Cheap Stocks, 9/28/2012 Update

We were only down .4% and are now up 25.9% for the year. NASDAQ gave up 2% last week but is still up 19.6% for the year and that makes us very nervous. We have also not been able to find any compelling new stocks. We have our eye on a couple but are not ready to recommend anything.

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:
EXTR 48%
GRVY 133%
CCUR 75%
SIGM 49%
ASTX 38%
CTIG 41%
MRVC 53%
ANGN 41%
AVNW 68%

The DOW was down 1.1% last week, NASDAQ was down 2% and the Russell 3000 was down 1.4%.

No earnings last week.

AVNW, BLIN, GRVY, and MITL are our favorites.

For the year, the DOW is up 10%, NASDAQ is up 19.6%, and the Russell 3000 is up 14.4%

Last week we went 6 stocks up, 9 down and 1 even. Since inception we are now 56 stocks up and 19 down for a 74.7% 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% (fourth trip on this)
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%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98%
2012-AEZS -63%
2012-RIMG -46% (including dividends)
2012-HPOL +34%
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
2012-SPNC +118%
2012-RWWI +1%

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 59 stocks that we closed out since 2006 (50 were winners) the average net gain was 35%.

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.24
Closed down $.04 at $1.20
Down 3%, BUY

Telecommunications Systems Inc. (NASDAQ-AVNW)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed down $.08 at $2.16
Carlo Cannell, an activist investor filled a 13D in September pointing out how undervalued TSYS is and urged them to put themselves on the block. He points to a valuation done on the company as of August 29th of $7.40 to $11.81 a share. Even the low point here is higher than our valuation.
TSYS announced in September it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Earnings announced in July. They were fine. Revenues were up 14% to $114 million and cutting through all the goodwill write-off it looks like they made $1.5 million on an operating basis. Our valuation rose to $6.72. After falling to around $1.15 the stock popped back up to close at $1.36 when it became apparent the sky was not falling.
TSYS announced an acquisition on in July. They are buying the leader in 911 communications for $37 million.
Up 58%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.37 (Was $8.85, $8.31)
Closed down $.12 at $2.38
Earnings announced in August. Revenues were down $5 million to $116 million, and they made $1.2 million on a Non-GAAP basis versus $2.8 million last year. Our valuation rose to $9.37 per share. Needham reiterated its “Buy” on AVNW.
Cash per share rose to $1.62.
Down 9%, 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 $29.59 (Was $29.58, $29.21)
Closed down $.02 at $9.84
Earnings out in August. They were good. Revenues were up 3%. They made a profit of $1.5 million ($.05 per share) compared to a loss of $1.8 million last year. Cash flow was positive and our valuation rose $.01 to $29.59 per share.
Up 37%, HOLD

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $1.73, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.54 unchanged
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Earnings announced in August. Revenues were $55 million down from $59 million last year. They lost $2 million ($.01 per share) after a net $1 million loss on litigation settlement and goodwill write-off. Our valuation stayed at $1.73, $.30 higher than our estimate for this quarter. The big news is that they are selling 2 more European companies for what looks like a combined $24 million and going forward with their optical communications group which is the bulk of their revenues. Our pro-forma valuation, assuming both of these sales close is $1.61 with $.44 a share in cash (76% of the current market cap). Still trading at less than ½ our valuation.
Raging Capital owns over 27 million shares or 17.6% of MRV.
Up 4% BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed up $.01 at $6.61
Earnings announced in September.
Revenues spiked up to $68.3 million including $26.6 million from their latest acquisition of Trident. They lost $13.3 million on a GAAP basis and $4.1 million on a Non-GAAP basis. Cash was $106 million or $3.22 a share after putting out $42 million for the Earnings announced in May. Overall our valuation increased another 25% to $13.05. They are projecting sales for next quarter (Q3) to be between $60-$65 million with 50% GAAP margins. They keep saying they are focused on expense reduction and profitability but we are not seeing it yet. Their new Directors will hopefully make them put these words into action.
So we are trading at a market cap of about $120 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 22%, 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 $13.92, $12.81, $15.28, $14.04, $10.39)
Closed up $.11 at $2.70
Latest earnings announced in August. Our valuation fell to $10.95 which is still more than triple the current price.
Down 11%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $70.28 (Was $62.59, $63.94, $63.84, $79.12, $63.99)
Closed down $1.19 at $22.25
We have also collected $1.10 a share in dividends here.
LXK now pays a $1.20 annual dividend.
LXK announced in September that it was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
Earnings announced in July. Revenue fell 12% and Non-GAAP earnings fell to $.89 a share from $1.36 a year earlier. Currency and Europe were blamed for the shortfall. Q3 guidance is another 10% revenue decline and Non-GAAP earnings of $.75-$.85 compared to $.95 last year. Our valuation actually increased on a gross margin increase to $70.28 and net cash fell a bit to $3.85 a share as they bought back 800,000 shares for $25 million and paid their quarterly dividend. This is why we don’t like Wall Street analysts. They would rather pay 100 times earnings for some maybe good company than a proven cash machine like LXK. Yield is now 6.2%
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 well below our original buy price so we are making this a Buy again.
Down 23%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $13.53 (was $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.25 at $4.49
Pays $.24 annual dividend.
We have collected $.06 in dividends so far.
Earnings announced in August. Revenues were down slightly from $15.1 million to $14.7 million but they made a profit of $.2 million versus a loss of $1.4 million last year. Net cash per share was $3.37 and our valuation fell to $13.53 a share. Still more than triple the current price.
Singer/Miller bought another 33,000 shares in early July at $3.88. They now own 12.1% of CCUR.
CCUR took on two of the Singer/Miller Board nominees and entered into a standstill agreement until the 2012 Shareholders meeting.
CCUR announced the initiation of a quarterly dividend of $.06 or $.24 annually in July.
Another 13D filed in June 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).
Down 12%, 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 $3.16 (was $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.03 at $3.08
ASTX announced that J&J got approval for a new Dagogen indication in Europe on Friday.
Earnings announced in August. Revenues were up to $19.9 million from $11.7 million and they made $.01 per share the same as last year. Cash was $121 million or $1.18 per share. They raised their earnings guidance to a loss of only $5 million from $15 million. All in all a good report. Our valuation fell however to $3.16 as revenues, cash and earnings were all a bit lower than last quarter.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 34%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$7.46 (was $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.35 down $.17
EXTR received $41.5 million for their real estate sale in September adding about $.44 per share to their cash hoard. Cash should now be up over $2 a share.
The CFO bought 10,000 shares at $3.47 on August 29th.
Earnings announced in August. We liked the quarter. Revenues were $87.6 million and they made $.08 a share profit compared to $.02 loss last year. Cash per share rose to $1.61. Our valuation rose to $7.46 compared to the same quarter of last years $6.45 as gross margin rose to 56% compared to 46% last year.
They are projecting next quarter at sales of $75-$82 million and EPS of $.00 to $.03.
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 5%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $3.41-(Was $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed up $.03 at $1.32
Requiem has been released on Facebook.
Earnings announced in August. Revenues fell 14% to $12.5 million and they incurred a loss of $1 million versus a small profit last year. The Company said that the results from Ragnarok 2 in Korea were below their expectations. Investors looking for immediate gratification from this sold last week. Net cash per share was $1.76 and our valuation fell to $3.41 as margins and earnings fell. Lots of news and game release information in their press release, so rather than repeating it all here, please read the PR. It looks like there are lots of good things ahead.
Now trading at below cash value again.
Down 9%, BUY

