We will take our 110% gain on HPOL. It could get bought out, and is only trading at 53% of our valuation, but the economy is still shaky and HPOL is not burning it up either with continuing losses.

2010 continues to be good for us. We were up 2.7% last week and are now up 6.6% for the year, on top of our 90% gain in 2009.

IPAS, MEDW and DWCH still are our favorites.

The DOW was down .1%, NASDAQ was down 1.3% and the S+P 500 was down .8%. The Russell 3000 was down .9% and the Wilshire 5000 was down .9%. For the year the DOW is up 1.7%, NASDAQ is up .8% and the S+P 500 is up 1.9%. The Wilshire is up 1.9% and the Russell is up .9%.

Last week we went 4 stocks up, 10 down and 2 even, but double digit gains in LTUS and HPOL propelled us into the plus column. Since inception we are now 39 stocks up and 11 down.

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%
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)

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).

For the 34 stocks that we closed out since 2006 the average net gain was 27%.

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed up $.01 at $.84.
Following the early December announcement that Cetrorelix is dead, Sandofi and AEZS canceled their agreement to develop Cetrorelix. On the other hand Kerx (AEZS partner in U.S. on Perifosine) announced positive news, “The data presented here further supports the planned Phase 3 trial design which has been granted Special Protocol Assessment by the FDA”. This is still a “lottery ticket”.
Earnings out in November. Revenues about $8.5 million and they lost $11.3 million. This of course all means nothing yet. Still has $45 million of cash.
Their pipeline and the related announcements will be what drives this stock.
Just waiting for some more good developement news here.
They stil have $45 million in cash, marketed products and a good pipeline
Down 41% HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Closed up $.15 at $7.02.
Canaccord Adams upgraded SPNC on the settlement announcement in December. Target price is $11.
The company has $34 million in cash ($1.04 per share), no debt and is growing about 10% a year.
Up 24%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
Valuation $7.17 (was $7.46, $8.12, $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed down $.10 at $2.58
Earnings out in November. Not bad. Revenue down 14% as you would expect this year, but they maintained profitability and made $.04 a share. Has $.94 a share in cash and our valuation is still $7.17, almost 3 times the current price.
KVO Capital management filed a 13D in September. They own 402,000 shares (just under 7% of the company). Purchases were all in the second half of August from $1.66 to $2.74 per share. Finally, someone else seems to see the value here.
Up 7%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $12.57 (was $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Down $.07 at $7.06.
MEDW announced the acquisition of 2 companies in the home infusion market for $5.5 million in November. These deals were closed in December.
Earnings out in November. Sales were up 9% and EPS more than doubled to $.08 per share. Cash is $2.78 per share and our valuation rose to $12.57 per share. Constellation Software filed another 13D/A in late August 2009. Bought 290,000 shares at $5.20 raising their stake to 21.8%. When is the take-over offer??
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 12%. BUY

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $2.17 (was $1.65, $1.89, $5.61, $6.42, $6.84, $7.58, $7.59)
Down $.04 at $.44.
VTRO presented at the Sidoti Microcap conference last week. Apparently they did not impress amyone. The presentation was just reinteration of old data.
Earnings out in November. Sales were $7.4 million and they lost $1.8 million before a $1.2 million gain from discontinued operations. Cash was about $6.9 million or $.20 per share. Our valuation rose to $2.17 per share. Thet are still saying they think they will get to positive EBITDA in Q4. We’ll see.
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 73%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $.69 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $2.72 (Was $3.09, $2.78, $4.67, $4.66, $6.00, $5.96)
Closed up $.20 at $1.45.
Earnings out in late October. Not bad at all. While sales were down 23% to $38.8 million, they had a tiny loss of $.01 per share ($.04 loss last year). Adjusted EBITDA was $2.1 million up from $.7 million last year.
Our valuation fell to $2.72 per share.
More interestingly, Mill Road Capital filed a Form 13D/A on 10/29/2009 disclosing that they bought another 742,000 shares at an average price of about $.88 from October 8th to October 28th. This brings their ownership up to 4,178,000 shares or 7.7% of the company (up from 6.4% previously).
Finaciere De Sainte Marine, is a big investor in HPOL. They own over 14% of the company.
Up 110%. HOLD

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.42 (adjusted for $.32 and $.16 dividends) (Was $2.07 before another $10,000 added and $2.15 before double up
Valuation $4.17 (was $4.73, $4.75, $4.12, $4.99, $4.30, $4.09)
Down $.02 at $1.17
Shamrock sold all their IPAS shares to Millenium partners in December at $.95, removing the overhang. Millenium now owns 6.2 million shares or 9.9% of the company.
IPASS announced a 80 person layoff in November. This is about 18% of their workforce.
They will take a $4.6 million charge in Q4 and this will supposedly save about $8.6 million a year. We think this is a good move in light of the economy and last quarters loss.
Earning out in November. Hmmmm. Revenues down 12% and they lost $6.1 million. Excluding “dial-up” revenues, revenues were still down 2.3%. $4.8 million of the loss was “one-time”. Apparently they figured out that they should have been charging sales taxes on some or all of their services. It took a state audit to turn this light on. This does not help with their credibility.
They also initiated a share buyback program of $10 million. Any buyback money not used will be dividended to shareholders in April 2010.
At September 30, they had $50 million in cash ($.81 per share) and our valuation fell a bit to $4.17.
Foxhill ownership is 6.7%. Millenium owns 9.9%, Royce 5.9% and Federated, 5.5%.
Down 13%. BUY

