Cheap Stock Weekly Update June 2nd 2014

We went in the opposite direction from the markets last week as micro caps were ignored and continued to drift down. We were down 1% last week driven by a 12% loss in BLIN.  We are now up 2% for the year. The DOW was up 1.1% and NASDAQ was up 1.4%. For the year, the DOW is up .9% and NASDAQ is up 1.6%

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:

UNTD 44%
CCUR 28%
SIGM 76%
MRVC 18%
SYNC 51%

 

PRSS, MRVC, DAEG, EXTR and UNTD can still be bought.

Last week we went 3 stocks up, 9 down and 2 even. Since inception we are now 67 stocks up and 18 down for a 78.8% winning percentage (80% is our target win %).  Of our closed-out positions 59 have been winners and 13 have been losers for an 82% win percentage and a 34% average net gain per position.

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% (third trip)

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% No more Chinese stocks for us

2012-AEZS -63%  a bad speculation.

2012-RIMG -46% (including dividends)

2012-HPOL +34% (4th trip)-bought out in 2013

2012-MEDW +133% (Buyout 1 week AFTER we sold this)

2012-SPNC +118%

2012-RWWI +1%

2012-MOTR -29% (lost biggest customer contract)

2013-INUV -83% Held this since 2007. Failed business model.

2013-ASTX-+40%

2013-MGCD-+79%

2013-LXK +2%

2013-AGYS +41%

2013-DRIV+31%

2013-EXTR +63%

2013-MITL +183%

2013-QADA +51%

2014-AVNW-28%

2014-CBEY +37% (Buyout)

2014-GRVY -36%

 

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).

 

CafePress, Inc.  Inc. (NASDAQ-PRSS)-Recommended 5/19/2014)

Buy Price $5.40

Valuation $11.27

Closed down $.30 at $5.15

Waiting on the outcome of their review of “strategic alternatives”.

Down 5%

Extreme Networks, Inc.  Inc. (NASDAQ-UNTD)-Recommended 3/12/2014)

Buy Price $3.95

Valuation $8.52

Closed up $.02 at $3.98

A Director bought 25,000 shares in May at $4 on top of the CFO’s 10,000 share purchase, also in May.

EXTR announced Q3 (March 31, 2014) earnings on May 6th. We will use all Non-GAAP numbers here, as all the accounting adjustments related to their merger, just don’t mean a thing to their business (pardon us SEC). Revenues came in at $143.7 million compared to the pre-merger $68.2 million last year. Earnings per share were $.02 compared to $.04 last year. Gross margins were 55% versus 56% last year. Net cash was negative $.16 per share. So in our view, a decent quarter.

The company is still going through the merger integration and expects to achieve significant cost reductions ($30-$40 million a year). For the upcoming quarter they expect to be at a $20 million saving run rate, versus $8 million in the March quarter.

Up 1% BUY

United Online Inc. (NASDAQ-UNTD)-Recommended 3/12/2014)

Buy Price $10.28

Valuation $32.35 (Was $27.86)

Closed up $.36 at $10.92

UNTD announced Q1 2014 earnings after the close on April 30, 2014. Revenues were $55.4 million down 3% from $57.2 million last year. GAAP net loss was $.75 a share, compared to income of $.03 per share last year. OIBDA (operating income before depreciation and amortization-the term United uses, which is essentially EBITDA) was $3.2 million compared to $5.2 million last year. Overall an OK quarter. Our valuation rose to $32.35 from $27.86 last quarter. UNTD is trading at about 33% of our valuation and cash is 40% of the market cap ($4.79 a share versus $4.29 a share last quarter.

UP 6% BUY

Synacor Inc. (NASDAQ-SYNC)-Recommended 12/17/2013)

Buy Price $2.56

Valuation $5.44 (Was $6.67, $6.39)’

Closed down $.02 at $2.27

SYNC announced Q1 2014 earnings on May 13th. Revenues were $25.2 million down from $29.1 million last year. Net loss was $.07 per share compared to breakeven last year. Adjusted EBITDA was a loss of $.7 million compared to positive adjusted EBITDA of $1.8 million last year. Not a great quarter.

Our valuation fell to $5.44 from $5.94 last quarter. Cash was $1.17 per share, more than 50% of the current market cap.

SYNC  is trading at about 42% of our valuation. We will HOLD for now and see how the next couple of quarters look. Any signs of a turnaround and we think this stock will soar. A buy out is always a possibility.