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 $3.11 (was $1.84, $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 $.73 up $.09
INUV announced 2 months sales of $9.7 million, so they are on track for $14-$15 million for this quarter compared to $13 million last quarter.
Earnings announced in August. Mediocre. Revenues were $12.9 million and they lost $3 million. This loss included some heavy non-cash charges related to the merger so adjusted EBITDA was $200,000. Our valuation was $3.11 compared to our estimate of $3.59.
Down 86% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $12.99 (was $11.95, $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 $.13 at $6.00
Earnings announced in August. Revenues were up from $6.4 million to $6.8 million. However they lost $.28 million versus a profit of $.14 million last year. Cash (adding the $1 million they just received from the sale of their New Leaf business) is $2.52 a share and our valuation rose to $12.99.
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 57%, 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 $1.15 up $.02
ARI announced an acquisition in August. They acquired the assets of Ready2Ride Inc., of Floyds Knobs, Ind., the first-to-market and leading provider of enhanced aftermarket fitment data for the power sports industry. Terms of the transaction were not disclosed.
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 29%, BUY, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.34 (Was $1.34, $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 $.225.
John Birbeck the CEO bought 85,000 shares on 9/12/2012 at $.185. He now owns over 600,000 shares.
Earnings announced in August. Another good quarter and no one cares. Revenues were up 11% to $4.5 million and they made $.3 million or $.01 per share. Cash per share was $.11 and our valuation stayed at $1.34.
CTIG announced a product deal with Mitel in June. Any PR is good news here.
Four profitable quarters in a row.
At a $7 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
Down 4%. BUY

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Cheap Stocks, 9/21/2012 Update

We had a decent week up .5% and are now up 26.3% for the year. NASDAQ is up 22.1% and that makes us very nervous, so we bought some SRTY-an ETF with 3X leverage. We have never done this kind of trade before so this is a test for us. We bought at $34.62.

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:
EXTR 46%
GRVY 136%
CCUR 71%
SIGM 49%
ASTX 39%
CTIG 39%
MRVC 53%
ANGN 40%
AVNW 65%

The DOW was down .1% last week, NASDAQ was down .1% and the Russell 3000 was down .6%.

No earnings last week.

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

For the year, the DOW is up 11.2%, NASDAQ is up 22.1%, and the Russell 3000 is up 16%

Last week we went 9 stocks up and 7 down. Since inception we are now 58 stocks up and 17 down for a 77.3% 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% (fourth trip on this)
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%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98%
2012-AEZS -63%
2012-RIMG -46% (including dividends)
2012-HPOL +34%
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
2012-SPNC +118%
2012-RWWI +1%

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 59 stocks that we closed out since 2006 (50 were winners) the average net gain was 35%.

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.24
Closed up $.05 at $1.24
EVEN, BUY

