This is our final weekly update. We will likely continue to update on the remaining open positions from time-to-time, but not on a regular basis. We will publish our final performance record in the next few days covering our annual performance for the last 10 years and the results of our closed out positions.
Well at least we ended our final year up, although last week was not good. We were down 2.2% last week and ended the year up 5.9%. We managed to beat the DOW by 8.1 points NASDAQ by .1%.
Meanwhile, the DOW was down .7% and the NASDAQ was down .8%. For the year the DOW was down 2.2% and NASDAQ was up 5.7%..
We still like GSL, CKP, CRNT, ATEC, AVID and SYNC. DXM is a lottery ticket. We should know very soon as their bank waiver only goes to January 4, 2016. MTSL, PRSS, EXTR, CCUR, ARIS are all solid holds. BLIN is less than solid, but we are still hopeful.
Last week we went 3 stocks up, 8 down and 2 even. Since inception we are now 69 stocks up and 24 down for a 74.2% winning percentage (80% is our target win %). Of our closed-out positions 66 have been winners and 14 have been losers for an 82.5% win percentage and a 39% 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).
Global Ship Lease. (NYSE-GSL)-Recommended 11/10/2015)
Buy Price $3.10 (was $3.68 before $10,000 added at $2.67)
Closed up $.02 at $2.60
Pays $.40 dividend, soon to be $.50
Now at a 15% yield.
We would add $10,000 here.
There is just no love for GSL. The GSL CEO stated is a press release in December that the plunge in the short term shipping rates DOES NOT AFFECT GSL.
Either this is the best pick in the whole stock universe or something else is going on. Tax loss selling?
We are supposing GSL is down due to the new lows in the Baltic shipping rates. GSL’s ships are under long term rate with an aver duration of just over 5 years. Baltic rates today are meaningless in our opinion.
MER Telemanagement Systems. (NASDAQ-MTSL)-Recommended 9/22/2015)
Buy Price $1.25
Valuation $2.89 (Was $3.56)
Closed up $.01 at $.84
MTSL announced Q3 2015 earnings (quarter ended September 30, 2015) on November 5, 2015.
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.
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)
Valuation $17.98 (Was $18.28)
Closed down $.35 at $6.27
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.
Down 7%, 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)
Valuation $4.54 (Was $4.84)
Closed down $.06 at $1.21
CRGN announced Q3 2015 earnings (quarter ended September 30, 2015) on November 2, 2015.
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 12% BUY
Avid Technology, Inc. (NASDAQ-AVID)-Recommended 1/20/2015)
Buy Price $8.35 (Was $14 before 8/15 $10,0000 add at $8.08 and 12/20/15 $10,000 add at $6.10).
Valuation $23.99 (Was $22.24, $22.59 $23.86, $28.10)
Closed down $.20 at $7.29
We would add $10,000 here also.
Well AVID got a 13D filed on them in December 2015. Cove Street Capital owns 5.4% of AVID. Cove said it is a small cap value fund. They don’t look much like an activist fund but it is still good that somebody is noticing how cheap this stock is.
AVID announced Q3 2015 earnings (quarter ended September 30, 2015) on 11/4/2015.
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 13% 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)
Valuation $1.82 (Was $2.54, $2.61, $3.11, $2.95, $3.00)
Closed at $.30 down $.03
ATEC reported Q3 2015 earnings (quarter ended September 30, 2015) on 11/3/2015’.
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 44% 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 $8.95, $9.09 $12.50, $11.17, $12.51, $11.27)
Closed up $.04 at $3.84
Q3 2015 earnings were announced on 11/12/2015.
Again, not bad. Revenues fell to $19.5 million from $25.9 million last year as they continued to slim down the business and focus on cash and profit. Their loss from operations declined to $2.1 million from $5.8 million last year. Adjusted EBITDA was negative $45 thousand versus negative $3.15 million last year. Cash fell to $44 million ($2.56) a share from $46 million. Our valuation for this seasonally weak quarter was $7.97 down from $8.95 last quarter.
Down 4% 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 down $.06 at $4.08
Extreme announced Q1 2016 (September 30, 2015) on October 29, 2015.
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 19%, HOLD
Synacor Inc. (NASDAQ-SYNC)-Recommended 12/17/2013)
Buy Price $2.56
Valuation $5.20 (Was $5.29, $5.71, $6.61, $5.58, $5.21, $5.44, $6.67, $6.39)’
Closed down $.03 at $1.75
SYNC announced Q3 2015 earnings on 11/10/2015. Revenues were $26.3 million flat with $26.2 million last year. GAAP Net loss was $.03 per share compared to a $.09 loss last year. Adjusted EBITDA was a positive $1.9 million compared to positive adjusted EBITDA of $.063 million last year.
Our valuation rose to $5.20 from our pro-forma valuation of $5.06 last quarter. Cash was $.29 per share.
While cash was used to buy Zimbra, it only contributed to the quarterly results for less than a month.
Guidance for next quarter is promising-from their press release:
“Based on information available as of November 11, 2015, the company is providing financial guidance for the fourth quarter and fiscal 2015 as follows:
- Q4 2015 Guidance: Revenue for the fourth quarter of 2015 is projected to be in the range of $29.0 million to $31.0 million. The company expects to report adjusted EBITDA of $0.8 million to $1.8 million.
- Fiscal 2015 Guidance: Revenue for the full year of 2015 is projected to be in the range of $107.0 million to $109.0 million. For the full year of 2015, the company expects to report adjusted EBITDA of $5.5 million to $6.5 million”.
Down 32%. 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 at $.12 unchanged
DXM extended their forebearance agreement with their lenders until January 4, 2016.
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.
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 98% 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 $6.02 (Was $6.20, $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 $.05 at $1.13
BLIN had to borrow another $1 million from Taglish in December..
BLIN announced Q4 2015 earnings (quarter ended September 30, 2015) on 12/23/2015. Revenues were $4.6 million down from $5.8 million last year and down from $4.9 million last quarter. They lost $.08 per share on a Non-GAAP basis compared to $.34 last year. Our valuation rose to $6.02 down from $6.20 last quarter. Margins crept up to 50% and EBITDA (adjusted) was positive ($21,000). Have to wait longer here as they eke out an existence and hopefully get this little boat moving in the right direction. They need to sell this company to someone with capital to fund the business. HOLD
Down 71%, HOLD
Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$4.58 (Was $5.08 before $.50 special dividend)
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 $.48 at $6.39 (including $1.44 of dividends)
Pays $.48 annual dividend.
Q1 2016 earnings were announced on Tuesday, November 3, 2015.
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 40%, 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 $4.50 unchanged
Q1 2016 (quarter ended 10/31/2015) earnings were announced on 12/10/2015.
Revenues were $11.7 million up a whopping 28% over last year. They made a profit of $.02 per share versus a $.01 profit last year. Our valuation rose to $6.40 up from $5.95 last quarter and $5.96 last year. Recurring revenue was 91.2% of total revenue. The company continues to execute. We will continue to HOLD ARI even with more than a 150% gain.
UP 179%, HOLD