 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 $.36 at $3.86
13D filed in May by Karen Singer (Lloyd Miller group) disclosing a 5.7% stake (494,000 shares) purchased between April 16th and May 24th at prices ranging from $3.40 to $3.62.
Singer is also involved in MRV and was involved with Evolving Systems (which we owned personally even though we didn’t recommend it—it was a huge winner). Good news.
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 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 $3.44 (was $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed down $.15 at $1.66
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 28%, 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 $.07 at $2.03
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 25%, 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 $3.53 down $.05
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 11%, 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 up $.09 at $1.95
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 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 at $.47 unchanged
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 down $.40 at $9.55
A Board member bought 6,000 shares on May 25th, at just over $9.90. Good show of support at this level.
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 68%, 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 $.50 at $14.19
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 124%, 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 $.78 up $.13
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 85% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
NEW Valuation $11.95 (was $13.36 $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 $.05 at $5.80
Earnings announced last week. Hmmm. Sales were down from $6.8 million last year to $6.3 million. They lost $.4 million versus $.1 million last year. Not great, but they blamed it on a few large customers pushing out some orders into the current quarter. We’ll see soon, cause then this quarter should be a barn burner. Our valuation slipped to $11.95 ($13.19 last year). Cash was $2.45 per share versus $2.42 last quarter. They also disclosed that they had entered into a Letter of Intent (LOI) to sell their New Leaf business and were going to change their name to MGC Diagnostics Corporation. Well at least that sounds like a medical company.
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 2012 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 52%, 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 $1.18 down $.07
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 27%, 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 $.80, 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 1%, 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 $.26.
A Director purchased 30,000 shares on May 23rd at $.25 a share. Not a lot of money but a good sign that things are going well.
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 less than 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