Telecommunications Systems Inc. (NASDAQ-AVNW)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed up $.05 at $2.24
Carlo Cannell, an activist investor filled a 13D in September pointing out how undervalued TSYS is and urged them to put themselves on the block. He points to a valuation done on the company as of August 29th of $7.40 to $11.81 a share. Even the low point here is higher than our valuation.
TSYS announced in September it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Earnings announced in July. They were fine. Revenues were up 14% to $114 million and cutting through all the goodwill write-off it looks like they made $1.5 million on an operating basis. Our valuation rose to $6.72. After falling to around $1.15 the stock popped back up to close at $1.36 when it became apparent the sky was not falling.
TSYS announced an acquisition on in July. They are buying the leader in 911 communications for $37 million.
Up 64%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.37 (Was $8.85, $8.31)
Closed down $.07 at $2.50
Earnings announced in August. Revenues were down $5 million to $116 million, and they made $1.2 million on a Non-GAAP basis versus $2.8 million last year. Our valuation rose to $9.37 per share. Needham reiterated its “Buy” on AVNW.
Cash per share rose to $1.62.
Down 5%, 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 $29.59 (Was $29.58, $29.21)
Closed up $.70 at $9.86
Earnings out in August. They were good. Revenues were up 3%. They made a profit of $1.5 million ($.05 per share) compared to a loss of $1.8 million last year. Cash flow was positive and our valuation rose $.01 to $29.59 per share.
Up 38%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $1.73, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.54 down $.02
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Earnings announced in August. Revenues were $55 million down from $59 million last year. They lost $2 million ($.01 per share) after a net $1 million loss on litigation settlement and goodwill write-off. Our valuation stayed at $1.73, $.30 higher than our estimate for this quarter. The big news is that they are selling 2 more European companies for what looks like a combined $24 million and going forward with their optical communications group which is the bulk of their revenues. Our pro-forma valuation, assuming both of these sales close is $1.61 with $.44 a share in cash (76% of the current market cap). Still trading at less than ½ our valuation.
Raging Capital continues to buy shares. They now own over 27 million shares or 17.6% of MRV.
Up 4% BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed up $.25 at $6.60
Earnings announced in September.
Revenues spiked up to $68.3 million including $26.6 million from their latest acquisition of Trident. They lost $13.3 million on a GAAP basis and $4.1 million on a Non-GAAP basis. Cash was $106 million or $3.22 a share after putting out $42 million for the Earnings announced in May. Overall our valuation increased another 25% to $13.05. They are projecting sales for next quarter (Q3) to be between $60-$65 million with 50% GAAP margins. They keep saying they are focused on expense reduction and profitability but we are not seeing it yet. Their new Directors will hopefully make them put these words into action.
So we are trading at a market cap of about $120 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 22%, 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 $13.92, $12.81, $15.28, $14.04, $10.39)
Closed down $.12 at $2.59
Latest earnings announced in August. Our valuation fell to $10.95 which is still more than triple the current price.
Down 15%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $70.28 (Was $62.59, $63.94, $63.84, $79.12, $63.99)
Closed down $.55 at $23.44
We have also collected $1.10 a share in dividends here.
LXK now pays a $1.20 annual dividend.
LXK announced in September that it was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
Earnings announced in July. Revenue fell 12% and Non-GAAP earnings fell to $.89 a share from $1.36 a year earlier. Currency and Europe were blamed for the shortfall. Q3 guidance is another 10% revenue decline and Non-GAAP earnings of $.75-$.85 compared to $.95 last year. Our valuation actually increased on a gross margin increase to $70.28 and net cash fell a bit to $3.85 a share as they bought back 800,000 shares for $25 million and paid their quarterly dividend. This is why we don’t like Wall Street analysts. They would rather pay 100 times earnings for some maybe good company than a proven cash machine like LXK. Yield is now 6.2%
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 well below our original buy price so we are making this a Buy again.
Down 19%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $13.53 (was $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed up $.41 at $4.74
Pays $.24 annual dividend.
We have collected $.06 in dividends so far.
Earnings announced in August. Revenues were down slightly from $15.1 million to $14.7 million but they made a profit of $.2 million versus a loss of $1.4 million last year. Net cash per share was $3.37 and our valuation fell to $13.53 a share. Still more than triple the current price.
Singer/Miller bought another 33,000 shares in early July at $3.88. They now own 12.1% of CCUR.
CCUR took on two of the Singer/Miller Board nominees and entered into a standstill agreement until the 2012 Shareholders meeting.
CCUR announced the initiation of a quarterly dividend of $.06 or $.24 annually in July.
Another 13D filed in June 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).
Down 7%, 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 $3.16 (was $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed down $.26 at $3.05
ASTX had climbed all the way back to $3.40 a share last week before it announced it was shutting down one of its drug candidates.
Earnings announced in August. Revenues were up to $19.9 million from $11.7 million and they made $.01 per share the same as last year. Cash was $121 million or $1.18 per share. They raised their earnings guidance to a loss of only $5 million from $15 million. All in all a good report. Our valuation fell however to $3.16 as revenues, cash and earnings were all a bit lower than last quarter.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 32%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$7.46 (was $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.52 down $.04
EXTR received $41.5 million for their real estate sale in September adding about $.44 per share to their cash hoard. Cash should now be up over $2 a share.
The CFO bought 10,000 shares at $3.47 on August 29th.
Earnings announced in August. We liked the quarter. Revenues were $87.6 million and they made $.08 a share profit compared to $.02 loss last year. Cash per share rose to $1.61. Our valuation rose to $7.46 compared to the same quarter of last years $6.45 as gross margin rose to 56% compared to 46% last year.
They are projecting next quarter at sales of $75-$82 million and EPS of $.00 to $.03.
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 $3.41-(Was $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.03 at $1.29
Requiem was released on Facebook.
Earnings announced in August. Revenues fell 14% to $12.5 million and they incurred a loss of $1 million versus a small profit last year. The Company said that the results from Ragnarok 2 in Korea were below their expectations. Investors looking for immediate gratification from this sold last week. Net cash per share was $1.76 and our valuation fell to $3.41 as margins and earnings fell. Lots of news and game release information in their press release, so rather than repeating it all here, please read the PR. It looks like there are lots of good things ahead.
Now trading at below cash value again.
Down 11%, BUY

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 $3.11 (was $1.84, $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 $.64 up $.05
INUV announced 2 months sales of $9.7 million, so they are on track for $14-$15 million for this quarter compared to $13 million last quarter.
Earnings announced in August. Mediocre. Revenues were $12.9 million and they lost $3 million. This loss included some heavy non-cash charges related to the merger so adjusted EBITDA was $200,000. Our valuation was $3.11 compared to our estimate of $3.59.
Down 88% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $12.99 (was $11.95, $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 $.23 at $6.13
Earnings announced in August. Revenues were up from $6.4 million to $6.8 million. However they lost $.28 million versus a profit of $.14 million last year. Cash (adding the $1 million they just received from the sale of their New Leaf business) is $2.52 a share and our valuation rose to $12.99.
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 60%, 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 $1.13 up $.06
ARI announced an acquisition in August. They acquired the assets of Ready2Ride Inc., of Floyds Knobs, Ind., the first-to-market and leading provider of enhanced aftermarket fitment data for the power sports industry. Terms of the transaction were not disclosed.
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 30%, BUY, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.34 (Was $1.34, $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 $.275 closed at $.265.
Earnings announced in August. Another good quarter and no one cares. Revenues were up 11% to $4.5 million and they made $.3 million or $.01 per share. Cash per share was $.11 and our valuation stayed at $1.34.
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.
Four profitable quarters in a row.
At a $7 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
Up 2%. BUY

Cheap Stocks, 9/14/2012 Update

Well it looks like we sold MEDW and SPNC a few days before they broke out. Pigs get slaughtered most of the time. We still had a great week up 5.4% and are now up 25.8% for the year. NASDAQ is up 22.2% and that makes us very nervous.

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:
EXTR 45%
GRVY 133%
CCUR 78%
SIGM 51%
ASTX 36%
CTIG 40%
MRVC 51%
ANGN 42%
AVNW 63%

The DOW was up 2.2% last week, NASDAQ was up 1.5% and the Russell 3000 was up 2%.