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (6.5% dividend yield)
Valuation $18.89 (Was $17.09, $17.05, $14.51, $17.23, $18.36)
Down $.04 to $5.90.
CCA announced earnings in October. Revenues were up 8% to $15.3 million and they earned $.23 per share compared to $.16 last year. They also declared their $.07 quarterly dividend. Our valuation moved up slightly to $18.89 per share. Cash was $2.76 per share.
Up 7%. HOLD

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $3.78 (was $3.84, $3.80, $3.97, $4.18, $4.15)
Closed down $.26 at $1.78
Earnings due out February 10th.
A lot of confusion about the ex-dividend date on this one. As far as we can tell the ex-dividend date was January 7th, the record date was the 11th and the payment date is the 25th.
There will be $.10 withheld for taxes on the $.50 dividend, but depending on your tax situation, you may get all or some of this back when you file your tax return.
Earnings out in November. Sales fell 15% to $13.5 million but they were still profitable and made $.03 per share. Our valuation fell $.06 to $3.78 per share and cash per share was $1.15.
Formula Systems (NASDAQ-FORTY) holds 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor that at some point will want to sell MGIC.
Up 18% (adjusted for special $.50 dividend). HOLD

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.73 (was $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.10 at $3.92
Earnings out in December. Sales fell 13% to $6.6 million (but increased from the $6.2 million last quarter) and they lost $600,000 or $.14 per share. Cash increased to $2.71 per share, and our valuation rose to $11.73 (still about 3 times the current share price).
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
UP 3% HOLD

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.16-(Was $2.59, $3.69 before adding another $10,000 each time)
Valuation NA-Dividend yield play
Closed down $.03 at $1.56
Current dividend yield–suspended
Earnings in November. Good again. Revenues up 57% to $37.6 million. Made $6.2 million or $.12 per share excluding a $8 million “mark-to-market” derivative charge. Everything else seems good.
CGM (their main customer continues to struggle. Trying to restructure their debt, get funding from the French goverment etc. We would think that GSL would be the last “supplier” to CGM to feel any effects of this due to CGM’s equity ownership in GSL.
Big announcements in late August 2009. They finally made a deal with their bank and survived the ordeal. They had the rest of their credit line canceled, were allowed to take delivery of a used ship, no dividend until the loan to ship value is less than 75% and they have to start prepaying their loans. CGM has to stay in as an equity holder until at least November 30, 2010. Meanwhile their business is great. This is definitely going to be long-term though.
Could be the buy of a lifetime if the ecomomy–and ship prices recover.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 29%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$8.57 (Was $8.49, $9.24)
Closed down $.22 at $5.78.
Earnings out in November. Sales fell 32% to $16.6 million. They lost about $2.5 million, excluding a $9.5 million litigation gain. Cash rose to $143 million or $4.34 per share. On a non-GAAP basis they lost about $300,000.
Our valuation rose to $8.57 per share.
We will hang on to this one for a while more.
Up 17%. HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks, especially in this Market.

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 $5.74 (was $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 $.90 unchanged.
Earnings out in December. Sales up 35% to $5.5 million and they made $162,000 or $.02 per share.
Our valuation backed off a bit to $5.74 per share. No one cares.
Wake up management–you have a great little company here worth 5-6X what it is selling for.
Now down 44%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.38 (was $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.58, down $.02.
Earnings out in November. Sales down 28% to $7.8 million, but they still made $127,000 of income. Our valuation fell to $2.38 per share, which is still 4X the current price. Market cap is about $9 million. AVSO sales are over $30 million, with decent margins, profitable and with $.11 in net cash.
Down 27%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.93 (Was $.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 $.08 unchanged. Closed at $.08.
At a $2 million market cap, this is stupidly cheap. Their itellectual property is probably worth 10 times this price. They need to liquify this value somehow.
Earnings out in November. Sales down 54% to $3.6. million (down from $4.1 in Q2) and they lost $320,000 (essentially breakeven excluding depreciation). They blame the sales decline on currency issues and the economy. Our valuation rose to $.93 ( 11 times the current selling price) as losses were reduced and margins gapped up over 70%.
Their VOIP business continues to struggle and lose money, sales were $112,000 down from $188,000 last quarter. They VOIP loss was $675,000. They also spent $129,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 70%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.00 (Was $1.84, $1.56, $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $1.59, up $.24.
Remember our $2 valuation is a true “value” calculation. EPS is not given much weight. But LTUS looks like it will earn $.40 this year, fully diluted. So at even a measly 8 multiple we could see over $3 per share.
Earnings out in November. Sales fell only 13% from last year, but they were up from Q2. They made $5.5 million in profit or $.11 per share. For the nine months they have now earned $.28 per share. Our valuation headed back up again to $2.00 per share. Also selling under 3 times earnings.
Lotus announced in February 2009 that it bought the land use rights in Mongolia for $26 million, subject to contruction approvals etc. If the project is not approved, they get the money back. They paid for this out of internally generated funds. Pretty impressive. 3 years and $58 million to go to build this plant. They are also looking to sell or rent up to 80% of the land to other pharma companies to create a pharma industrial park.
This may work out ok. Unusual legal structure, $58 million construction project all hang over this company.
UP 90%. HOLD

So far 2010 has been pretty good.

A nice week last week for us–up 3.9%.

IPAS, MEDW, DWCH, and LTUS.ob still are our favorites.

The DOW was up 1.8%, NASDAQ was up 2.1% and the S+P 500 was up 2.7%. The Russell 3000was up 1.75% and the Wilshire 5000 was up 2.8

Last week we went 11 stocks up, 4 down and 1 even. Since inception we are now 39 stocks up and 11 down.

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%
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)

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).

For the 34 stocks that we closed out since 2006 the average net gain was 27%.