.Down 11%. HOLD

Dex Media Inc. (NASDAQ-DXM)-Recommended 5/10/2013)

Buy Price $15.14

Valuation $37.98 ( Was $34.36, $31.50, $24.25)

Closed down $.14 at $9.92

DXM announced Q1 2014 earnings on May 6th. Revenues were $456 million down from $581 million last year (adjusting for the SuperMedia acquisition). GAAP net loss was $4.74 a share, compared to a loss of $.5.84 per share last year. Adjusted EBITDA was $194 million compared to $230 million last year. Not a bad quarter as YOY declines have been anticipated, but a bit below our expectations. DXM generated $97 million in free cash flow and paid down its debt by $74 million in the quarter. Net debt stands at $2.447 billion.  Our valuation rose to $37.98 up from $34.36 last quarter. DXM is trading at about 25% of our valuation, but due to the high debt level and small number of shares outstanding, relatively small changes in DXM’s results can cause large swings in our valuation..

Down 35% HOLD

XRS Inc. (NASDAQ-XRSC)-Recommended 2/26/2013)

Buy Price $1.50

Valuation $5.60 (Was $5.57, $6.71, $6.16, $6.79, $6.50)

Closed down $.06 at $2.65

XRSC announced Q2 2014 earnings (quarter ended March 31, 2014) on May 8th. Revenues were $12.8 million down from $14.5 million last year. XRSC is a bit similar to BLIN as they are transitioning their legacy software business to a subscription based service and revenues take a hit as they don’t book a big software sale upfront, but rather record it monthly in smaller pieces. But subscription based revenues are generally worth more to a buyer than one-time sales. GAAP net loss was $.07 a share, compared to a gain of $.01 per share last year. Non-GAAP earnings were $1.2 million or $.04 per share compared to $2.2 million or $.08 a share last year.  Our valuation rose to $5.60 up from $5.57 last quarter. XRSC is trading at about 50%% of our valuation.  We will continue to HOLD as results were not that exciting, but the valuation is still compelling.

UP 77%, HOLD

Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)

Buy Price $1.09 (Was $1.20 before we doubled up)

Valuation $3.25 (Was $3.25, $3.42, $4.64, $4.86, $4.00)

Closed down $.02 at $1.26

Earnings were reported on 2/25/2014. YOY comparisons were not good. Sales fell to $7.9 million from $10.4 million and adjusted EBITDA fell to $1 million from $1.8 million last year. Net debt decreased a bit to $11.3 million from $11.6 million last quarter, and is down about $2.4 million from last year. This is the first quarter in a while where sales did not decline from the previous quarter.. Our valuation stabilized and rose a bit to $3.25 per share-still a lot higher than the current trading price.

Norm Pessin filed a 13D on November 27, 2013 disclosing a 6.2% stake and upped it to 12.2% in December 2013. Good news that someone else sees the value here.

Up 16%, BUY

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)

Buy Price $1.17 ($1.24 before 2/14/2014 $10,000 adder)

Valuation $1.74 (Was $1.83, $1.61, $2.19, $2.35, $2.56, $2.24)

Closed down $.11 at $.81

BLIN announced Q2 2014 earnings (quarter ended March 31, 2014) on May 15th. Ug. Revenues were $5.3 million down from $6 million last year. GAAP net loss was $.13 a share, compared to a loss of $.05 per share last year. Non-GAAP loss was  $.07 per share compared to breakeven last year.  Our valuation fell to $1.74 up from $1.83 last quarter. BLIN is trading at about 45% of our valuation.  BLIN management expressed how disappointed they were at these results. No kidding. We were too. Their backlog was a healthy $20 million ($12.2 million booked this past quarter) but the $7 million deal they recently signed won’t kick in until FY 2015 (2 more quarters). They also alluded to signing another multiyear, multi-million dollar deal this quarter (which is half over). Until then they are projecting about $6 million a quarter. We are still believers here but this is no longer a BUY. We will give them another couple of quarters but we are reducing this to a HOLD for now. We really like BLIN and think that just their recurring revenue stream of $6.4 million is worth more than the current $14 million market cap.

Down 35%, HOLD

Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)

Buy Price- $1.37

Valuation $5.99 (Was $5.32, $6.81, $6.28, $4.89, $6.02, $6.72, $5.49)

Closed down $.21 at $3.17

TSYS announced Q1 2014 earnings after the close on May 1. Revenues were $85.1 million down 10% from $94.8 million last year and up 8% from last quarter. GAAP net loss was $.01 the same last year. Non-GAAP net income was $.04, also the same as last year. Overall a decent quarter. Our valuation rose to $5.99 from $5.32 last quarter. TSYS is trading at about 56% of our valuation. .

UP 131%, HOLD

MRV Communications (Pink Sheets-MRVC.pk)-Recommended 10//10/2011

Valuation $23.19 (Was $25.50, $28.98, $24.01 $23.06, $27.15, $31.80, $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 $12.81 down $.19

Karen Singer filed a 13G in May disclosing a 5.3% stake. Singer was a 13D filer before and helped instigate all the special dividends. Good to see them with a healthy stake again. With the price decline from $15 and the Singer disclosure, we are upping this to a BUY

MRVC announced Q1 results on May 8th. Revenues were $42.3 million up 9% from $38.9 million last year. GAAP net loss was $.58 a share, compared to a loss of $.59 per share last year. Non-GAAP  loss was about $3.0 million compared to $4.4 million last year.  Our valuation fell to $23.19 from $25.49 last quarter but up slightly from $23.19 last year. MRVC is trading at about 56%% of our valuation.  ,

Lloyd Miller disclosed a 6.9% stake in February 2012.

