Cheap Stocks, 11/6/2015 Update

We were up over 3% last week until we got bombed by MTSL, CKP and AVID. We ended up down .4% and are now up 5.6% on the year. Why AVID, CRGN and CKP got hammered is beyond us. We personally bought more of all of them. Meanwhile, the DOW was up 1.4% and the NASDAQ was up 1.9%. For the year the DOW is up .5% and NASDAQ is now up 8.7%.

MTSL, AVID, ATEC, CCUR, CKP and CRGN 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:

CCUR 44%
SYNC 54%
PRSS 57%
MTSL 59%

CKP, CRNT, ATEC, AVID, EXTR and SYNC, can still be bought.

Last week we went 6 stocks up and 7 down. Since inception we are now 70 stocks up and 22 down for a 76.1% winning percentage (80% is our target win %). Of our closed-out positions 65 have been winners and 14 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).

MER Telemanagement Systems. (NASDAQ-MTSL)-Recommended 9/22/2015)

Buy Price $1.25

NEW Valuation $2.89 (Was $3.56)

Closed down $.29 at $1.00

MTSL announced Q3 2015 earnings (quarter ended September 30, 2015) on November 5, 2015.

http://finance.yahoo.com/news/mts-announces-third-quarter-2015-130000559.html

Revenues were $3.8 million up from $1.8 million last year. They had a Non-GAAP loss of $.02 per share versus a $.08 loss last year. These results include a full quarter of Vexigo. While the results were not as good as we had hoped for when we recommended MTSL, our new valuation of $2.89 (was $3.46) is still more than double the current stock price and they seem to be indicating that Q4 video advertising (Vexigo) will be better. We are cutting this to a HOLD for now

Down 20%

HOLD

Checkpoint Systems Inc. (NYSE-CKP)-Recommended 9/16/2015)

Buy Price $6.76 ($7.79 before adding $10,000 at $5.97 on 11/5/2015)

NEW Valuation $17.98 (Was $18.28)

Closed down $.80 at $6.68

CKP announced Q3 2015 earnings (quarter ended September 30, 2015) on November 4, 2015. Revenues were $146 million down from $161 million last year. They made a Non-GAAP profit of $.07 per share versus a $.22 profit last year. Foreign currency impact was most of the sales decline (over 90%). They reduced their sales guidance for the year to $575-$600 million down from $625 million and at the top end of Adjusted EBITDA to $50-$60 million down from $55-$68 million. They also announced an accounting error in their previous quarterly reports this year in how they accounted for income taxes, but according to their 8K, the errors have no impact on cash flow, or any other pre-tax numbers. Nevertheless not good news.

Our valuation fell a bit to $17.98 from $18.28.

http://finance.yahoo.com/news/checkpoint-systems-inc-announces-third-012200717.html

Down 1% BUY

Ceregon Networks, Inc. (NASDAQ-CRNT)-Recommended 8/20/2015)

Buy Price $1.38 (Was $1.46 before adding $10,000 at $1.30 on 11/2/2015)

NEW Valuation $4.54 (Was $4.84)

Closed down $.39 at $1.36

CRGN announced Q3 2015 earnings (quarter ended September 30, 2015) on November 2, 2015.

http://finance.yahoo.com/news/ceragon-networks-reports-third-quarter-123000706.html

Revenues were $85.4 million down from $99 million last year. They made a Non-GAAP profit of $.05 per share versus a $.05 loss last year. Their focus on profitability rather than revenues seems to be paying off. For the nine months they now have a Non-GAAP profit of $.07 versus a loss of $.37 last year. They paid down about $6 million of debt and now have less than $5 million of net debt. Our valuation moved down a bit to $4.54 from $4.84 last quarter.

DOWN 1% BUY

Avid Technology, Inc. (NASDAQ-AVID)-Recommended 1/20/2015)

Buy Price $10.25 (Was $14 before 8/15 double up at $8.08.

NEW Valuation $23.99 (Was $22.24, $22.59 $23.86, $28.10)

Closed down $1.79 at $6.66

AVID announced Q3 2015 earnings (quarter ended September 30, 2015) on 11/4/2015.

http://finance.yahoo.com/news/avid-announces-financial-results-third-215941217.html

Revenues were $137.4 million down from $142.4 million last year. They made a Non-GAAP profit of $.47 per share versus a $.57 profit last year. Our valuation moved up a bit to $23.99 from $22.24 last quarter. Overall a decent quarter as they continue their transition to a recurring revenue model, foregoing short term revenues and profits. AVID is trading for less than 40% of our valuation.

