Apparently last week was a vacation week as the market averages as well as CSI, went nowhere. We were dead even last week and are still down .4% for the year. The DOW ended the week even and the NASDAQ was up .1%. For the year the DOW is up 1.7% and NASDAQ is up 4.8%.
DAEG, ATEC , SYNC and PRSS 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:
| UNTD | 34% |
| CCUR | 38% |
| SIGM | 37% |
| MRVC | 26% |
| SYNC | 38% |
| CTIG | 52% |
| PRSS | 53% |
AVID, ATEC, PRSS, MRVC, SYNC, EXTR, and DXM can still be bought.
Last week we went 8 stocks up, 6 down and 1 even. Since inception we are now 68 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).
Avid Technology, Inc. (NASDAQ-AVID)-Recommended 1/20/2015)
Buy Price $14.00
Valuation $28.10
Closed up $.94 at $15.68
Next earnings for Q4 2014 due out Tuesday, March 5th after the market close.
UP 12% BUY
Alphatec Holdings, Inc. (NASDAQ-ATEC)-Recommended 9/2/2014)
Buy Price $1.56
NEW Valuation $3.11 (Was $2.95, $3.00)
Closed up $.10 at $1.45
Q4 (12/31/2014) earnings were announced on February 26, 2015.
Revenues were $53.6 million compared to $53.1 million last year. EBITDA was up 22% from $7.5 to $8.3 million. 2015 guidance is revenues of $215 to $222 million and adjusted EBITDA of $34 to $37 million compared to 2014 revenues of $207 million and adjusted EBITDA of $30.8 million. Our valuation came in at $3.11 compared to the previous $2.95.
Down 7% BUY
CafePress, Inc. Inc. (NASDAQ-PRSS)-Recommended 5/19/2014)
Buy Price $4.01 (Was $5.40 before adding $10,000 at $3.19 on 3/2/2015)
NEW Valuation $12.50 (Was $11.17, $12.51, $11.27)
Closed down $.57 at $3.16
Boy, where do we start here. PRSS announced Q4 2014 earnings on February 25, 2015. Rather than focus on the actual results, because they include the results of the 2 divisions they are selling, we will focus on what we think the rest of 2015 looks like on a pro-forma basis (our best guess from the press release and conference call).
The sales of their two divisions will result in approximately $40 million of cash added to the $30 million or so at 12/31/2014. This will be just under $4 a share in net cash. The stock is trading at $3.16. The sales will result in the loss of 35% of their revenues which were $230 million. So call it $150 million after the divestures. They had about $2.5 million of adjusted EBITDA in 2014 and from their conference call will lose some EBITDA as a result of the sales. So they may lose $1 million or so, on the EBITDA level in 2015. This does not concern us as that is nothing compared to $70 million in cash.
Looking at all this our valuation on a pro-forma basis comes in about $12.50 a share, and the company is much more focused on its’ core business, has its’ original management back that knows how to run this business and are looking to build shareholder value.
One of our readers asked us a while ago how we decided whether to double up on a stock or not. Our answer was “confidence”. While there is still a ways to go here, like closing the deals, finishing rationalizing the remaining business and then growing it, we think that doubling up here is the correct move. The new Buy Price will be $4.01 per share.
Lloyd Miller filed a Form 13G on October 24, 2014 disclosing a 5.1% (887,000 shares) stake in PRSS..
Down 42% BUY
Extreme Networks, Inc. Inc. (NASDAQ-UNTD)-Recommended 3/12/2014)
Buy Price $3.43 (was $3.95 before we added another $10,000)
Valuation $9.34, (Was $8.24, $9.68, $8.52)
Closed up $.09 at $3.55
EXTR announced Q2, 2015 (December 31, 2014) earnings on January 28, 2015. Revenues were $147.2 million, up from $146.5 million last year. They made $4.7 million versus a $14.1 million profit last year on a Non-GAAP basis. Gross margin held steady at over 50%. Our valuation was $9.34 up from $8.34 last quarter. Cash per share was $.20 (compared to negative $.17 last quarter). Guidance for next quarter is a tepid $130-$140 million in revenue and bottom line of between a loss of $3.1 million and a profit of $1.8 million which will result in a valuation of about $8.40 a share (all Non-GAAP numbers). Hopefully they can beat this.
UP 4% BUY
United Online Inc. (NASDAQ-UNTD)-Recommended 3/12/2014)
Buy Price $10.28
Valuation $34.65 (Was $33.50 $35.84, $32.35, $27.86)
Closed up $.46 at $16.37
UNTD announced Q4, 2014 (December 31, 2014) earnings after the close on February 18, 2015. Revenues were $54.4 million, down from $62.6 million last year, but up from $52.9 million last quarter. They made $2.3 million before tax versus an $8 million loss before taxes last year. Gross margin held steady at 68%. Our valuation was $34.65 up from $33.50 last quarter. Cash per share was $5.53 (compared to $5.38 last quarter). Guidance for next quarter is $47.5-$50.5 million in revenue and bottom line of between a loss of $.8 million and $2.8 million.
