We made up a little ground on the market averages last week. I guess we need another deal or two to beat the market averages this year. We were up 4.2% last week and are up 6.8% for the year, while the DOW up 3.5% and is now up 4.9% on the year and NASDAQ was up 3.3% and now stands at up 10.9% for the year.
TSYS, SYNC, ATEC, CCUR, EXTR, ARIS earnings last week.
Some of our stocks are just stupid cheap—compared to their net cash on hand divided by their stock price.
Check this list:
ATEC, PRSS, CAFE, MRVC, DAEG, SYNC, SIGM, CCUR, BLIN, EXTR, DXM and UNTD can still be bought.
Last week we went 9 stocks up, 4 down and 1 unchanged. Since inception we are now 67 stocks up and 20 down for a 77% winning percentage (80% is our target win %). Of our closed-out positions 60 have been winners and 13 have been losers for an 82% win percentage and a 35% average net gain per position.
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).
Alphatec Holdings, Inc. (NASDAQ-ATEC)-Recommended 9/2/2014)
Buy Price $1.56
NEW Valuation $2.95 (Was, $3.00)
Closed up $.06 at $1.52
ATEC announced Q3 2014 (September 30, 2014) earnings on October 30, 2014. Revenues were $51 million compared to $50.2 million last year. Non-GAAP, EPS was a loss of $.01 compared to a profit of $.01 last year. More significantly, EBITDA was up 22% from $6.7 to $8.2 million. Our valuation came in at $2.95 compared to the previous $3.00. ATEC is trading at 51% of our valuation.
Down 3% BUY
CafePress, Inc. Inc. (NASDAQ-PRSS)-Recommended 5/19/2014)
Buy Price $5.40
Valuation $12.51 (Was, $11.27)
Closed down $.22 at $2.90
Lloyd Miller filed a Form 13G on October 24, 2014 disclosing a 5.1% (887,000 shares) stake in PRSS.
Q3 earnings due out Thursday, November 13th, after the market close.
Earnings announced on August 12th. Nothing to write home about and no update on their “strategic alternatives”. They did announce the “retirement” of the current CEO and the return of the two founders as CEO and Chief Marketing Officer. They also made their interim CFO, permanent. Revenues were down less than $1 million to $51.4 million and Non-GAAP loss was $1.8 million ($.11 per share) up from a $.7 million loss or $.04 per share last year. Our valuation actually rose from last quarter to $12.51 mostly on reduced losses.
Waiting on the outcome of their review of “strategic alternatives” which now seems like it will take a few more quarters as the founders right the ship, which will probably entail a restructuring and some investment in the business.
Down 43% BUY
Extreme Networks, Inc. Inc. (NASDAQ-UNTD)-Recommended 3/12/2014)
Buy Price $3.43 (was $3.95 before we added another $10,000)
NEW Valuation $8.24, (Was $9.68, $8.52)
Closed up $.07 at $3.14
EXTR announced Q1 2015 (September 30, 2014) earnings on October 29, 2014. Revenues were $137.1 million, Non-GAAP EPS was a loss of $.01. Net cash was $2.92 per share. Overall an OK quarter. Our valuation came in a little better than expected after their preannounced revenue miss for the quarter, at $8.24. Guidance for next quarter is revenue of about $140 to $150 million and Non-GAAP EPS of $.03 to $.07 a share.
The CEO bought 10,000 shares on 8/29 at $5.33 a share.
UP 5% BUY
United Online Inc. (NASDAQ-UNTD)-Recommended 3/12/2014)
Buy Price $10.28
Valuation $35.84 (Was $32.35, $27.86)
Closed up $.37 at $11.22
Next earnings due out Tuesday, November 4th after the market close.
UNTD announced Q2 2014 earnings after the close on August 11, 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 $10.1 million compared to $10.1 million last year. Our valuation rose to $35.84 from $32.35 last quarter. UNTD is trading at about 31% of our valuation and cash is 41% of the market cap ($4.98 a share versus $4.79 a share last quarter.
