You may have noticed that there are no ads on our blog anymore. Google/Adsense unilaterally decided that I was somehow breaking their rules for blogging and will not let me use Adsense anymore. They won’t tell me what rule is and they won’t even respond to my e-mails. They sent me some excerpt of their rules and I don’t even understand what any of them are, let alone actually do them. I have not made a change to my Blog since 2006 and Google selected the ads. They also took my earning away. Not that I give a rats ass since I don’t do this Blog for money, I do it for self discipline. I figure if I have to say my stock purchases out loud and be accountable to someone other than myself, it will improve my discpline in sticking to my formula and not speculating. Hopefully others will benefit from it also. I would buy Google stock as they got an extra $75 from me. Since they are an uncontrolled monopoly, this blog may one day disappear so I have been scouting out new free blog hosts–Posterous seems like the easiest to use (since I am not a techno-nerd and don’t have the time to screw around with learning a new program). So if one day this Blog is not here–look for us on Posterous or WordPress.
Sorry for the rant, but when someone falsely accuses you of something and can’t even tell you what it is and causes you monetary harm, that would probably make some lawyer smile. Non-response to my e-mails is just an indication of Google’s arrogance.
Back to business:
We were up .4% last week and are now up 26.2% for the year. NASDAQ was up .6% last week and is still up 20.4% 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, in fact on of them came out with bad news last week and fell 20%.
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:
The DOW was up 1.3% last week, NASDAQ was up .6% and the Russell 3000 was up 1.4%.
No earnings last week.
AVNW, BLIN, GRVY, and MITL are our favorites.
For the year, the DOW is up 11.4%, NASDAQ is up 20.4%, and the Russell 3000 is up 15.9%
Last week we went 6 stocks up, 9 down and 1 even. 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-ONXS +11% (Buyout offer)
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
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-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)
2009-DTLK +33% (fourth trip on this)
2009-HSTM +67% (continued good earnings)
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-PRM +56% Buyout (1 week after we recommended it)
2012-RIMG -46% (including dividends)
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
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
Closed up $.11 at $1.31
Up 6%, BUY
Telecommunications Systems Inc. (NASDAQ-AVNW)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed down $.01 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 $.03 at $2.35
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 10%, BUY
CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.59 (Was $29.58, $29.21)
Closed down $.29 at $9.55
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 33%, 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 $.53 down $.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 3% BUY
Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed down $.44 at $6.17
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 27%, 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 $.12 at $2.82
Latest earnings announced in August. Our valuation fell to $10.95 which is still more than triple the current price.
Down 7%, HOLD
Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Valuation $70.28 (Was $62.59, $63.94, $63.84, $79.12, $63.99)
Closed down $.70 at $21.55
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 25%, HOLD
Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Valuation $13.53 (was $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed up $.51 at $5.00
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 2%, 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 $.18 at $2.90
ASTX announced that J&J got approval for a new Dagogen indication in Europe in September.
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 26%, 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 $3.49 up $.14
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 10%, 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 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. 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 $.85 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 84% 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 $.20 at $6.20
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 62%, 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 down $.05
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 $.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
Hi. Just found your blog a few days ago. I've been trying to wrap my head around implementing the principles of the “Intelligent Investor.” MITL seems to satisfy all of Benjamin Graham's more immediate criteria for evaluation (a type of stock I haven't been able to find yet). The one question I have, having been researching MITL myself on this blog's suggestion, is why the news is so negative ? It even got downgraded recently in certain reports. One explanation could be that the company is too small to warrant consideration by big investors. But why then would it be dismissed. (Under what conditions will the price go up – a dividend be paid – or the company be acquired?) I am very excited about the stock otherwise and just hoping to understand this phenomena. Thank you for your time.
Sorry, I don't follow anyone's theories. I notice up and downgrades but don't put much stock in them when they involve value stocks. My formula says this is way undervalued and MITEL is not bleeding cash, has good margins. Could it go down? Of course. It is Canadian and has a fair amount of debt which are negatives. What will make it go up? Maybe a buyout (we have had a fair number of our stocks bought out), or just some decent earnings. Patience is the key.