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed up $.02 at $.83.
Following the early December announcement that Cetrorelix is dead, Sandofi and AEZS canceled their agreement to develope Cetrorelix. On the other hand Kerx (AEZS partner in U.S. on Perifosine) announced positive news, “The data presented here further supports the planned Phase 3 trial design which has been granted Special Protocol Assessment by the FDA”. This is still a “lottery ticket”.
Earnings out in November. Revenues about $8.5 million and they lost $11.3 million. This of course all means nothing yet. Still has $45 million of cash.
Their pipeline and the related announcements will be what drives this stock.
Just waiting for some more good developement news here.
They stil have $45 million in cash, marketed products and a good pipeline
Down 42% HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Closed down $.09 at $6.87.
Canaccord Adams upgraded SPNC on the settlement announcement in December. Target price is $11.
The company has $34 million in cash ($1.04 per share), no debt and is growing about 10% a year.
Up 21%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
Valuation $7.17 (was $7.46, $8.12, $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed up $.03 at $2.68
Earnings out in November. Not bad. Revenue down 14% as you would expect this year, but they maintained profitability and made $.04 a share. Has $.94 a share in cash and our valuation is still $7.17, almost 3 times the current price.
KVO Capital management filed a 13D in September. They own 402,000 shares (just under 7% of the company). Purchases were all in the second half of August from $1.66 to $2.74 per share. Finally, someone else seems to see the value here.
Up 11%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $12.57 (was $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Down $.21 at $7.13.
MEDW announced the acquisition of 2 companies in the home infusion market for $5.5 million in November. These deals were closed in December.
Earnings out in November. Sales were up 9% and EPS more than doubled to $.08 per share. Cash is $2.78 per share and our valuation rose to $12.57 per share. The stock got up to $7.38 before falling back a bit. This should be a $10 stock right now, in our opinion.
Constellation Software filed another 13D/A in late August. Bought 290,000 shares at $5.20 raising their stake to 21.8%. When is the take-over offer??
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 13%. BUY

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $2.17 (was $1.65, $1.89, $5.61, $6.42, $6.84, $7.58, $7.59)
Up $.06 at $.48.
Earnings out in November. Sales were $7.4 million and they lost $1.8 million before a $1.2 million gain from discontinued operations. Cash was about $6.9 million or $.20 per share. Our valuation rose to $2.17 per share. Thet are still saying they think they will get to positive EBITDA in Q4. We’ll see.
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 71%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $.69 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $2.72 (Was $3.09, $2.78, $4.67, $4.66, $6.00, $5.96)
Closed up $.06 at $1.25.
Earnings out in late October. Not bad at all. While sales were down 23% to $38.8 million, they had a tiny loss of $.01 per share ($.04 loss last year). Adjusted EBITDA was $2.1 million up from $.7 million last year.
Our valuation fell to $2.72 per share.
More interestingly, Mill Road Capital filed a Form 13D/A on 10/29/2009 disclosing that they bought another 742,000 shares at an average price of about $.88 from October 8th to October 28th. This brings their ownership up to 4,178,000 shares or 7.7% of the company (up from 6.4% previously).
Finaciere De Sainte Marine, is a big investor in HPOL. They own over 14% of the company.
Up 81%. HOLD

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.42 (adjusted for $.32 and $.16 dividends) (Was $2.07 before another $10,000 added and $2.15 before double up
Valuation $4.17 (was $4.73, $4.75, $4.12, $4.99, $4.30, $4.09)
Up $.15 at $1.19
IPASS announced a 80 person layoff in November. This is about 18% of their workforce.
They will take a $4.6 million charge in Q4 and this will supposedly save about $8.6 million a year. We think this is a good move in light of the economy and last quarters loss.
Earning out in November. Hmmmm. Revenues down 12% and they lost $6.1 million. Excluding “dial-up” revenues, revenues were still down 2.3%. $4.8 million of the loss was “one-time”. Apparently they figured out that they should have been charging sales taxes on some or all of their services. It took a state audit to turn this light on. This does not help with their credibility.
They also initiated a share buyback program of $10 million. Any buyback money not used will be dividended to shareholders in April 2010.
At September 30, they had $50 million in cash ($.81 per share) and our valuation fell a bit to $4.17.
Foxhill ownership is 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
Down 12%. BUY

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (6.5% dividend yield)
Valuation $18.89 (Was $17.09, $17.05, $14.51, $17.23, $18.36)
Up $.39 to $5.94.
CCA stock price has risen significantly over the last few weeks and we are now actually in the black on this one. The 50% take-over premium on an already pricy valuation of Chattem (NASDAQ-CHTT) may have woken investors up to the value here.
CCA announced earnings in October. Revenues were up 8% to $15.3 million and they earned $.23 per share compared to $.16 last year. They also declared their $.07 quarterly dividend. Our valuation moved up slightly to $18.89 per share. Cash was $2.76 per share.
Up 8%. HOLD

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $3.78 (was $3.84, $3.80, $3.97, $4.18, $4.15)
Closed up $.25 at $2.04
A lot of confusion about the ex-dividend date on this one. As far as we can tell the ex-dividend date was January 7th, the record date in the 11th and the payment date is the 25th. So on Thursday when the stock dropped from $2.35 to $1.85 it sure looked lke a dividend adjustment to us. Our 32% gain calculation is based on this.
There will be $.10 withheld for taxes on the $.50 dividend, but depending on your tax situation, you may get all or some of this back when you file your tax return.
Earnings out in November. Sales fell 15% to $13.5 million but they were still profitable and made $.03 per share. Our valuation fell $.06 to $3.78 per share and cash per share was $1.15.
Formula Systems (NASDAQ-FORTY) holds 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor that at some point will want to sell MGIC.
Up 32%. HOLD

