We were down .7% last week and are now up 7.3% for the year.
No earnings announcements 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:
The DOW was up .1% last week, NASDAQ was down 1% and the Russell 3000 was down .4%. For the year, the DOW is up 6.8%, NASDAQ is up 4.7% and the Russell is up 6.6%.
DRIV, AGYS, DAEG, BLIN, MRVC, GRVY and CBEY are our favorites.
Last week we went 3 stocks up, 14 down and 1 even. Since inception we are now 64 stocks up and 15 down for an 81% 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-HPOL +27% (third trip)
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)
2012-MOTR -29% (lost biggest customer contract)
2013-INUV -83% Held this since 2007. Failed business model.
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 61 stocks that we closed out since 2006 (50 were winners) the average net gain was 29%.
Agilysys Inc. (NASDAQ-AGYS)-Recommended 1/18/2013)
Buy Price $8.40
Valuation (Was $16.10)
Closed down $.03 at $9.62
Earnings announced in January. Pretty good we think. Revenues were up 30% to $67 million and they made $1.7 million on Non-GAAP income, or $.08 per share versus a $1.4 million ($.06) loss last year. Gross margins dropped from 39% to $35% and net cash rose to $3.65 per share. Overall our valuation rose only slightly to $16.23 as the margin drop offset almost everything else. They also raised their 2013 guidance to $230-$232 million in sales and $.24-$.26 of Non-GAAP net income. This means Q4 guidance is sales of about $57 million and Non-GAAP net income of $.07-$.09 per share.
UP 15%, BUY
Digital River Inc. (NASDAQ-DRIV)-Recommended 1/11/2013)
Buy Price $14.20
Valuation $34.59 (Was $32.20)
Closed up $.60 at $14.65
Earnings announced in February. Revenues were $101 million, above guidance but below last year $112 million. Non-GAAP earnings were $.31 per share compared to $.45 last year. Next quarters guidance is revenues on $101-$104 million and Non-GAAP earnings of $.18-$.22 per share. The market didn’t like the earnings too much but our valuation went up to $37.32—but that is before you take out the $100 million in cash they paid for LML in January. Adjusting for this, and Q1 guidance our valuation still rose to $34.59 and net cash of $7.83.
Up 3%, BUY
Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.20
Closed unchanged at $1.36
Looks like BlueLine Partners (a “strategic opportunities fund”) have shaken up Daegis management in January with the ouster or the CEO and CFO. The interim CEO and Chairman of the Board is a BlueLine founder. Its feeling like they are not happy with the current stock price for sure.
Up 13%, BUY
Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.35 (Was $2.56, $2.24)
Closed down $.12 at $1.42
Earnings announced in February. So-so. Revenues fell from $6.5 million to $6.2 million. iAPPS revenue rose 17% ($4.2 million) and recurring revenues were just under 20% of total sales. They lost $.02 on a Non-GAAP basis versus a profit of $.01 last year. Guidance is for revenues of $27-$28 million for the year. iAPPs revenue is expected to increase 27% to $21 million. They expect to be adjusted EBITDA positive in 2013.
Our valuation fell a bit to $2.35 per share. We see our valuation soaring to $3.25 if they can make their numbers this year.
Up 15%, BUY
Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.02 (Was $6.72, $5.49)
Closed down $.09 at $2.32
TSYS announced another patent deal. This time it is with Acacia Research a patent licensing group. They termed the deal an “alliance” so we think it is more of a brokering agreement where Acacia looks for licensees and they share the revenues.
Earnings announced in January. Revenues rose 9.7% to $132.7 million and they made $.20 per share in Non-GAAP income. However, these results included the previously announced patent deal, which they still did not give any financial details on. We are thinking it could be as much as $8 million of the sales and profit for the quarter. Even adjusting for this our valuation dropped to $6.02. We still like TSYS as they say they will continue to monetize their patents and their results are still better year-over-year.