No earnings last week. We sold LTUS, RIMG, AEZS, SPNC, HPOL, MEDW and RWWI.ob last week.

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

For the year, the DOW is up 11.3%, NASDAQ is up 22.2%, and the Russell 3000 is up 16.7%

Last week we went 15 stocks up and 1 down. Since inception we are now 57 stocks up and 18 down for a 76% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:
2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR +19%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%
2009-MBRK +67%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33% (fourth trip)
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%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98%
2012-AEZS -63%
2012-RIMG -46% (including dividends)
2012-HPOL +34%
2012-MEDW +133% (buyout 1 week after we SOLD it)
2012-SPNC +118%
2012-RWWI +1%

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 59 stocks that we closed out since 2006 (50 were winners) the average net gain was 35%.

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.24
Closed up $.03 at $1.19
Down 4%, BUY

Telecommunications Systems Inc. (NASDAQ-AVNW)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed up $.17 at $2.20
Carlo Cannell, an activist investor filled a 13D last week pointing out how undervalued TSYS is and urged them to put themselves on the block. He points to a valuation done on the company as of August 29th of $7.40 to $11.81 a share. Even the low point here is higher than our valuation.
TSYS announced in September it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Earnings announced in July. They were fine. Revenues were up 14% to $114 million and cutting through all the goodwill write-off it looks like they made $1.5 million on an operating basis. Our valuation rose to $6.72. After falling to around $1.15 the stock popped back up to close at $1.36 when it became apparent the sky was not falling.
TSYS announced an acquisition on in July. They are buying the leader in 911 communications for $37 million.
Up 60%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.37 (Was $8.85, $8.31)
Closed up $.33 at $2.57
Earnings announced in August. Revenues were down $5 million to $116 million, and they made $1.2 million on a Non-GAAP basis versus $2.8 million last year. Our valuation rose to $9.37 per share. Needham reiterated its “Buy” on AVNW.
Cash per share rose to $1.62.
Down 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 $29.59 (Was $29.58, $29.21)
Closed up $.66 at $9.16
Earnings out in August. They were good. Revenues were up 3%. They made a profit of $1.5 million ($.05 per share) compared to a loss of $1.8 million last year. Cash flow was positive and our valuation rose $.01 to $29.59 per share.
Up 28%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $1.73, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.56 up $.01
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Earnings announced in August. Revenues were $55 million down from $59 million last year. They lost $2 million ($.01 per share) after a net $1 million loss on litigation settlement and goodwill write-off. Our valuation stayed at $1.73, $.30 higher than our estimate for this quarter. The big news is that they are selling 2 more European companies for what looks like a combined $24 million and going forward with their optical communications group which is the bulk of their revenues. Our pro-forma valuation, assuming both of these sales close is $1.61 with $.44 a share in cash (76% of the current market cap). Still trading at less than ½ our valuation.
Raging Capital continues to buy shares. They now own over 27 million shares or 17.6% of MRV.
Up 5% BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed up $.26 at $6.35
Earnings announced in September.
Revenues spiked up to $68.3 million including $26.6 million from their latest acquisition of Trident. They lost $13.3 million on a GAAP basis and $4.1 million on a Non-GAAP basis. Cash was $106 million or $3.22 a share after putting out $42 million for the Earnings announced in May. Overall our valuation increased another 25% to $13.05. They are projecting sales for next quarter (Q3) to be between $60-$65 million with 50% GAAP margins. They keep saying they are focused on expense reduction and profitability but we are not seeing it yet. Their new Directors will hopefully make them put these words into action.
So we are trading at a market cap of about $120 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 $13.92, $12.81, $15.28, $14.04, $10.39)
Closed up $.02 at $2.71
Latest earnings announced in August. Our valuation fell to $10.95 which is still more than triple the current price.
Down 11%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $70.28 (Was $62.59, $63.94, $63.84, $79.12, $63.99)
Closed up $2.35 at $23.99
We have also collected $1.10 a share in dividends here.
LXK now pays a $1.20 annual dividend.
The stock spiked on news that LXK was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
Earnings announced in July. Revenue fell 12% and Non-GAAP earnings fell to $.89 a share from $1.36 a year earlier. Currency and Europe were blamed for the shortfall. Q3 guidance is another 10% revenue decline and Non-GAAP earnings of $.75-$.85 compared to $.95 last year. Our valuation actually increased on a gross margin increase to $70.28 and net cash fell a bit to $3.85 a share as they bought back 800,000 shares for $25 million and paid their quarterly dividend. This is why we don’t like Wall Street analysts. They would rather pay 100 times earnings for some maybe good company than a proven cash machine like LXK. Yield is now 6.2%
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 well below our original buy price so we are making this a Buy again.
Down 17%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $13.53 (was $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed up $.06 at $4.33
Pays $.24 annual dividend.
We have collected $.06 in dividends so far.
Earnings announced in August. Revenues were down slightly from $15.1 million to $14.7 million but they made a profit of $.2 million versus a loss of $1.4 million last year. Net cash per share was $3.37 and our valuation fell to $13.53 a share. Still more than triple the current price.
Singer/Miller bought another 33,000 shares in early July at $3.88. They now own 12.1% of CCUR.
CCUR took on two of the Singer/Miller Board nominees and entered into a standstill agreement until the 2012 Shareholders meeting.
CCUR announced the initiation of a quarterly dividend of $.06 or $.24 annually in July.
Another 13D filed in June 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).
Down 15%, 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 $3.16 (was $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.16 at $3.31
Earnings announced in August. Revenues were up to $19.9 million from $11.7 million and they made $.01 per share the same as last year. Cash was $121 million or $1.18 per share. They raised their earnings guidance to a loss of only $5 million from $15 million. All in all a good report. Our valuation fell however to $3.16 as revenues, cash and earnings were all a bit lower than last quarter.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 44%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$7.46 (was $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.56 up $.01

EXTR received $41.5 million for their real estate sale in September adding about $.44 per share to their cash hoard. Cash should now be up over $2 a share.