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.73 (was $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.07 at $4.02
Earnings out in December. Sales fell 13% to $6.6 million (but increased from the $6.2 million last quarter) and they lost $600,000 or $.14 per share. Cash increased to $2.71 per share, and our valuation rose to $11.73 (still about 3 times the current share price).
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
UP 5%. HOLD

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.16-(Was $2.59, $3.69 before adding another $10,000 each time)
Valuation NA-Dividend yield play
Closed up $.17 at $1.59
Current dividend yield–suspended
Earnings in November. Good again. Revenues up 57% to $37.6 million. Made $6.2 million or $.12 per share excluding a $8 million “mark-to-market” derivative charge. Everything else seems good.
CGM (their main customer continues to struggle. Trying to restructure their debt, get funding from the French goverment etc. We would think that GSL would be the last “supplier” to CGM to feel any effects of this due to CGM’s equity ownership in GSL.
Big announcements in late August. They finally made a deal with their bank and survived the ordeal. They had the rest of their credit line canceled, were allowed to take delivery of a used ship, no dividend until the loan to ship value is less than 75% and they have to start prepaying their loans. CGM has to stay in as an equity holder until at least November 30, 2010. Meanwhile their business is great. This is definitely going to be long-term though.
Could be the buy of a lifetime if the ecomomy–and ship prices recover.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 27%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$8.57 (Was $8.49, $9.24)
Closed up $.35 at $6.00.
Earnings out in November. Sales fell 32% to $16.6 million. They lost about $2.5 million, excluding a $9.5 million litigation gain. Cash rose to $143 million or $4.34 per share. On a non-GAAP basis they lost about $300,000.
Our valuation rose to $8.57 per share.
We will hang on to this one for a while more.
Up 22%. HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks, especially in this Market.

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 $5.74 (was $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 $.90 unchanged.
Earnings out in December. Sales up 35% to $5.5 million and they made $162,000 or $.02 per share.
Our valuation backed off a bit to $5.74 per share. No one cares.
Wake up management–you have a great little company here worth 5-6X what it is selling for.
Now down 44%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.38 (was $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.60, up $.02.
Earnings out in November. Sales down 28% to $7.8 million, but they still made $127,000 of income. Our valuation fell to $2.38 per share, which is still 4X the current price. Market cap is about $9 million. AVSO sales are over $30 million, with decent margins, profitable and with $.11 in net cash.
Down 24%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.93 (Was $.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 $.08 down $.01. Closed at $.07.
At a $2 million market cap, this is stupidly cheap. Their itellectual property is probably worth 10 times this price. They need to liquify this value somehow.
Earnings out in November. Sales down 54% to $3.6. million (down from $4.1 in Q2) and they lost $320,000 (essentially breakeven excluding depreciation). They blame the sales decline on currency issues and the economy. Our valuation rose to $.93 ( 11 times the current selling price) as losses were reduced and margins gapped up over 70%.
Their VOIP business continues to struggle and lose money, sales were $112,000 down from $188,000 last quarter. They VOIP loss was $675,000. They also spent $129,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 70%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.00 (Was $1.84, $1.56, $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $1.35, up $.07.
Remember our $2 valuation is a true “value” calculation. EPS is not given much weight. But LTUS looks like it will earn $.40 this year, fully diluted. So at even a measly 8 multiple we could see over $3 per share.
Earnings out in November. Sales fell only 13% from last year, but they were up from Q2. They made $5.5 million in profit or $.11 per share. For the nine months they have now earned $.28 per share. Our valuation headed back up again to $2.00 per share. Also selling under 3 times earnings.
Lotus announced in February 2009 that it bought the land use rights in Mongolia for $26 million, subject to contruction approvals etc. If the project is not approved, they get the money back. They paid for this out of internally generated funds. Pretty impressive. 3 years and $58 million to go to build this plant. They are also looking to sell or rent up to 80% of the land to other pharma companies to create a pharma industrial park.
This may work out ok. Unusual legal structure, $58 million construction project all hang over this company.
UP 61%. BUY

Happy New Year. Let’s hope 2010 brings a continuation of 2009 in the market.

A nice week last week for us–up 9.3%, while the market averages were all down.

So we finished the year up a huge 89%, crushing the Dow by 70 points, the S+P 500 by 65 points and NASDAQ by 45 points.

IPAS, MEDW, DWCH, and LTUS.ob still are our favorites.

The DOW was down .9%, NASDAQ was down .7% and the S+P 500 was down 1%. For the year the DOW was up 18.9%. NASDAQ is up 43.9% and the S+P 500 is up 23.5%. The Russell 3000 and the Wilshire 5000 were up 26-27% this year.

Last week we went 13 stocks up and 3 down. Since inception we are now 39 stocks up and 11 down (we just missed our 80% winner target) .

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%
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)

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).

For the 34 stocks that we closed out since 2006 the average net gain was 27%.