TSYS announced in November it was one of 20 companies selected to participate in a 5 year, $10 billion contract with the U.S. government.
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.
Up 69%, HOLD
Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $10.28 (Was $9.03, $9.37, $8.85, $8.31)
Closed down $.05 at $3.70
Dimension Fund filed a Form 13G last week disclosing a 5.3% stake, Vanguard disclosed a 5.67% stake and Blue Mountain has been buying more and is now up to a 5.90% stake.
AVNW blew away their revised upwards guidance and came in with revenues of $129 million and Non-GAAP income of about $4.5 million. Gross margins were steady at 30% and our valuation jumped to $10.28 per share. Net cash was $1.40 per share.
Next quarter they are projecting $115-$121 million in sales and that they will again be profitable on a non-GAAP basis ($.02 to $.06 per share).
Up 41%, HOLD
CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.04 (Was $29.59, $29.58, $29.21)
Closed down $.18 at $7.78
Earnings announced in November. Not bad. Sales were off $1 million to $121 million and they made $.06 a share compared to a $.04 loss last year. They raised their 2012 guidance a bit and gave 2013 guidance that was tepid at best.
“Management expects revenue to be close to 2012 levels with increasing growth in the latter part of the year. Adjusted EBITDA is expected to decline in 2013 due to increased levels of SG&A expense primarily associated with the growing sales force needed to support future levels of revenue growth. With respect to cash capital expenditures, management expects a slightly higher level relative to 2012. As a result, management expects a reduced level of free cash flow when compared with 2012. However, management expects to continue its focus on delivering significant levels of positive free cash flow in 2013 and future years.”
$90 million of EBITDA, no net debt and a $250 market cap. Cheap.
Our valuation fell a tad to $29.04, still way more than the stock is selling for today.
Up 9%, BUY
MRV Communications (Pink Sheets-MRVC.pk)
Valuation $31.80 (Was $34.60, $28.60, $41.20, $43.20 (after $9.50, $6.00 and $1.40 special dividends), $52.40, $55.80)
Buy Price October 7, 2011- $8.50 ($25.40 before special dividends)
Closed at $11.08 down $.07
Lloyd Miller disclosed a 6.9% stake last week.
The 20 for 1 stock split happened in December, so all the share information has been adjusted.
Raging Capital bought another 1.6 million shares in the first week of December at $.54 bringing their holdings to 30.7 million shares or 20.1% of the company.
Earnings announced in November. Not bad. Revenues fell a bit to $51 million but it appears that the revenue shortfall was in the divisions that were sold in October. Hard to tell from their press release or 10Q what the real results were excluding the sold divisions so we are still estimating our valuation which dropped to $31.80 per share. Looks like they broke even for the quarter after excluding an asset impairment write-off.
Still trading at less than ½ our valuation.
Up 29% 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 $.26 at $4.78
Dimension Fund disclosed a 6.48% stake in SIGM last week and Vanguard disclosed a 5.61% stake via 13G filings and MAK Capital One sold their 6.6% stake.
Earnings announced in November. Hmmmm. Sales fell $4 million to $64 million (but right on guidance) and they lost $39 million. But wait, it was “only” $9 million on a non-GAAP basis. The CEO swears that they will get to profitability in Q1, 2014 (next quarter is Q4, 2013). We’ll see. Cash fell a bit to $97 million or $2.91 a share and our valuation fell to $11.39. Have to give this another quarter or two I guess.
SIGM announced a big restructuring plan in November. The goal is to cut expenses by $45 million for their FY 2014 which starts in 4 months (1/29/2013). Headcount and expense cuts are the bulk of the savings. They say this will get them to Non-GAAP profitability at a $56 million a quarter run rate. They will take a $1 million charge in Q3. The also said “Sigma is also investigating strategic alternatives for several research and development programs”. Not sure exactly what this means but it sounds like it will be a positive.