Down 35% BUY

Alphatec Holdings, Inc. (NASDAQ-ATEC)-Recommended 9/2/2014)

Buy Price $.59 ($1.56 before doubling up on 8/10/2015 at $.66 and adding $10,000 at $.34)

NEW Valuation $1.82 (Was $2.54, $2.61, $3.11, $2.95, $3.00)

Closed down $.03 at $.32

ATEC reported Q3 2015 earnings (quarter ended September 30, 2015) on 11/3/2015’.

http://finance.yahoo.com/news/alphatec-holdings-announces-third-quarter-214255650.html

Revenues were $43 million down from $51 million last year and they broke-even on a Non-GAAP basis versus a $.01 loss last year. They did write-off $165 million of goodwill and intangibles in Q3. Our valuation fell to $1.82 a share from $2.07 last quarter. They have/are introducing new products and cutting costs, so we think this may be the bottom. In any event, ATEC is trading at less than 25% of our valuation.

Down 46% 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)

Valuation $9.09 (Was $12.50, $11.17, $12.51, $11.27)

Closed down $.04 at $4.67

Q3 2015 earnings due out Thursday, November 12, 2015 after the market close.

PRSS announced Q2 2015 (6/30/2015) earnings on 8/14/2015.

http://finance.yahoo.com/news/cafepress-reports-results-second-quarter-201500378.html

Not bad. They continue to slim down the business to its core. They are divesting their EZ print business now also. Revenues fell to $21.8 million from $29.1 million last year, but their loss from operations declined to $1.8 million from $4.4 million last year. Adjusted EBITDA was positive $.7 million versus negative $1.8 million last year. Cash fell to $46 million ($2.64 a share from $56 million due to working capital changes and the repurchase of $2.3 million worth of stock. Our valuation was $8.95 down a tad from $9.09 last quarter.

UP 16% HOLD

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

Buy Price $3.43 (was $3.95 before we added another $10,000)

Valuation $7.69, (Was $9.47, $6.99, $9.34, $8.24, $9.68, $8.52)

Closed up $32 at $3.91

Extreme announced Q1 2016 (September 30, 2015) on October 29, 2015.

http://finance.yahoo.com/news/extreme-networks-reports-first-quarter-200500547.html

Revenues came in at $124.9 compared to $137.0 and they made $.07 a share versus a loss of $.01 a share last year on a Non-GAAP basis. Our valuation came in at $7.69 a share versus $8.24 last year but better than our estimate of $7.45 for this quarter. Based on their guidance for next quarter our valuation should go up.

UP 14%, BUY

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

Buy Price $2.56

Valuation $5.29 (Was $5.71, $6.61, $5.58, $5.21, $5.44, $6.67, $6.39)’

Closed up $.21 at $1.54

SYNC has closed the acquisition of Zimbra.

SYNC announced Q2 2015 (June 30, 2015) earnings on 8/4/2015.

http://finance.yahoo.com/news/synacor-gains-ebitda-momentum-revenue-200100723.html

Revenues were $24.7 million up slightly from $24.2 million the prior year. They had a Non-GAAP loss of about $.3 million compared to a loss of $1 million last year. SYNC’s valuation fell from last quarter to $5.29, but was a tad higher than last years $5.21.

Down 40%. BUY

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

Buy Price 6.46 (Was $15.14 before adding $10,000 on 3/30/2015)

Valuation $21.00 (Was $31.00, $31.00, $34.00, $37.98, $34.36, $31.50, $24.25)

Closed up $.03 at $.25

If it isn’t apparent, DEX could go bankrupt and the market valuation is betting on it with a market cap under $5 million. They are working on a restructuring with their lenders and entered into a forebearance agreement in November and received a term sheet from a group of lenders representing over 50% of the senior debt. They did not disclose the contents or if stock holders would be wiped out. So maybe that is good news? We have said all along this was a risky bet, and it looks like it surely was. Too much debt and their business declining too fast. This is a cheap lottery ticket.