The CFO bought 10,000 shares at $3.47 on August 29th.
Earnings announced in August. We liked the quarter. Revenues were $87.6 million and they made $.08 a share profit compared to $.02 loss last year. Cash per share rose to $1.61. Our valuation rose to $7.46 compared to the same quarter of last years $6.45 as gross margin rose to 56% compared to 46% last year.
They are projecting next quarter at sales of $75-$82 million and EPS of $.00 to $.03.
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 12%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $3.41-(Was $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed up $.01 at $1.32
Requiem was released on Facebook.
Earnings announced in August. Revenues fell 14% to $12.5 million and they incurred a loss of $1 million versus a small profit last year. The Company said that the results from Ragnarok 2 in Korea were below their expectations. Investors looking for immediate gratification from this sold last week. Net cash per share was $1.76 and our valuation fell to $3.41 as margins and earnings fell. Lots of news and game release information in their press release, so rather than repeating it all here, please read the PR. It looks like there are lots of good things ahead.
Now trading at below cash value again.
Down 9%, BUY

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 $3.11 (was $1.84, $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 $.59 up $.06
INUV announced 2 months sales of $9.7 million, so they are on track for $14-$15 million for this quarter compared to $13 million last quarter.
Earnings announced in August. Mediocre. Revenues were $12.9 million and they lost $3 million. This loss included some heavy non-cash charges related to the merger so adjusted EBITDA was $200,000. Our valuation was $3.11 compared to our estimate of $3.59.
Down 89% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $12.99 (was $11.95, $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 $.22 at $5.90
Earnings announced in August. Revenues were up from $6.4 million to $6.8 million. However they lost $.28 million versus a profit of $.14 million last year. Cash (adding the $1 million they just received from the sale of their New Leaf business) is $2.52 a share and our valuation rose to $12.99.
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 54%, 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 $1.07 down $.13
ARI announced an acquisition in August. They acquired the assets of Ready2Ride Inc., of Floyds Knobs, Ind., the first-to-market and leading provider of enhanced aftermarket fitment data for the power sports industry. Terms of the transaction were not disclosed.
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 32%, BUY, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.34 (Was $1.34, $1.37, $1.36, $1.23, $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.27 closed at $.22.
Earnings announced in August. Another good quarter and no one cares. Revenues were up 11% to $4.5 million and they made $.3 million or $.01 per share. Cash per share was $.11 and our valuation stayed at $1.34.
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.
Four profitable quarters in a row.
At a $7 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
EVEN%. BUY

MEDW Buy out at $22

After holding MEDW for 5 years and knocking down a 133% gain, MEDW got a take-over offer this morning for $22 a share or more than 3X our average buy price.

Coulda, woulda, shoulda.

Well we had not quite liquidated our position in MEDW and still have about 35% of our position so we are only 65% stupid for selling early on this one, but 35% smart.

This would have been our first buy-out of the year………………..

Fall Purge 9/9/2012

With NASDAQ up 20% we are nervous and have decided to purge our portfolio a bit. We are taking some of our big long-term gains and some of our losses where we don’t see any light at the end of the tunnel.

Sell:

HPOL @ $1.23 for a 34% gain.

MEDW @ $14.75 for a 134% gain.

SPNC @ $12.29 for a 118% gain.

RWWI @ $.80 for a 1% gain.

LTUS @ $.04 for a 98% loss.

RIMG @ $6.75 for a 53% loss

AEZS @ $.53 for a 63% loss

Cheap Stocks, 9/7/2012 Update

We were up 4% last week and we are now up 20.4% 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 91%
EXTR 45%
GRVY 134%
CCUR 79%
SIGM 53%
ASTX 37%
CTIG 51%
MRVC 52%
ANGN 43%
AVNW 72%

The DOW was up 1.7% last week, NASDAQ was up 2.3% and the Russell 3000 was up 2.5%.

SIGM earnings last week.

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

For the year, the DOW is up 8.9%, NASDAQ is up 20.4%, and the Russell 3000 is up 14.4%

Last week we went 14 stocks up, 8 down and 1 unchanged. Since inception we are now 56 stocks up and 19 down for a 74.7% 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%
2012-PTIX -44%
2012-MTSL +157%

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 52 stocks that we closed out since 2006 (46 were winners) the average net gain was 40%.

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.24
Closed up $.05 at $1.16
Down 7%, BUY

Telecommunications Systems Inc. (NASDAQ-AVNW)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed up $.27 at $2.03
TSYS announced it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Earnings announced in July. They were fine. Revenues were up 14% to $114 million and cutting through all the goodwill write-off it looks like they made $1.5 million on an operating basis. Our valuation rose to $6.72. After falling to around $1.15 the stock popped back up to close at $1.36 when it became apparent the sky was not falling.
TSYS announced an acquisition on in July. They are buying the leader in 911 communications for $37 million.
Up 48%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.37 (Was $8.85, $8.31)
Closed down $.04 at $2.24
Earnings announced in August. Revenues were down $5 million to $116 million, and they made $1.2 million on a Non-GAAP basis versus $2.8 million last year. Our valuation rose to $9.37 per share. Needham reiterated its “Buy” on AVNW.
Cash per share rose to $1.62.
Down 14%, 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 $29.59 (Was $29.58, $29.21)
Closed up $.40 at $8.50
Earnings out in August. They were good. Revenues were up 3%. They made a profit of $1.5 million ($.05 per share) compared to a loss of $1.8 million last year. Cash flow was positive and our valuation rose $.01 to $29.59 per share.
Up 19%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $1.73, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.55 up $.01
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Earnings announced in August. Revenues were $55 million down from $59 million last year. They lost $2 million ($.01 per share) after a net $1 million loss on litigation settlement and goodwill write-off. Our valuation stayed at $1.73, $.30 higher than our estimate for this quarter. The big news is that they are selling 2 more European companies for what looks like a combined $24 million and going forward with their optical communications group which is the bulk of their revenues. Our pro-forma valuation, assuming both of these sales close is $1.61 with $.44 a share in cash (76% of the current market cap). Still trading at less than ½ our valuation.
Raging Capital continues to buy shares. They now own over 27 million shares or 17.6% of MRV.
Up 4% BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
NEW Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed down $.78 at $6.09
Earnings announced last week.
Revenues spiked up to $68.3 million including $26.6 million from their latest acquisition of Trident. They lost $13.3 million on a GAAP basis and $4.1 million on a Non-GAAP basis. Cash was $106 million or $3.22 a share after putting out $42 million for the Earnings announced in May. Overall our valuation increased another 25% to $13.05. They are projecting sales for next quarter (Q3) to be between $60-$65 million with 50% GAAP margins. They keep saying they are focused on expense reduction and profitability but we are not seeing it yet. Their new Directors will hopefully make them put these words into action.
So we are trading at a market cap of about $120 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 28%, 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 $13.92, $12.81, $15.28, $14.04, $10.39)
Closed down $.09 at $2.69
Latest earnings announced in August. Our valuation fell to $10.95 which is still more than triple the current price.
Down 11%, HOLD