Down 44%, 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 $13.10 (Was $10.92, $13.92, $12.81, $15.28, $14.04, $10.39)
Closed down $.27 at $3.70
MITL announced some updated guidance as they talked to lenders about refinancing their debt. They are expecting $142 million of sales (previous guidance was $141-$146 million), margins of 55-56% and Non-GAAP expenses of 43-44% and adjusted EBITDA of $21-$22.5 million.
Earnings announced in December. Pretty good. Revenues were down 6% to $145.5 million, gross margins increased from 53% to 56.2% and adjusted EBITDA increased 17% from $21.4 million to $24.1 million. Our valuation rose to $13.10. Non-GAAP net income rose to $14.2 million from $12.6 million. Non-GAAP net income was $.25 a share and was $.33 for the six months.
The discount to our valuation is huge.
Up 22%, BUY
Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Valuation $60.44 (Was $60.41, $70.28, $62.59, $63.94, $63.84, $79.12, $63.99)
Closed down $.62 at $23.99 (includes dividends)
We have collected $1.40 a share in dividends here.
LXK now pays a $1.20 annual dividend.
Earnings announced in January. Not that good, but this is a strong company. Revenues came in $967 million, down 9% from last year. Not unexpected. Net income was only $.61 per share (Non-GAAP) versus $1.25 last year. Guidance for 2013 is for sales to decline 11-13% and Non-GAAP earnings for Q1 are expected to be between $.80-$.90 per share compared to $1.05. Based on 2013 guidance our valuation is $60.44. Not bad.
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.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases
Down 17%, HOLD
Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$4.58 (Was $5.08 before $.50 special dividend)
Valuation $16.20 (was $15.37, $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.82 at $7.10
Pays $.24 annual dividend.
Looks like the NIA effect may be wearing off. But we will continue to hold on the large discount to our valuation.
Looks like the infamous NIA (National Inflation Society) has picked another of our stocks to pump. Last time they drove Broadvision to $50 a share from $8. We sold at $14.10 just before the stock went wild. Our valuation of BVSN was about $18 a share and the business looked dead (and still does). We have collected $.18 in dividends so far (excluding the $.50 special dividend).
Earnings announced in January. Not bad. Revenues were up a tad to $16.6 million compared to $16.4 million last year. They made $.08 per share versus a loss of $.06 last year. Cash per share dropped to $2.78 per share as they paid $.56 a share in dividends. Our valuation rose to $16.20 a share.
Singer/Miller duo own 12.1% of CCUR.
Up 55%, 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 $3.20 (was $3.16, $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed down $.19 at $3.10
Next earnings due out Monday, February 25th after the market close.
Earnings announced in October. Revenues were $17.2 million compared to $16.9 million last year. They lost $1.8 million after some special charges. Cash was $130 million or $1.40 per share. Based on the current quarter, our valuation rose slightly to $3.20 per share. Based on their 12 month guidance our valuation looks like $3.64 with a $4 million profit. They are projecting $60 million in product revenue next year and they do not project milestone/development revenues. They are projecting a cash loss of maybe $18 million next year—again without any milestone or development revenue.
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 35%, HOLD
Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.99 (was $6.97, $7.46, $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 $.03
Vanguard filed a Form 13G last week disclosing a 5.21% stake, Wellington disclosed a 6.3% stake and Soros upped his holdings to 9.85%..
Earnings announced in January. Revenues came in at $75.6 million (the low end of revised downward guidance) down 9% from last year. Non-GAAP income was $2.8 million ($.03 per share) compared to $5.8 million ($.06 per share). Net cash was $2.08 per share. Our valuation increased $.02 to $6.99 per share.
Guidance for next quarter looks much the same as this past quarter.
Starboard owns 8.8% and Blackrock owns 5.4% 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 $3.65-(Was $3.41, $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed at $1.43 down $.03
Earnings announced in November. Not bad and better than Q2. Revenues were $12.8 million and they lost about $.2 million (excluding a $2.5 million impairment charge). Cash rose to $51 million or $1.83 per share. Our valuation rose to $3.65 per share.