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed up $.02 at $.81.
Following the early December announcement that Cetrorelix is dead, Sandofi and AEZS canceled their agreement to develope Cetrorelix. On the other hand Kerx (AEZS partner in U.S. on Perifosine) announced positive news, “The data presented here further supports the planned Phase 3 trial design which has been granted Special Protocol Assessment by the FDA”. This is still a “lottery ticket”.
Earnings out in November. Revenues about $8.5 million and they lost $11.3 million. This of course all means nothing yet. Still has $45 million of cash.
Their pipeline and the related announcements will be what drives this stock.
Just waiting for some more good developement news here.
They stil have $45 million in cash, marketed products and a good pipeline
Down 43% HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Closed up $.99 at $6.96.
Finally the FDA resoulution was announced last week. Basiacally a $5 million penalty and promises to not screw up in the future. Too bad more people weren’t around for the announcement.
Maybe after this quarter with no litigation costs and distractions, SPNC can actually start announcing “EARNINGS” and we can get back into the double digit price range again.
SPNC is up 167% this year.
SPNC announced FDA approval on a new “lead” management device in December.
Earnings out in October. Pretty good actually. Sales up 7% to $28.8 million (second highest quarterly sales ever). They lost $2.5 million or $.08 per share. Excluding write-offs and litigation costs they made $641k pre-tax.
A 510(K) filing for in-stent restenosis happened in early Octobber.
Canaccord Adams upgraded SPNC on the settlement announcement. Target price is $11.
The company has $34 million in cash ($1.04 per share), no debt and is growing about 10% a year.
Up 23%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
Valuation $7.17 (was $7.46, $8.12, $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed up $.17 at $2.65
Earnings out in November. Not bad. Revenue down 14% as you would expect this year, but they maintained profitability and made $.04 a share. Has $.94 a share in cash and our valuation is still $7.17, almost 3 times the current price.
KVO Capital management filed a 13D in September. They own 402,000 shares (just under 7% of the company). Purchases were all in the second half of August from $1.66 to $2.74 per share. Finally, someone else seems to see the value here.
Up 10%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $12.57 (was $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up $.33 at $7.34.
MEDW announced the acquisition of 2 companies in the home infusion market for $5.5 million in November. These deals were closed in December.
Earnings out in November. Sales were up 9% and EPS more than doubled to $.08 per share. Cash is $2.78 per share and our valuation rose to $12.57 per share. The stock got up to $7.38 before falling back a bit. This should be a $10 stock right now, in our opinion.
Constellation Software filed another 13D/A in late August. Bought 290,000 shares at $5.20 raising their stake to 21.8%. When is the take-over offer??
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 16%. BUY

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $2.17 (was $1.65, $1.89, $5.61, $6.42, $6.84, $7.58, $7.59)
Up $.03 at $.42.
Earnings out in November. Sales were $7.4 million and they lost $1.8 million before a $1.2 million gain from discontinued operations. Cash was about $6.9 million or $.20 per share. Our valuation rose to $2.17 per share. Thet are still saying they think they will get to positive EBITDA in Q4. We’ll see.
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 74%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $.69 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $2.72 (Was $3.09, $2.78, $4.67, $4.66, $6.00, $5.96)
Closed down $.05 at $1.19.
HPOL is up 600% from its lows earlier in 2009.
Earnings out in late October. Not bad at all. While sales were down 23% to $38.8 million, they had a tiny loss of $.01 per share ($.04 loss last year). Adjusted EBITDA was $2.1 million up from $.7 million last year.
Our valuation fell to $2.72 per share.
More interestingly, Mill Road Capital filed a Form 13D/A on 10/29/2009 disclosing that they bought another 742,000 shares at an average price of about $.88 from October 8th to October 28th. This brings their ownership up to 4,178,000 shares or 7.7% of the company (up from 6.4% previously).
Finaciere De Sainte Marine, is a big investor in HPOL. They own over 14% of the company.
Up 72%. HOLD

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.42 (adjusted for $.32 and $.16 dividends) (Was $2.07 before another $10,000 added and $2.15 before double up
Valuation $4.17 (was $4.73, $4.75, $4.12, $4.99, $4.30, $4.09)
Up $.02 at $1.04
IPASS announced a 80 person layoff in November. This is about 18% of their workforce.
They will take a $4.6 million charge in Q4 and this will supposedly save about $8.6 million a year. We think this is a good move in light of the economy and last quarters loss.
Earning out in November. Hmmmm. Revenues down 12% and they lost $6.1 million. Excluding “dial-up” revenues, revenues were still down 2.3%. $4.8 million of the loss was “one-time”. Apparently they figured out that they should have been charging sales taxes on some or all of their services. It took a state audit to turn this light on. This does not help with their credibility.
They also initiated a share buyback program of $10 million. Any buyback money not used will be dividended to shareholders in April 2010.
At September 30, they had $50 million in cash ($.81 per share) and our valuation fell a bit to $4.17.
Foxhill ownership is 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
Down 20%. BUY

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (6.5% dividend yield)
Valuation $18.89 (Was $17.09, $17.05, $14.51, $17.23, $18.36)
Up $.63 to $5.55.
CCA stock price has risen significantly over the last few weeks and we are now actually in the black on this one. The 50% take-over premium on an already pricy valuation of Chattem (NASDAQ-CHTT) may have woken investors up to the value here.
CCA announced earnings in October. Revenues were up 8% to $15.3 million and they earned $.23 per share compared to $.16 last year. They also declared their $.07 quarterly dividend. Our valuation moved up slightly to $18.89 per share. Cash was $2.76 per share.
Up 1%. HOLD

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $3.78 (was $3.84, $3.80, $3.97, $4.18, $4.15)
Closed up $.44 at $2.29
MGIC announced a special $.50 dividend last week pushing the stock price up to $2.50 at one point. There will be $.10 withheld for taxes, but depending on your tax situation, you may get all or some of this back when you file your tax return.
Earnings out in November. Sales fell 15% to $13.5 million but they were still profitable and made $.03 per share. Our valuation fell $.06 to $3.78 per share and cash per share was $1.15.
Formula Systems (NASDAQ-FORTY) holds 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor that at some point will want to sell MGIC.
Up 19%. HOLD