OIBTDA (which they use instead of EBITDA) was $11.4 million compared to $12.6 million last year.
Up 59% HOLD
Synacor Inc. (NASDAQ-SYNC)-Recommended 12/17/2013)
Buy Price $2.56
NEW Valuation $6.61 (Was $5.58, $5.21, $5.44, $6.67, $6.39)’
Closed up $.02 at $2.22
Q4 earnings were announced on February 25, 2015. Actually they were surprisingly good and our valuation jumped to $6.61 a share. Then, they gave 2015 guidance of revenues of $95-100 million and EBITDA of $1.5 to $3.5 million—this would knock our valuation back down to about $5.29 a share. The CEO said they were “excited” about this-we are not. Revenues were $30.9 million for the quarter, up 18% over the previous quarter and up 5% over last year. Net cash rose to $.84 a share.
Pre-tax profit for the quarter was about $1 million versus $500,000 last year. EBITDA was $4 million compared to $2.8 million last year. Again, the quarter results were doused by 2015 tepid guidance.
JEC and Ratio Capital have been quiet lately.
Down 13%. BUY
Dex Media Inc. (NASDAQ-DXM)-Recommended 5/10/2013)
Buy Price $15.14
Valuation $31.00 (Was $34.00, $37.98, $34.36, $31.50, $24.25)
Closed down $.52 at $6.75
DEX announced a major restructuring on December 11, 2014. They expect to incur
$70-$100 million of expenses to achieve $150 million of ongoing expense savings with $110 million of that coming in 2015. They expect to begin deleveraging their balance sheet (meaning Net Debt to adjusted EBITDA ratio) in 2016. No question that’s what they need to do.
DXM announced Q3 2014 (September 30, 2014) earnings on 11/4/2014. Revenues were $452 million, down from $474 million last quarter and adjusted EBITDA was $167 million down from 174 million last quarter. Overall an OK quarter. Our valuation fell a bit to $31 down from $34 last quarter. They have paid off $319 million of net debt over the last twelve months and total net debt stands at $2.3 billion.
Looking back to 2012 at their projections before the merger it looks like they will miss their 2014 projections for revenue and adjusted EBITDA by 10-15%, but will beat their projected debt reduction target by over $100 million. The faster they get rid of the huge debt, the better, as it is the primary risk factor affecting the stock price in our opinion.
DXM is trading at about 27% 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 55% BUY
Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.09 (Was $1.20 before we doubled up)
NEW Valuation $1.83 (Was $2.83, $2.85, $3.39, $3.25, $3.42, $4.64, $4.86, $4.00)
Closed down $.10 at $.64
Second quarter (10/31/2014) earnings announced on November 20th. Ouch!
Revenues were $5.7 million down from $7.9 million last year and down from $6.7 million last quarter. They lost $.06 on a GAAP basis compared to a $.05 loss last year. On a Non-GAAP basis they lost $.04 a share versus a profit of $.02 last year. Our valuation plunged to $1.83 from $2.83 last quarter. Net debt came declined a bit to $7.6 million from $8.7 million last quarter and declined from $11.3 million a year ago. It will be a longer wait to see some action here. Still trading at less than 50% of our valuation but they need to get this company moving in the right direction-soon, or sell it.
Norm Pessin filed a 13D on November 27, 2013 disclosing a 6.2% stake and upped it to 12.2% in December 2013.
Down 41%, HOLD
Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $.79 ($ 1.17, $1.24 before 12/15/2014 and 2/14/2014 $10,000 adders)
Valuation $1.17 (Was $1.51, $1.75, $1.76, $1.83, $1.61, $2.19, $2.35, $2.56, $2.24)
Closed up $.01 at $.51
BLIN announced earnings on February 12, 2015 for Q4 2014. Not good. Revenues were down to $5 million from $6.5 million last year. They lost $2.1 million versus $.8 million last year. Looks like they were too occupied with their expense reductions in Q4.They did announce that they did not anticipate any more equity issuance in 2015, which is a good step. They reaffirmed their $800,000 a quarter expense reduction in 2015 also. All our hope is they can execute going forward on their record backlog going into 2015. Our valuation dropped to $1.17, still more than double the current trading price, but about 50% from where we started here. This is now a Hold—they need to show progress.