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $$14.03 (Was $19.81, $22.23, $25.63, $26.45)
Closed down $.13 at $6.75
Pays $.68 a share annual dividend.
We have collected $.98 of dividends since we recommended RIMG.
Earnings announced in July. Well not really earnings. Revenues fell 9% to $18.3 million, margins fell to 45% from 49% last year and they lost $2.75 million or $.27 per share. Qumu revenues were a whopping $1.4 million. Cash fell to $62.3 million or $6.13 and our valuation fell again to $14.03
This is the worst case of management squandering its assets on an acquisition to escape being bought out and fired. We have lost over $12 on our valuation and the stock is down over 50% Spent over $40 million to buy Qumu’s paltry revenue stream.
They are now projecting next quarter to be $20-$22 million of revenue and only lose $.02-$.10 per share. Guidance for 2012 is low double digit sales growth and the same level cash flow.
Teetering on selling here despite the yield.
Down 53%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $70.28 (Was $62.59, $63.94, $63.84, $79.12, $63.99)
Closed down $.07 at $21.64
We have also collected $1.10 a share in dividends here.
LXK now pays a $1.20 annual dividend.
The stock spiked on news that LXK was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
Earnings announced in July. Revenue fell 12% and Non-GAAP earnings fell to $.89 a share from $1.36 a year earlier. Currency and Europe were blamed for the shortfall. Q3 guidance is another 10% revenue decline and Non-GAAP earnings of $.75-$.85 compared to $.95 last year. Our valuation actually increased on a gross margin increase to $70.28 and net cash fell a bit to $3.85 a share as they bought back 800,000 shares for $25 million and paid their quarterly dividend. This is why we don’t like Wall Street analysts. They would rather pay 100 times earnings for some maybe good company than a proven cash machine like LXK. Yield is now 6.2%
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 well below our original buy price so we are making this a Buy again.
Down 25%, BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $2.65 (Was $3.15, $3.05, $2.90, $3.11, $2.63, $2.97)
Closed at $1.23, up $.05
Earnings announced in August. Sales dropped from $44.2 million last year to $35.5 million as they continued to cull out low margin business. Net loss was $.02 a share down from $.09 last year. EBITDA for the quarter was $1.5 million compared to an EBITDA loss of $2.1 million last year. The “turnaround” continues. Net cash was $.10 a share and our valuation was $2.65 a share compared to $2.63 last year.
Up 34%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $13.53 (was $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.01 at $4.27
Pays $.24 annual dividend.
We have collected $.06 in dividends so far.
Earnings announced in August. Revenues were down slightly from $15.1 million to $14.7 million but they made a profit of $.2 million versus a loss of $1.4 million last year. Net cash per share was $3.37 and our valuation fell to $13.53 a share. Still more than triple the current price.
Singer/Miller bought another 33,000 shares in early July at $3.88. They now own 12.1% of CCUR.
CCUR took on two of the Singer/Miller Board nominees and entered into a standstill agreement until the 2012 Shareholders meeting.
CCUR announced the initiation of a quarterly dividend of $.06 or $.24 annually in July.
Another 13D filed in June 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).
Down 16%, 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 $3.16 (was $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.32 at $3.15
Earnings announced in August. Revenues were up to $19.9 million from $11.7 million and they made $.01 per share the same as last year. Cash was $121 million or $1.18 per share. They raised their earnings guidance to a loss of only $5 million from $15 million. All in all a good report. Our valuation fell however to $3.16 as revenues, cash and earnings were all a bit lower than last quarter.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 37%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$7.46 (was $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.54 down $.01.
The CFO bought 10,000 shares at $3.47 on August 29th.
Earnings announced in August. We liked the quarter. Revenues were $87.6 million and they made $.08 a share profit compared to $.02 loss last year. Cash per share rose to $1.61. Our valuation rose to $7.46 compared to the same quarter of last years $6.45 as gross margin rose to 56% compared to 46% last year.
They are projecting next quarter at sales of $75-$82 million and EPS of $.00 to $.03.
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 12%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $3.41-(Was $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.04 at $1.31
Earnings announced in August. Revenues fell 14% to $12.5 million and they incurred a loss of $1 million versus a small profit last year. The Company said that the results from Ragnarok 2 in Korea were below their expectations. Investors looking for immediate gratification from this sold last week. Net cash per share was $1.76 and our valuation fell to $3.41 as margins and earnings fell. Lots of news and game release information in their press release, so rather than repeating it all here, please read the PR. It looks like there are lots of good things ahead.
Now trading at below cash value again.
Down 10%, 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 $.53 up $.05
“Earning” out in August. Revenues were $7.5 million versus $6.5 million last year and they lost $7.6 million from operations versus $8 million last year.
Cash stood at $40 million and they continue to sell more stock. They sold another 2.6 million this quarter for $1.9 million. A reverse stock split is coming, pending shareholder approval
Speculative for sure.
Down 63%, 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 –$16.00 (was $14, $12, $10)
Closed up $.25 at $12.39
Earnings announced in July. Sales were up 9% YOY and they made $.02 a share (same as last year). They did raise annual guidance to 8-10% revenue growth versus 5-7% previously. The stock seems like it wants to go higher.
A Board member bought 6,000 shares on May 25th, at just over $9.90. Good show of support at this level.
This company needs to be sold so that someone can take advantage of their 70%+ gross margins and enjoy some profits.
Up 118%, 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 $.07 at $14.75
MEDW announced another acquisition of a blood management consulting company in August. No financial details (as usual).
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 133%, 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 $3.11 (was $1.84, $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 $.53 up $.12
INUV announced 2 months sales of $9.7 million, so they are on track for $14-$15 million for this quarter compared to $13 million last quarter.
Earnings announced in August. Mediocre. Revenues were $12.9 million and they lost $3 million. This loss included some heavy non-cash charges related to the merger so adjusted EBITDA was $200,000. Our valuation was $3.11 compared to our estimate of $3.59.
Down 92% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $12.99 (was $11.95, $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 $.35 at $5.68
Earnings announced in August. Revenues were up from $6.4 million to $6.8 million. However they lost $.28 million versus a profit of $.14 million last year. Cash (adding the $1 million they just received from the sale of their New Leaf business) is $2.52 a share and our valuation rose to $12.99.
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 $1.20 up $.10.
ARI announced an acquisition in August. They acquired the assets of Ready2Ride Inc., of Floyds Knobs, Ind., the first-to-market and leading provider of enhanced aftermarket fitment data for the power sports industry. Terms of the transaction were not disclosed.
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 32%, 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, up $.10
RWWI announced an acquisition in August. No financial details. The acquisition was in computational fluid dynamics (CFD) analysis consulting and thermal simulation services that provide design insight allowing customers to make better informed design decisions without distractions to their current development processes.
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 $40 million for a $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 $1.34, $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 $.21 closed at $.20.
Earnings announced in August. Another good quarter and no one cares. Revenues were up 11% to $4.5 million and they made $.3 million or $.01 per share. Cash per share was $.11 and our valuation stayed at $1.34.
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.
Four profitable quarters in a row.
At a $7 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
Down 24%. 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.
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.
Down 98%, HOLD