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.73 (was $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.49 at $4.09
Earnings out in December. Sales fell 13% to $6.6 million (but increased from the $6.2 million last quarter) and they lost $600,000 or $.14 per share. Cash increased to $2.71 per share, and our valuation rose to $11.73 (still about 3 times the current share price).
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
UP 7%. HOLD

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.16-(Was $2.59, $3.69 before adding another $10,000 each time)
Valuation NA-Dividend yield play
Closed up $.01 at $1.42
Current dividend yield–suspended
Earnings in November. Good again. Revenues up 57% to $37.6 million. Made $6.2 million or $.12 per share excluding a $8 million “mark-to-market” derivative charge. Everything else seems good.
CGM (their main customer continues to struggle. Trying to restructure their debt, get funding from the French goverment etc. We would think that GSL would be the last “supplier” to CGM to feel any effects of this due to CGM’s equity ownership in GSL.
Big announcements in late August. They finally made a deal with their bank and survived the ordeal. They had the rest of their credit line canceled, were allowed to take delivery of a used ship, no dividend until the loan to ship value is less than 75% and they have to start prepaying their loans. CGM has to stay in as an equity holder until at least November 30, 2010. Meanwhile their business is great. This is definitely going to be long-term though.
Could be the buy of a lifetime if the ecomomy–and ship prices recover.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 35%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$8.57 (Was $8.49, $9.24)
Closed up $.40 at $5.64.
Earnings out in November. Sales fell 32% to $16.6 million. They lost about $2.5 million, excluding a $9.5 million litigation gain. Cash rose to $143 million or $4.34 per share. On a non-GAAP basis they lost about $300,000.
Our valuation rose to $8.57 per share.
We will hang on to this one for a while more.
Up 14%. HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks, especially in this Market.

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 $5.74 (was $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 $.90 up $.10.
Earnings out in December. Sales up 35% to $5.5 million and they made $162,000 or $.02 per share.
Our valuation backed off a bit to $5.74 per share. No one cares.
Wake up management–you have a great little company here worth 5-6X what it is selling for.
Now down 44%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.38 (was $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.58, up $.01.
Earnings out in November. Sales down 28% to $7.8 million, but they still made $127,000 of income. Our valuation fell to $2.38 per share, which is still 4X the current price. Market cap is about $9 million. AVSO sales are over $30 million, with decent margins, profitable and with $.11 in net cash.
Down 27%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.93 (Was $.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 $.09 down $.005. Closed at $.06.
Tax loss selling at least brought some volume to this stock! We even sold some last week to offset other taxable gains.
At a $2 million market cap, this is stupidly cheap. Their itellectual property is probably worth 10 times this price. They need to liquify this value somehow.
Earnings out in November. Sales down 54% to $3.6. million (down from $4.1 in Q2) and they lost $320,000 (essentially breakeven excluding depreciation). They blame the sales decline on currency issues and the economy. Our valuation rose to $.93 ( 11 times the current selling price) as losses were reduced and margins gapped up over 70%.
Their VOIP business continues to struggle and lose money, sales were $112,000 down from $188,000 last quarter. They VOIP loss was $675,000. They also spent $129,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 67%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.00 (Was $1.84, $1.56, $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $1.28, down $.02.
Lotus is up 540% from the stupidly low price at the end of 2008.
Remember our $2 valuation is a true “value” calculation. EPS is not given much weight. But LTUS looks like it will earn $.40 this year, fully diluted. So at even a measly 8 multiple we could see over $3 per share.
Earnings out in November. Sales fell only 13% from last year, but they were up from Q2. They made $5.5 million in profit or $.11 per share. For the nine months they have now earned $.28 per share. Our valuation headed back up again to $2.00 per share. Also selling under 3 times earnings.
Lotus announced in February 2009 that it bought the land use rights in Mongolia for $26 million, subject to contruction approvals etc. If the project is not approved, they get the money back. They paid for this out of internally generated funds. Pretty impressive. 3 years and $58 million to go to build this plant. They are also looking to sell or rent up to 80% of the land to other pharma companies to create a pharma industrial park.
This may work out ok. Unusual legal structure, $58 million construction project all hang over this company.
UP 53%. BUY

Merry Christmas, Happy Holidays to all

Good week for the markets, and a very good week for us–up 7.2%

Now up 79.6% this year.

IPAS, MEDW, DWCH, MGIC, LTUS.ob and CAW still are our favorites.

Expect tax loss selling and slow trading as we are deep in the holiday vacation season. We have 4 stocks (out of 26) that are down this year-GSL, AEZS, ARIS.ob and CTIG.ob. We expect tax selling pressure on GSL and AEZS.

The DOW was up 1.9%, NASDAQ was up 3.4% and the S+P 500 was up 2.2%. For the year the DOW is up 19.2%. NASDAQ is up 44.9% and the S+P 500 is up 24.7%. The Russell 3000 and the Wilshire 5000 are up 27-28% this year.

Last week we went 9 stocks up, 4 down and 3 even. Since inception we are now 36 stocks up and 14 down (we are trying hard to get to our 80% winner target) .

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%
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)

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).

For the 34 stocks that we closed out since 2006 the average net gain was 27%.