Down 36%, HOLD
Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.55 (Was $6.88, $6.12, $5.99, $5.32, $6.81, $6.28, $4.89, $6.02, $6.72, $5.49)
Closed down $.05 at $3.22
Q4 earnings announced on, February 5, 2015.
Not bad. Revenues were $93.3 million up 19% compared to $78.6 million last year and they made $.06 a share on an “adjusted basis” compared to $.02 last year. If this were some high flying tech stock this would be over $4 a share based on the 19% revenue jump-but alas, it is not. Apparently they “missed’ analysts revenue estimate and little happened with the stock price. Our valuation slid a bit to $6.55, up from $5.32 last year but down $.33 from last quarter.
They also reached a settlement with Becker Drapkin in February. BD gets two Board seats in exchange for not buying more than 12% of TSYS stock prior to 12/31/2016.
Becker Drapkin filed a 13D on November 24, 2014 disclosing a 6.7% stake. They had the standard 13D language about their intentions to discuss various options with management. Good news that someone is paying attention to this undervalued company.
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.
UP 135%, HOLD
MRV Communications (Pink Sheets-MRVC.pk)-Recommended 10//10/2011
Valuation $25.52 (Was $24.58, $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 $9.94 down $.01
On December 16, 2014 MRV announced an eight million dollar share buyback. Not our favorite method of enhancing shareholder value, but a nice expression of confidence in the business prospects.
MRVC announced Q3 2014 (September 30, 2014) earnings on 11/5/2014. Revenues were $43.2 million, up 12% from $38.4 million last year. They lost $1.04 million versus a $.146 million loss last year. Cash per share rose to $2.63 from $2.20 last quarter. Our valuation was $25.52 up from $24.58 last quarter.
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 16% BUY
Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $12.17 (Was $9.60, $8.24, $9.16, $12.30, $11.86, $8.24, $13.05, $10.67, $8.41 $12.10, $13.40, $16.02)
Closed up $.56 at $7.37
Q3 2015 earnings were announced on December 10, 2014. Revenues were up 26% and they made $.04 a share on a Non-GAAP basis. Cash rose to $2.75 a share and our valuation jumped to $12.17 a share. Nice quarter-finally.
Ariel Investments filed a 13G on January 10, 2014 disclosing a 10.1% stake in Sigma.
Down 13%, HOLD
Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$4.58 (Was $5.08 before $.50 special dividend)
Valuation $13.07 (was $14.80, $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 $.05 at $7.21 (including $1.08 of dividends)
Pays $.48 annual dividend.
CCUR announced Q2 2015 (December 31, 2014) earnings on January 27, 2015.. Revenues were $16 million, down 10% from $17.8 million last year. They lost $.6 million versus a $1.1 million profit last year. Gross margin held steady at 55%. Our valuation was $13.07 down from $14.80 last quarter. CCUR is trading at 52% of our valuation. Cash per share was $2.75 or 40% of the market cap. This is now a HOLD until we see what the new CEO can do and they get revenue growth back (and profits). We continue to collect the 7% dividend.
We have collected $1.08 in dividends so far (excluding the $.50 special dividend which reduced our basis).
UP 57%, 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 $5.96 (was $6.02, $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 $3.63, up $.02
Second quarter earnings due out Thursday, March 5th, 2015 after the market closes.
Q1 2015 earnings announced December, 11,2014. ARI continues to make good progress. Revenues were up 12% to $9.1 million and they made $.01 a share after about $.02 a share of charges related to their acquisition of Tire Company Solutions. Only 1 month of TCS revenue was included in the quarter. Our valuation fell a bit, burdened by the full cost of buying TCS, with only 1/3 a quarter of revenue to $5.95 a share. We think it will go up to about $6.65 with a full quarter of TCS revenues.
Additionally, it looks like Park City Capital has been buying up Wynnefield Capitals shares and provides an activist investor to the mix.
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 2014.
UP 125%, HOLD, Still a large valuation gap here.
CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.34 (Was $1.22, $.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 $.36 closed at $.35
CTI announced last week that they had named their CFO as the Interim President and CEO. Having the CFO as CEO sometimes means they are ready to sell the company?
Q3 earnings announced after the close on November 14th when no one was looking. Results were actually good, so why are they hiding it? Another insider take-over bid coming? Revenues were up 14% to $4.1 million from $3.6 million last year and they lost $154,000 versus a loss of $384,000 last year. Adding back non-cash charges for amortization they made $273,000 pre-tax versus $129,000 last year. Cash increased from last quarter to $5.5 million from $5.3 million. They now have $.19 per share in cash. Our valuation rose to $1.34 per share, the highest in 2 years, CTIG is trading at 28% of our valuation.
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).
They need to get an investment banker and sell the company. Probably get at least $.75 a share for it from someone.
UP 33%. HOLD
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