From their press release:
“Gravity is planning to release Ragnarok Online II in North America and the Philippines in the first half of 2013 after its launch in Singapore and Malaysia in December 2012.
Steal Fighter to be launched in Korea in the first quarter of 2013
Gravity will launch Steal Fighter, an action real-time strategy role playing game, in Korea in the first quarter of 2013. Gravity entered into a license agreement with L-Time Games Co., Ltd., the developer of Steal Fighter, to publish the game in Korea in April 2012 and conducted closed beta testing in September 2012. The Company intends to launch the game in the overseas markets after its launch in Korea.
Ragnarok Online — Uprising: Valkyrie to be launched in China and Taiwan
Ragnarok Online — Uprising: Valkyrie, a mobile massively multiplayer online role playing game, will be released in China and Taiwan by the end of 2012. Gravity has entered into license agreements with local licensees in each market and the game will be available on iOS and Android platform. Ragnarok Online — Uprising: Valkyrie hits more than 600,000 cumulative downloads in Korea since its launch in May 2012.”
It looks like there are lots of good things ahead.
Now trading at way below cash value again.
Down 2%, BUY
Medical Graphics Corporation (MGCD-Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $15.03 (was $12.99, $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 $.25 at $6.30
Earnings announced in December. Sales were up 4% to $8.232 million and they broke even on an operating basis compared to a profit of $.585 million last year. Net cash was $2.46 per share and our valuation was $15.03 down from $15.90 last year. With the gain from the sale of New Leaf, MGCD reported earnings of $.20 a share.
If this company could just show a bit of growth I think we would see $10 in short order—if.
While MGCD 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 65%, HOLD
OB-abies (Bulletin Board Listed Stocks)
As proven by OPTIO, patience is necessary with these stocks.
ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.97 (was $6.21, $6.13, $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 $2.04 up $.44
Maybe ARIS is finally getting noticed?
Earnings announced in December. They were good. Revenues were up 10% to $5.9 million and they made $300,000 or $.01 per share down from $.03 last year. Gross margins rose 2% to 76.3%. Our valuation fell by a bit less than the cost of their August acquisition of Ready2Ride, to $5.97 a share.
ARIS closed the purchase of “Fifty Below”. In their press release they even said it was a “game changer” which is what we said earlier.
Earlier in November ARIS announced that it was buying the retail assets of “Fifty Below Sales and Marketing” for about $5 million out of bankruptcy.
The retail division of 50 Below is a leading provider of eCommerce websites in the powersports, automotive tire & wheel aftermarket, medical equipment and pool and spa industries. Fifty Below had about $10 million in revenue for the first 9 months of 2012 and has over 3,500 dealer websites. At less than 50% of revenues the deal looks good. The financing will not be cheap on the $3.5 million it is borrowing from a private investor—14% interest rate and 400,000 shares of ARI stock. Despite this cost, the deal should add over 50% to ARI’s sales and hopefully at least that much to its income. There was no disclosure of projected profits on this deal.
Douglas Singer a private investor filed a Form 13D/A in October disclosing he sold about 90,000 shares at prices of $1.00 to $1.16 from 9/6/2012 to October 12, 2012. He still owns 510,000 shares or 6.3%.
Now up 27%, BUY, Still a Huge valuation gap here.
CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.17 (Was $1.34, $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 $.23
John Birbeck the CEO bought another 2,500 shares at $.385 on 12/6/2012 and now owns 747,000 shares.
Earning announced in November. The good news was that they were again profitable, making $.01 versus losing $.01 last year. However revenue fell 10% from $4.4 million to $4 million. Net cash fell to $.09 per share and our valuation fell to $1.17.
CTI recently announced that it had partnered with BroadSoft (NASDQ-BSFT) to sell CTI’s Call Center Express solution. Very reputable company to partner with.
Five profitable quarters in a row. .
Still an “undercover” company and stock.
Down 4%. BUY