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed down $.03 at $.79.
Following the early December announcement that Cetrorelix is dead, Sandofi and AEZS canceled their agreement to develope Cetrorelix. On the other hand Kerx (AEZS partner in U.S. on Perifosine) announced positive news, “The data presented here further supports the planned Phase 3 trial design which has been granted Special Protocol Assessment by the FDA”. This is still a “lottery ticket”.
Earnings out in November. Revenues about $8.5 million and they lost $11.3 million. This of course all means nothing yet. Still has $45 million of cash.
Their pipeline and the related announcements will be what drives this stock.
Just waiting for some more good developement news here.
They stil have $45 million in cash, marketed products and a good pipeline
Down 45% HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Closed up $.50 at $5.97.
Everyone is waitng for the promised FDA resolution.
SPNC is up 129% this year.
SPNC announced FDA approval on a new “lead” management device in December.
Earnings out in October. Pretty good actually. Sales up 7% to $28.8 million (second highest quarterly sales ever). They lost $2.5 million or $.08 per share. Excluding write-offs and litigation costs they made $641k pre-tax.
Got to get past this FDA matter to allow this stock to move up.
A 510(K) filing for in-stent restenosis happened in early Octobber.
Canaccord Adams issued a BUY on SPNC in September. Target price is $8.
Hopefully we are getting close to a settlement with the FDA. Canaccord seems to think so.
SPNC is suffering from the year-ago FDA, ICE raids that apparently eminated from the ex-employee whistle-blower. SPNC has the financial where-with-all to deal with this. Growing nicely in a crappy economy. Just got to wait this one out.
The company has $34 million in cash ($1.04 per share), no debt and is growing about 10% a year.
Up 5%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
Valuation $7.17 (was $7.46, $8.12, $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed up $.12 at $2.48
Earnings out in November. Not bad. Revenue down 14% as you would expect this year, but they maintained profitability and made $.04 a share. Has $.94 a share in cash and our valuation is still $7.17, almost 3 times the current price.
KVO Capital management filed a 13D in September. They own 402,000 shares (just under 7% of the company). Purchases were all in the second half of August from $1.66 to $2.74 per share. Finally, someone else seems to see the value here.
Up 3%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $12.57 (was $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up $.21 at $7.01.
MEDW announced the acquisition of 2 companies in the home infusion market for $5.5 million in November. These deals were closed in December.
Earnings out in November. Sales were up 9% and EPS more than doubled to $.08 per share. Cash is $2.78 per share and our valuation rose to $12.57 per share. The stock got up to $7.38 before falling back a bit. This should be a $10 stock right now, in our opinion.
Constellation Software filed another 13D/A in late August. Bought 290,000 shares at $5.20 raising their stake to 21.8%. When is the take-over offer??
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 11%. BUY

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $2.17 (was $1.65, $1.89, $5.61, $6.42, $6.84, $7.58, $7.59)
Up $.02 at $.39.
Earnings out in November. Sales were $7.4 million and they lost $1.8 million before a $1.2 million gain from discontinued operations. Cash was about $6.9 million or $.20 per share. Our valuation rose to $2.17 per share. Thet are still saying they think they will get to positive EBITDA in Q4. We’ll see.
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 76%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $.69 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $2.72 (Was $3.09, $2.78, $4.67, $4.66, $6.00, $5.96)
Closed up $.09 at $1.24.
Earnings out in late October. Not bad at all. While sales were down 23% to $38.8 million, they had a tiny loss of $.01 per share ($.04 loss last year). Adjusted EBITDA was $2.1 million up from $.7 million last year.
Our valuation fell to $2.72 per share.
More interestingly, Mill Road Capital filed a Form 13D/A on 10/29/2009 disclosing that they bought another 742,000 shares at an average price of about $.88 from October 8th to October 28th. This brings their ownership up to 4,178,000 shares or 7.7% of the company (up from 6.4% previously).
Finaciere De Sainte Marine, is a big investor in HPOL. They own over 14% of the company.
Up 79%. HOLD

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.42 (adjusted for $.32 and $.16 dividends) (Was $2.07 before another $10,000 added and $2.15 before double up
Valuation $4.17 (was $4.73, $4.75, $4.12, $4.99, $4.30, $4.09)
Up $.05 at $1.02
Huge volume last week. Either a big seller getting out, or the company buying back shares–or both. Whatever the reason, the selling pressure seemed to pass, allowing a small rise in the price.
IPASS announced a 80 person layoff in November. This is about 18% of their workforce.
They will take a $4.6 million charge in Q4 and this will supposedly save about $8.6 million a year. We think this is a good move in light of the economy and last quarters loss.
Earning out in November. Hmmmm. Revenues down 12% and they lost $6.1 million. Excluding “dial-up” revenues, revenues were still down 2.3%. $4.8 million of the loss was “one-time”. Apparently they figured out that they should have been charging sales taxes on some or all of their services. It took a state audit to turn this light on. This does not help with their credibility.
They also initiated a share buyback program of $10 million. Any buyback money not used will be dividended to shareholders in April 2010.
At September 30, they had $50 million in cash ($.81 per share) and our valuation fell a bit to $4.17.
Foxhill ownership is 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
Down 21%. BUY

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (6.5% dividend yield)
Valuation $18.89 (Was $17.09, $17.05, $14.51, $17.23, $18.36)
Up $.56 $4.92.
This is definitely a BUY.
CCA announced earnings in October. Revenues were up 8% to $15.3 million and they earned $.23 per share compared to $.16 last year. They also declared their $.07 quarterly dividend. Our valuation moved up slightly to $18.89 per share. Cash was $2.76 per share.
Down 11%. BUY

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $3.78 (was $3.84, $3.80, $3.97, $4.18, $4.15)
Closed down $.13 at $1.85
Earnings out in November. Sales fell 15% to $13.5 million but they were still profitable and made $.03 per share. Our valuation fell $.06 to $3.78 per share and cash per share was $1.15.
Formula Systems (NASDAQ-FORTY) holds 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor that at some point will want to sell MGIC.
Down 4%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.73 (was $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.17 at $3.60
Earnings out in December. Sales fell 13% to $6.6 million (but increased from the $6.2 million last quarter) and they lost $600,000 or $.14 per share. Cash increased to $2.71 per share, and our valuation rose to $11.73 (still about 3 times the current share price).
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 8%. HOLD