Up 9% BUY
Synacor Inc. (NASDAQ-SYNC)-Recommended 12/17/2013)
Buy Price $2.56
NEW Valuation $5.58 (Was $5.21, $5.44, $6.67, $6.39)’
Closed up $.31 at $1.90
SYNC announced Q3 2014 (September 30, 2014) earnings on October 30, 2014. Revenues were $26.2 million down slightly from $26.5 million the prior year. They had a Non-GAAP loss of about $1.4 million compared to a loss of $.4 million last year. SYNC’s valuation rose from last quarter to $5.58, but was still lower than last years $6.01.
JEC and Ratio Capital seem to have been quiet lately.
Down 26%. BUY
Dex Media Inc. (NASDAQ-DXM)-Recommended 5/10/2013)
Buy Price $15.14
Valuation $34.00 (Was $37.98, $34.36, $31.50, $24.25)
Closed down $.20 at $7.79
Next earnings due out Tuesday, November 4th, before the market opens.
DXM announced another debt tender in September, this time for about $29 million of debt at discounts ranging from 10% to 23%. Not as big a discount range as previous tenders as their debt prices have firmed based on their continued good performance.
DXM announced Q1 2014 earnings on August 11th. Revenues were $474 million down from $558 million last year (adjusting for the SuperMedia acquisition). GAAP net loss was $4.93 a share, compared to a loss of $4.58 per share last year. Adjusted EBITDA was $174 million compared to $214 million last year. Again, not a bad quarter as YOY declines have been anticipated, but again a bit below our expectations. DXM generated $105 million of free cash flow in the quarter and paid down its debt by $128 million in the quarter. Net debt stands at $2.370 billion. Our valuation fell a tad to $34.00, from $37.98 last quarter. DXM is trading at about 23% 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 49% BUY
Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.09 (Was $1.20 before we doubled up)
Valuation $2.85 (Was $3.39, $3.25, $3.42, $4.64, $4.86, $4.00)
Closed down $.11 at $.61
First quarter (7/31/2014) earnings announced on August 26th.
Revenues were $6.7 million down from $8 million last year and $7.2 million last quarter. They lost $.02 per share on a GAAP basis. On a Non-GAAP basis they made $.01 a share versus $.03 last year. Our valuation fell to $2.85 up from $3.39 last quarter. Net debt came down to $7.6 million from $11 million a year ago and the credit agreement was extended out to June 2017. This is a drop-off from last quarter, but they are still making money and paying off debt. It will be a longer wait to see some action here.
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. DAEG is trading at about 21% of our valuation.
Down 44%, BUY
Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.17 ($1.24 before 2/14/2014 $10,000 adder)
Valuation $1.75 (Was $1.76, $1.83, $1.61, $2.19, $2.35, $2.56, $2.24)
Closed down $.01 at $.65
Earnings for Q3 announced August 14th. Slow improvement. Revenues were $6.2 million up 11% from $5.6 million last year and $5.3 million last quarter. They lost $1.3 million versus $1.6 million last year. They are projecting they will finish the year at $24 million in revenue which would mean another $6 million quarter for Q4. Their backlog rose to almost $26 million (up $6 million from last quarter) and recurring revenues grew 50% to $1.8 million. We continue to think that their recurring revenue stream of $7.2 million a year (based on this quarter) is worth more than the current market cap on BLIN.
Our valuation was $1.75, flat with last quarters $1.76. BLIN is trading at about 37% of our valuation.
Down 48%, BUY
Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
NEW Valuation $6.88 (Was $6.12, $5.99, $5.32, $6.81, $6.28, $4.89, $6.02, $6.72, $5.49)
Closed up $.07 at $2.88
TSYS announced Q3 2014 (September 30, 2014) earnings on October 30, 2014. Revenues were $95.3 million down a tad from $96 million last year and adjusted EPS was $.05 the same as last year. Overall, a decent quarter. Our valuation came in at $6.88 up from $6.81 last year and $6.12 last quarter.
We will continue to hold TSYS despite our over 100% gain. Maybe this will turn into another MITL and be trading at $10+ in the next year.
TSYS is trading at about 42% of our valuation. .