UP 49%  BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)

Buy Price-$8.49

Valuation $9.16 (Was $12.30, $11.86, $8.24, $13.05, $10.67, $8.41 $12.10, $13.40, $16.02)

Closed unchanged at $3.42

4th quarter earnings announced 4/9/2014. Another dismal quarter. Revenues were $38.5 million down from $44.2 million last year. They reported a $4.5 million Non-GAAP loss for Q4 compared to income of $3.3 million last year. Margins were good at 57% and net cash rose to $2.59 a share from $2.55 last quarter, but this was largely due to delayed payments at the end of the quarter. Their guidance for Q1 2015 was dismal also. Revenues expected to be $35-$38 million and an operating loss of around $4-$8 million. The only positive thing we could see was that they basically agreed that they could be at a $60 million run rate and the end of Q4 2014. At that level, assuming margins and expenses stay about the same, they would be very profitable. It is a long time to wait for some decent performance. Our valuation fell to $9.16 per share, but up from the $8.24 last year.

Ariel Investments filed a 13G on January 10, 2014 disclosing a 10.1% stake in Sigma.

The CEO bought 343,000 shares back from Potomac Capital in December 2013 leaving Potomac with only 465,000 shares of SIGM. The interesting part was that the CEO paid $5.50 a share or about $1 over its trading price. Either a great expression of confidence in SIGM or a small price to pay to get rid of an activist investor. Since we don’t know which it is, or both we will stay a hold on this for now.

Down 60%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)

Buy Price-$4.58 (Was $5.08 before $.50 special dividend)

Valuation $15.10 (was $15.01,  $14.55, $14.77, $16.26, $16.20, $15.37, $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)

Closed down $.05 at $8.73 (including dividends)

Pays $.48 annual dividend.

CCUR announced Q3 2014 earnings on April 29, 2014. Revenues were $18.3 million, up 8% from last year and EPS was $.12 up 9% from last year. Net cash was $2.47 per share. Overall a nice quarter. Our valuation fell slightly to $15.01 from $15.10 last quarter. CCUR is trading at 54% of our valuation and cash is about 30% of the market cap. We have collected $.60 in dividends so far (excluding the $.50 special dividend which reduced our basis).

UP 91%, HOLD

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 $5.57 (was $5.70, $6.71, $6.41, $6.14, $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 $2.81, up $.09

Q2 earnings announced 3/6/2013. Revenues were up 9% to $8.1 million from $7.5 million last year, gross margin was 79% and they lost $461,000 compared to income of $4,000 last year. This quarter included a $234,000 restructuring charge that should cut annual costs by $2.5 million. Recurring revenues were 95% of total revenues. They say in the press release that they are investing more in sales and marketing this year, but still expect to achieve higher EBITDA than last year. Q2 revenues were essentially flat with Q1. If they don’t get some revenue traction soon, we don’t expect to see much share price appreciation. Our valuation fell however to $5.57. Still trading at only 49% of our valuation.

ARI announced another acquisition in November 2013. No details, but a good sign that they are really trying to accelerate their growth.

Wynnefield partners bought another 100,000 shares at $2.90 in the first week of July 2013 raising their stake to over 10%..

UP 74%, HOLD, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)

Buy price $.27 ask,

Valuation $.99 (Was $1.02, $1.05,  $1.07, $1.14, $1.17, $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 $.32 closed at $.30

Earnings for the quarter ended 3/31/2014 announced in May. No press release of course, just a 10Q filing.

Revenues were $3.9 million up slightly from last year and they lost $303,000 on an operating basis compared to a loss of $338,000 last year. Due to the QWEST settlement, they reported income of $979,000 compared to a $443,000 loss last year. Our valuation declined slightly to $.99.

Not a mention of the status of the acquisition.

Here is the longest running acquisition we have ever seen—and for the least amount of money for a public company..

Fairford/Birbeck upped their non-binding offer to $.40 a share on December 30,2013. No indication as to whether the Board will accept it or any other details. Still a low-ball offer but one which we would take after holding this for almost 8 years.

Birbeck and Fairford Holdings made a non-binding offer to buy CTIG in March 2013 for $.29 a share. The company formed a special committee to evaluate the offer.

UP 17%. HOLD

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1 Comment

  1. Hi! A thorough and illustrative blog. Have you checked ELX? Seems to worth at least $9.5, and no dilutive effects from the convertible till $10.30.

    Based on a quick look, I would tend to agree. I will need to do some more research though.

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