We had another nice week last week, driven by an additional 15% gain in ARIS. We were up 2.4% and are now up 13.6% for the year.
No earnings 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 even last week, NASDAQ was down .1% and the Russell 3000 was down .3%. For the year, the DOW is up 10.7%, NASDAQ is up 7.5% and the Russell is up 9.60%.
DRIV, AGYS, DAEG, BLIN, MRVC, GRVY and CBEY are our favorites.
Last week we went 6 stocks up, 10 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-LTUS -98% No more Chinese stocks for us
2012-AEZS -63% a bad speculation.
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 63 stocks that we closed out since 2006 (52 were winners) the average net gain was 30%.
XRS Inc. (NASDAQ-XRSC)-Recommended 2/26/2013)
Buy Price $1.50
Closed up $.20 at $1.80
Up 20%, BUY
Agilysys Inc. (NASDAQ-AGYS)-Recommended 1/18/2013)
Buy Price $8.40
Valuation (Was $16.10)
Closed up $.02 at $9.61
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 14%, BUY
Digital River Inc. (NASDAQ-DRIV)-Recommended 1/11/2013)
Buy Price $14.20
Valuation $34.59 (Was $32.20)
Closed down $.38 at $14.25
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 1%, BUY
Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.20
Valuation $4.86 (Was $4.00)
Closed down $.06 at $1.14
Earnings announced in March. Not bad. Sales fell from $11.1 last year to $10.4 million, but they were up slightly from last quarters $10.35 million. Gross margins were up to over 70% and net debt decreased to $13.8 million from $14.5 million last quarter. Non-GAAP earnings were $449,000 versus $252,000 last quarter. Our valuation spiked to $4.86 per share up 20% from last quarter.
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.
Down 5%, BUY
Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.35 (Was $2.56, $2.24)
Closed down $.10 at $1.30
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 5%, 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 $2.31
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 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 $.14 at $3.39
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 29%, 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 $28.33 (Was $29.04, $29.59, $29.58, $29.21)
Closed down $.19 at $7.35
Earnings announced in February. 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 3%, 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 $10.50 down $.49
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 22% BUY
Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Valuation $8.24 (Was $13.05, $10.67, $8.41 $12.10, $13.40, $16.02)
Closed down $.02 at $5.00
Earnings announced in March. They stunk up the place. While sales were up to $44 million from $36 million last year, they lost $36 million or $1.18 per share. Cash fell again to $2.51 per share (it was $5.40 when we recommended SIGM) and our valuation plunged to its lowest level ever. But wait, there’s more…..they are projecting next quarter to be about breakeven on $49-$52 million in sales. The market looked past this past quarter and the stock rose. We will be watching this one very closely and may sell at any time.
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.
Down 41%, HOLD
Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $12.26 (Was $13.10, $10.92, $13.92, $12.81, $15.28, $14.04, $10.39)
Closed up $.10 at $3.76
No news but all of MITL’s loss last week was in the last hour or so of trading.
In addition to refinancing their debt out to 2019-2020, MITL announced earnings in February. 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 24%, 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 up $.87 at $27.19 (includes dividends)
We have collected $1.70 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 6%, 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 up $.64 at $7.79
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.
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 70%, 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 $3.50 down $.05
Vanguard filed a Form 13G in March 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 $1.32 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.
Now trading at way below cash value again.
Down 9%, BUY
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 $6.14 (was $5.97, $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 $2.70 up $.35
ARI closed their private placement last week and the stock continued its climb. We are almost up to 50% of our valuation!
Earnings announced in March. We saw transitional results as a result of integrating 2 acquisitions including 50 Below which closed November 28, 2012. Revenues were up 36% to $7.5 million but expenses were up 39% excluding $600,000 of acquisition related expenses. As a result pre-tax loss was $206,000 versus income of $122,000. How much of this loss was due to additional integration expenses was not disclosed.
At the same time ARI announced a private placement of stock for $4.8 million at $1.50 a share. They will use this to pay down the 14% debt they took on to buy 50 Below. With all this and only a partial quarter of 50 Below sales, we estimate the current valuation at $6.14 a share. We don’t expect much in the way of earnings over the next 2 quarters as more integration costs will continue for a while. So while this acquisition may be a game changer, we are only in the 3rd inning.
Now up 68%, HOLD, 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 $.28 closed at $.265
Well Birbeck and Fairford Holdings made an offer to buy CTIG in March for $.29 a share. The company formed a special committee to evaluate the offer. Hopefully they will find somebody else who will pay fair value—or at least close to it.
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.
Five profitable quarters in a row. .
UP 4%. HOLD