UP 110%, HOLD
MRV Communications (Pink Sheets-MRVC.pk)-Recommended 10//10/2011
Valuation $24.58 (Was $23.19, $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 $11.52 up $.09
MRVC filed their 10Q on August 19th.
Revenues continued their consistent climb upward to $43.1 million from $38.2 million. Gross margin recovered a bit to 34% from 31% last quarter. GAAP net loss per share was $.31 versus $.13 last year and our valuation rose to $24.58.
Karen Singer filed a 13G in May 2014 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.
Lloyd Miller disclosed a 6.9% stake in February 2012.
UP 34% BUY
Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Valuation $9.60 (Was $8.24, $9.16, $12.30, $11.86, $8.24, $13.05, $10.67, $8.41 $12.10, $13.40, $16.02)
Closed up $.06 at $3.99
Earnings announced for Q2 FY2015 on September 10th. Going in the right direction for a change. Although revenue was down from last year at $42.8 million compared to $53.8 million it was up from the $36.9 million last quarter. Non-GAAP loses was also cut to $2 million from $5 million last quarter. Net cash rose a bit to $2.41 per share and our valuation bounced back up to $9.60. There was no forward guidance given.
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 at the time. Either a great expression of confidence in SIGM or a small price to pay to get rid of an activist investor.
Down 53%, BUY
Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$4.58 (Was $5.08 before $.50 special dividend)
NEW Valuation $14.80 (was $17.72, $15.01, $15.10, $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 $.25 at $8.06 (including dividends)
Pays $.48 annual dividend.
CCUR announced Q1 2015 (September 30, 2014) earnings on October 29, 2014. Revenues were $17.5 million, up from $17.2 million last year and EPS was $.04 down from $.08 last year. Net cash was $2.92 per share. Our valuation was $14.80 up from $14.55 last year (down from last quarter) after we have collected $.48 worth of dividend payments.
CCUR is trading at about 48% of our valuation and cash is about 40% of the market cap. We have collected $.96 in dividends so far (excluding the $.50 special dividend which reduced our basis).
UP 81%, BUY
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),
NEW Valuation $6.02 (was $5.67, $5.57, $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 $3.46, up $.33
ARI announced Q4 2014 (July 31, 2014) earnings on October 29, 2014. Revenues were $8.5 million up slightly from $8.4 million the prior year. EPS was a profit of $.01 compared to a loss of $.02 last year. ARI’s valuation continued to creep up—to $6.02. Over 90% of their revenues are recurring revenues.
ARI announced another acquisition in October. This one provides software, websites and digital marketing services designed exclusively for dealers, wholesalers, retreaders and manufacturers within the automotive tire and wheel vertical. They have about 600 customers. This deal will add approximately $6 million a year in revenue and positive EBITDA to ARI results. The purchase cost $9.1 million of which $4.2 million was in cash, a $3 million seller note and $1.9 million in stock and a potential earn-out. At 1.5 times sales, this was a reasonable price in our opinion. This should give them about a 15% boost in sales for FY 2015 (started August 1, 2014). They are doing a good job positioning the company to be acquired. Hopefully this will soon happen with a $5+ price like we got for XRS in September.
UP 115%, HOLD, Still a large valuation gap here.
CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.22 (Was $.99, $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 $.38 closed at $.375
John Birbeck announced his departure in October 2014. He was one of the group trying to take CTIG private for $.40 a share. Birbeck will remain a Director of the company. He owns about 7% of CTIG (about 2.3 million shares).
Q2 earnings disclosed on their Form 10Q on 8/14 and a press release!. Another good quarter. Revenues were $4.1 million versus $3.9 million last year and they reported a $.01 loss, the same as last year. Cash soared to $.17 per share from zero last quarter. Deferred revenues more than doubled from December 31, 2013 to $5.8 million.
Our valuation jumped 23% to $1.22 a share, the highest in over a year.
CTI announced in June that the special committee of the Board of Directors rejected managements $.40 buy-out offer. Then the special committee was promptly disbanded. This company should not be a public company, but we can understand the decision in rejecting a lowball offer. They need to get an investment banker and sell the company. Probably get at least $.75 a share for it from someone.
UP 41%. HOLD