Cheap Stocks, 8/31/2012 Update

We were down 1.5% last week.

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 89%
EXTR 45%
GRVY 130%
CCUR 79%
SIGM 63%
ASTX 42%
CTIG 53%
MRVC 53%
ANGN 46%
AVNT 71%

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

The DOW was down .5% last week, NASDAQ was down .1% and the Russell 3000 was down .2%.

CCUR, GRVY, MITL and MGCD earnings last week.

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

For the year, the DOW is up 7.2%, NASDAQ is up 17.7%, and the Russell 3000 is up 11.6%

Last week we went 9 stocks up, 13 down and 1 unchanged. Since inception we are now 55 stocks up and 19 down for a 74.3% 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%
2012-PTIX -44%
2012-MTSL +157%

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%.

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.24
Closed down $.09 at $1.11
Down 11%, BUY

Telecommunications Systems Inc. (NASDAQ-AVNW)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed up $.16 at $1.76
TSYS picked up an upgrade last week.
Earnings announced in July. They were fine. Revenues were up 14% to $114 million and cutting through all the goodwill write-off it looks like they made $1.5 million on an operating basis. Our valuation rose to $6.72. After falling to around $1.15 the stock popped back up to close at $1.36 when it became apparent the sky was not falling.
TSYS announced an acquisition on in July. They are buying the leader in 911 communications for $37 million.
Up 29%, BUY

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.37 (Was $8.85, $8.31)
Closed down $.07 at $2.28
Earnings announced in August. Revenues were down $5 million to $116 million, and they made $1.2 million on a Non-GAAP basis versus $2.8 million last year. Our valuation rose to $9.37 per share. Needham reiterated its “Buy” on AVNW.
Cash per share rose to $1.62.
Down 13%, 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 $29.59 (Was $29.58, $29.21)
Closed down $.06 at $8.10
Earnings out in August. They were good. Revenues were up 3%. They made a profit of $1.5 million ($.05 per share) compared to a loss of $1.8 million last year. Cash flow was positive and our valuation rose $.01 to $29.59 per share.
Up 13%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.73 (Was $1.73, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.54 up $.015
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Earnings announced in August. Revenues were $55 million down from $59 million last year. They lost $2 million ($.01 per share) after a net $1 million loss on litigation settlement and goodwill write-off. Our valuation stayed at $1.73, $.30 higher than our estimate for this quarter. The big news is that they are selling 2 more European companies for what looks like a combined $24 million and going forward with their optical communications group which is the bulk of their revenues. Our pro-forma valuation, assuming both of these sales close is $1.61 with $.44 a share in cash (76% of the current market cap). Still trading at less than ½ our valuation.
Raging Capital continues to buy shares. They now own over 27 million shares or 17.6% of MRV.
Up 4% BUY

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 $.10 at $6.87
Next earnings due out Wednesday, September 5th after the market close.
Sigma and Potomac settled their war, at least temporarily as Potomac will get two Board seats.
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 $70 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 19%, 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 $13.92, $12.81, $15.28, $14.04, $10.39)
Closed up $.04 at $2.78
Official earnings last week. Our valuation fell to $10.95 which is still more than triple the current price.
Down 9%, HOLD