Q2, 2015 earnings were announced August 6, 2015.

http://finance.yahoo.com/news/dex-media-announces-second-quarter-110000263.html

Revenues were $387 million, down from $474 million last year and down from $406 million last quarter and adjusted EBITDA was $159 million up from $143 million last quarter and down from $176 million last year. Overall not a great quarter. For the year they are guiding to revenue of about $1.5 billion and $525 million of EBITDA. In their original projection for 2015 they were looking at revenue of $2.077 billion and EBITDA of $782 million. Clearly they are not making their projections. Net debt was $2.144 (their original projection was to end 2015 with $2.004 billion of debt—a goal they will likely make. Based on this performance we have lowered our valuation to $4.71 a share. 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.

Down 96% HOLD

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

Buy Price $3.95 ($ 5.85, $6.20 before 12/15/2014 and 2/14/2014 $10,000 adders)

Valuation $6.20 (Was $6.10, $5.85, $5.98 $7.55, $8.75, $8.80, $1.83, $9.15, $10.95, $11.75, $12.80, $11.20)

Closed up $.08 at $1.21

BLIN announced Q3 2015 earnings (quarter ended June 30, 2015) on 8/14/2015. Revenues were $4.9 million down from $6.2 million last year but up from $4.8 million last quarter. They lost $.20 per share on a Non-GAAP basis compared to $.24 last year. Our valuation rose to $6.20 up from $6.10 last quarter on better margins. Overall, while margins and EBITDA (adjusted) improved it was pretty much a nothing quarter. Have to wait longer here as they eke out an existence and hopefully get this little boat moving in the right direction. HOLD

http://finance.yahoo.com/news/bridgeline-digital-announces-financial-results-120000429.html

Down 69%, HOLD

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

Buy Price- $1.37

Valuation $7.01 (Was $5.78, $5.43, $6.55, $6.88, $6.12, $5.99, $5.32, $6.81, $6.28, $4.89, $6.02, $6.72, $5.49)

Closed up $.27 at $4.36

Q3 2015 earnings were announced on, October 29, 2015.

http://finance.yahoo.com/news/telecommunication-systems-reports-third-quarter-200500194.html

Revenues were $101.1 million, up from $95.3 million last year and adjusted EPS was $.12 compared to $.05 last year. Overall a very nice quarter-again. Our valuation jumped to $7.01 $ up from $6.88 last year and up from $5.78 last quarter.

We are now waiting on the outcome of their “strategic alternatives” investigation with Lazard. This is still a HOLD.

UP 218%, HOLD

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

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

NEW Valuation $12.45 (was $11.49,$16.38, $13.07, $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 $.21 at $6.08 (including $1.20 of dividends)

Pays $.48 annual dividend.

Q1 2016 earnings were announced on Tuesday, November 3, 2015.

http://finance.yahoo.com/news/concurrent-reports-first-quarter-fiscal-210100825.html

Revenues were $13.4 million down from $13.8 million last quarter and down from $17.5 million last year. They had a loss of about $900,000 excluding the $4.1 million gain on the sale of their video analytics business. Overall, not a great quarter. Our valuation actually rose to $12.45 from $11.49 last quarter on gross margin expansion. We really think it is time for this company to be sold.

We continue to collect the 10% dividend.

UP 33%, 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 $5.95 (was $6.66, $6.47, $5.96, $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 $3.96 up $.27.

Q4 2015 (quarter ended 7/31/2015) earnings were announced on Wednesday, October 28th.

Another nice quarter operationally. Revenues were up 23% from last year at $10.9 million and they made $.02 a share. Revenues cracked $40 million for the year and they made $.07 a share.

http://finance.yahoo.com/news/ari-network-services-inc-announces-200400126.html

While all was good, our valuation fell a bit to $5.95 due to shares outstanding rising to just over 17 million, but only included a partial quarter from their latest acquisition. Hopefully, a full quarter from this acquisition will offset the additional shares.

UP 146%, HOLD

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3 Comments

  1. Hi Dave, very much enjoy the blog so thanks for all your work on it. I was surprised that you had 3 stocks fall 20-30% last week and only lost 3.5% – everything else must have done very well. Agree the market’s reaction to CRNT was wholly unjustified. Thanks again for the updates!

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