We were up .6% last week and are now up 7.8% for the year.
MITL, ASTX and CBEY earnings last week.
We are selling ASTX (44% gain) and MGCD (79% gain).
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 .6% last week, NASDAQ was up .3% and the Russell 3000 was up .2%. For the year, the DOW is up 7.5%, NASDAQ is up 5% and the Russell is up 6.7%.
DRIV, AGYS, DAEG, BLIN, MRVC, GRVY and CBEY are our favorites.
Last week we went 4 stocks up, 14 down and 1 even. Since inception we are now 65 stocks up and 15 down for an 81.3% 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%.
XRS Inc. (NASDAQ-XRSC)-Recommended 2/26/2013)
Buy Price $1.50
Closed up $.10 at $1.60
Up 7%, BUY
Agilysys Inc. (NASDAQ-AGYS)-Recommended 1/18/2013)
Buy Price $8.40
Valuation (Was $16.10)
Closed down $.34 at $9.28
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 11%, BUY
Digital River Inc. (NASDAQ-DRIV)-Recommended 1/11/2013)
Buy Price $14.20
Valuation $34.59 (Was $32.20)
Closed down $.45 at $14.20
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.
Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.20
Closed down $.01 at $1.35
Next earnings due out Thursday, March 7th after the market closes.
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 $.06 at $1.36
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 10%, HOLD
Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.02 (Was $6.72, $5.49)
Closed down $.03 at $2.29
TSYS announced another patent deal in February. 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 67%, 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 $.10 at $3.60
Penn Capital Mgmt. filed a 13G in late February disclosing a 6.05% stake.
Dimension Fund filed a Form 13G in February 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 37%, HOLD
CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at $6.53)
NEW Valuation $28.33 (Was $29.04, $29.59, $29.58, $29.21)
Closed down $.57 at $7.21
Earnings announced last week. Not bad, but didn’t set the world on fire. Revenues were down from last year-$118.9 versus $123.3 million. They lost $5.8 million versus $5 million last year on a GAAP basis. Adjusted EBITDA also fell to $18.8 million from $22.6 million. Nevertheless they did generate $4.3 million of free cash flow versus $4.2 last year. Guidance for 2013 was revenues of $475-$485 million, adjusted EBITDA of $75-$82 million and free cash flow of $15-$20 million. Our valuation fell to $28.33 and based on 2013 guidance should stay in about the same range.
Penn Capital Mgmt. filed a 13G in late February disclosing a 5.55% stake.
$80 million of EBITDA, $.68 a share in net cash and a $230 market cap. Cheap.
Up 1%, 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 $11.06 down $.02
Lloyd Miller disclosed a 6.9% stake in February.
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 $.11 at $4.67
Dimension Fund disclosed a 6.48% stake in SIGM in February 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 45%, 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 $12.26 (Was $13.10, $10.92, $13.92, $12.81, $15.28, $14.04, $10.39)
Closed up $.31 at $4.01
In addition to refinancing their debt out to 2019-2020, MITL announced earnings last week. Revenues were down to $142 million from $150.5 million last year and Non-GAAP net income was $.23 a share versus $.21 a share last year. Our valuation fell a bit to $12.26 a share-still more that 3X the current price.
Up 32%, 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 $.80 at $23.19 (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 20%, 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 $.11 at $6.99
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 53%, HOLD
Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
NEW Valuation $3.93 (was $3.20, $3.16, $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.21 at $3.31
Earnings announced last week. Pretty good actually. Revenues were a tad over $24 million compared to just over $21 million last year and they made $4.5 million compared to a profit of $.2 million last year. They ended the year with $138 million of cash and no debt. Our valuation rose to $3.93 a share. But, 2013 will apparently be a year of investment, declining revenues and large cash burn. They are projecting $55 million of revenue, a loss of $30 million. They are not including any milestone payments in the revenue forecast ($12 million in 2012) which would almost 100% flow to the bottom line. So we are pulling the plug and taking our gain. While the upside might be huge, we don’t like the cash burn for 2013. Just not how we invest. If you want to have a $3 lottery ticket this looks reasonable.
Up 44%, SELL
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 $3.50 down $.04
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 10%, 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 $1.39 down $.04
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 4%, 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 up $.53 at $6.83
Next earnings due out Tuesday, March 5th after the market close.
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 79%, SELL
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 $1.95 down $.09
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 21%, 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