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $$14.03 (Was $19.81, $22.23, $25.63, $26.45)
Closed down $.03 at $6.88
Pays $.68 a share annual dividend.
We have collected $.81 of dividends since we recommended RIMG.
Earnings announced in July. Well not really earnings. Revenues fell 9% to $18.3 million, margins fell to 45% from 49% last year and they lost $2.75 million or $.27 per share. Qumu revenues were a whopping $1.4 million. Cash fell to $62.3 million or $6.13 and our valuation fell again to $14.03
This is the worst case of management squandering its assets on an acquisition to escape being bought out and fired. We have lost over $12 on our valuation and the stock is down over 50% Spent over $40 million to buy Qumu’s paltry revenue stream.
They are now projecting next quarter to be $20-$22 million of revenue and only lose $.02-$.10 per share. Guidance for 2012 is low double digit sales growth and the same level cash flow.
Teetering on selling here despite the yield.
Down 52%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $70.28 (Was $62.59, $63.94, $63.84, $79.12, $63.99)
Closed up $2.26 at $21.71
We have also collected $.80 a share in dividends here.
LXK now pays a $1.20 annual dividend.
The stock spiked on news that LXK was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
Earnings announced in July. Revenue fell 12% and Non-GAAP earnings fell to $.89 a share from $1.36 a year earlier. Currency and Europe were blamed for the shortfall. Q3 guidance is another 10% revenue decline and Non-GAAP earnings of $.75-$.85 compared to $.95 last year. Our valuation actually increased on a gross margin increase to $70.28 and net cash fell a bit to $3.85 a share as they bought back 800,000 shares for $25 million and paid their quarterly dividend. This is why we don’t like Wall Street analysts. They would rather pay 100 times earnings for some maybe good company than a proven cash machine like LXK. Yield is now 6.2%
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 well below our original buy price so we are making this a Buy again.
Down 25%, BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $2.65 (Was $3.15, $3.05, $2.90, $3.11, $2.63, $2.97)
Closed at $1.18, down $.04
Earnings announced in August. Sales dropped from $44.2 million last year to $35.5 million as they continued to cull out low margin business. Net loss was $.02 a share down from $.09 last year. EBITDA for the quarter was $1.5 million compared to an EBITDA loss of $2.1 million last year. The “turnaround” continues. Net cash was $1.0 a share and our valuation was $2.65 a share compared to $2.63 last year.
Up 28%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
NEW Valuation $13.53 (was $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.18 at $4.28
Pays $.24 annual dividend.
We have collected $.06 in dividends so far.
Earnings out last week. Revenues were down slightly from $15.1 million to $14.7 million but they made a profit of $.2 million versus a loss of $1.4 million last year. Net cash per share was $3.37 and our valuation fell to $13.53 a share. Still more than triple the current price.
Singer/Miller bought another 33,000 shares in early July at $3.88. They now own 12.1% of CCUR.
CCUR took on two of the Singer/Miller Board nominees and entered into a standstill agreement until the 2012 Shareholders meeting.
Another 13D filed in June 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).
Down 16%, 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 $3.16 (was $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.16 at $2.83
Earnings announced in August. Revenues were up to $19.9 million from $11.7 million and they made $.01 per share the same as last year. Cash was $121 million or $1.18 per share. They raised their earnings guidance to a loss of only $5 million from $15 million. All in all a good report. Our valuation fell however to $3.16 as revenues, cash and earnings were all a bit lower than last quarter.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 23%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$7.46 (was $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.56 up $.21.
The CFO bought 10,000 shares at $3.47 on August 29th.
Earnings announced in August. We liked the quarter. Revenues were $87.6 million and they made $.08 a share profit compared to $.02 loss last year. Cash per share rose to $1.61. Our valuation rose to $7.46 compared to the same quarter of last years $6.45 as gross margin rose to 56% compared to 46% last year.
They are projecting next quarter at sales of $75-$82 million and EPS of $.00 to $.03.
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 12%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
NEW Valuation $3.41-(Was $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.33 at $1.35
Earnings last week. Revenues fell 14% to $12.5 million and they incurred a loss of $1 million versus a small profit last year. The Company said that the results from Ragnarok 2 in Korea were below their expectations. Investors looking for immediate gratification from this sold last week. Net cash per share was $1.76 and our valuation fell to $3.41 as margins and earnings fell. Lots of news and game release information in their press release, so rather than repeating it all here, please read the PR. It looks like there are lots of good things ahead.
Now trading at below cash value again.
Down 7%, 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 $.48 down $.03
“Earning” out in August. Revenues were $7.5 million versus $6.5 million last year and they lost $7.6 million from operations versus $8 million last year.
Cash stood at $40 million and they continue to sell more stock. They sold another 2.6 million this quarter for $1.9 million. A reverse stock split is coming, pending shareholder approval
Speculative for sure.
Down 66%, 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 –$16.00 (was $14, $12, $10)
Closed down $.09 at $12.14
Earnings announced in July. Well it appears they did not screw anything up and the stock rebounded to hit a new high of $12.14. Sales were up 9% YOY and they made $.02 a share (same as last year). They did raise annual guidance to 8-10% revenue growth versus 5-7% previously. The stock seems like it wants to go higher.
This company needs to be sold so that someone can take advantage of their 70%+ gross margins and enjoy some profits.
Up 114%, 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 $.21 at $14.68
MEDW announced another acquisition of a blood management consulting company in August. No financial details (as usual).
Earnings announced in May. Another good report. Revenues increased 22% and they made $.22 per share compared to $.17 last year. Cash is closing in on $4.50 a share ($4.42). Our valuation rose to $19.24.
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 132%, HOLD

Inuvo (INUV (was-VTRO, MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $3.11 (was $1.84, $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 $.41 down $.04
Earnings announced in August. Mediocre. Revenues were $12.9 million and they lost $3 million. This loss included some heavy non-cash charges related to the merger so adjusted EBITDA was $200,000. Our valuation was $3.11 compared to our estimate of $3.59.
Down 92% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
NEW Valuation $12.99 (was $11.95, $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 $.17 at $5.33
Earnings out last week. Revenues were up from $6.4 million to $6.8 million. However they lost $.28 million versus a profit of $.14 million last year. Cash (adding the $1 million they just received from the sale of their New Leaf business) is $2.52 a share and our valuation rose to $12.99.
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 39%, 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 $1.10 up $.05.
ARI announced an acquisition last week. They acquired the assets of Ready2Ride Inc., of Floyds Knobs, Ind., the first-to-market and leading provider of enhanced aftermarket fitment data for the powersports industry. Terms of the transaction were not disclosed.
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 32%, 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 $.70, down $.10
RWWI announced an acquisition in August. No financial details. The acquisition was in computational fluid dynamics (CFD) analysis consulting and thermal simulation services that provide design insight allowing customers to make better informed design decisions without distractions to their current development processes.
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 $40 million for a $90 million in sales company with 50% margins and not losing money, just too cheap.
Our valuation is 3X the current price.
Down 12%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.34 (Was $1.34, $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 $.21 closed at $.20.
Earnings announced in August. Another good quarter and no one cares. Revenues were up 11% to $4.5 million and they made $.3 million or $.01 per share. Cash per share was $.11 and our valuation stayed at $1.34.
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.
Four profitable quarters in a row.
At a $7 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
Down 24%. 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.
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.
Down 98%, HOLD