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.16-(Was $2.59, $3.69 before adding another $10,000 each time)
Valuation NA-Dividend yield play
Closed up $.06 at $1.41
Current dividend yield–suspended
Earnings in November. Good again. Revenues up 57% to $37.6 million. Made $6.2 million or $.12 per share excluding a $8 million “mark-to-market” derivative charge. Everything else seems good.
CGM (their main customer continues to struggle. Trying to restructure their debt, get funding from the French goverment etc. We would think that GSL would be the last “supplier” to CGM to feel any effects of this due to CGM’s equity ownership in GSL.
Big announcements in late August. They finally made a deal with their bank and survived the ordeal. They had the rest of their credit line canceled, were allowed to take delivery of a used ship, no dividend until the loan to ship value is less than 75% and they have to start prepaying their loans. CGM has to stay in as an equity holder until at least November 30, 2010. Meanwhile their business is great. This is definitely going to be long-term though.
Could be the buy of a lifetime if the ecomomy–and ship prices recover.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 36%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$8.57 (Was $8.49, $9.24)
Closed unchanged at $5.24.
Earnings out in November. Sales fell 32% to $16.6 million. They lost about $2.5 million, excluding a $9.5 million litigation gain. Cash rose to $143 million or $4.34 per share. On a non-GAAP basis they lost about $300,000.
Our valuation rose to $8.57 per share.
We will hang on to this one for a while more.
Up 6%. HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks, especially in this Market.

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 $5.74 (was $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 $.80 unchanged.
Earnings out in December. Sales up 35% to $5.5 million and they made $162,000 or $.02 per share.
Our valuation backed off a bit to $5.74 per share. No one cares.
Wake up management–you have a great little company here worth 5-6X what it is selling for.
Now down 50%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.38 (was $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.57, down $.03.
Earnings out in November. Sales down 28% to $7.8 million, but they still made $127,000 of income. Our valuation fell to $2.38 per share, which is still 4X the current price. Market cap is about $9 million. AVSO sales are over $30 million, with decent margins, profitable and with $.11 in net cash.
Down 28%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.93 (Was $.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 $.095 unchanged. Closed at $.08.
At a $2 million market cap, this is stupidly cheap. Their itellectual property is probably worth 10 times this price. They need to liquify this value somehow.
Earnings out in November. Sales down 54% to $3.6. million (down from $4.1 in Q2) and they lost $320,000 (essentially breakeven excluding depreciation). They blame the sales decline on currency issues and the economy. Our valuation rose to $.93 ( 11 times the current selling price) as losses were reduced and margins gapped up over 70%.
Their VOIP business continues to struggle and lose money, sales were $112,000 down from $188,000 last quarter. They VOIP loss was $675,000. They also spent $129,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 65%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.00 (Was $1.84, $1.56, $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $1.30, up $.15.
Lotus is up 550% from the stupidly low price at the end of 2008.
Remember our $2 valuation is a true “value” calculation. EPS is not given much weight. But LTUS looks like it will earn $.40 this year, fully diluted. So at even a measly 8 multiple we could see over $3 per share.
Earnings out in November. Sales fell only 13% from last year, but they were up from Q2. They made $5.5 million in profit or $.11 per share. For the nine months they have now earned $.28 per share. Our valuation headed back up again to $2.00 per share. Also selling under 3 times earnings.
Lotus announced in February 2009 that it bought the land use rights in Mongolia for $26 million, subject to contruction approvals etc. If the project is not approved, they get the money back. They paid for this out of internally generated funds. Pretty impressive. 3 years and $58 million to go to build this plant. They are also looking to sell or rent up to 80% of the land to other pharma companies to create a pharma industrial park.
This may work out ok. Unusual legal structure, $58 million construction project all hang over this company.
UP 55%. BUY

Good week for us last week-up 3.6%

Now up 72.4% this year.

IPAS, MEDW, DWCH, MGIC, LTUS.ob and CAW still are our favorites.

Expect tax loss selling and slow trading as we are deep in the holiday vacation season. We have 4 stocks (out of 26) that are down this year-GSL, AEZS, ARIS.ob and CTIG.ob. We expect tax selling pressure on GSL and AEZS.

The DOW was down 1.3%, NASDAQ was up 1% and the S+P 500 was down .4%. For the year the DOW is up 17.7%. NASDAQ is up 40.2% and the S+P 500 is up 22.1%. The Russell 3000 and the Wilshire 5000 are up 24-25% this year.

Last week we went 8 stocks up and 8 down. Since inception we are now 35 stocks up and 15 down (we are trying hard to get to our 80% winner target) .

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%
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)

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).

For the 34 stocks that we closed out since 2006 the average net gain was 27%.

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed down $.05 at $.82.
Following last weeks announcement that Cetrorelix is dead, Sandofi and AEZS canceled their agreement to develope Cetrorelix. On the other hand Kerx (AEZS partner in U.S. on Perifosine) announced positive news last week “The data presented here further supports the planned Phase 3 trial design which has been granted Special Protocol Assessment by the FDA”. This is still a “lottery ticket”.
Earnings out in November. Revenues about $8.5 million and they lost $11.3 million. This of course all means nothing yet. Still has $45 million of cash.
Their pipeline and the related announcements will be what drives this stock.
Just waiting for some more good developement news here.
They stil have $45 million in cash, marketed products and a good pipeline
Down 43% HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Closed down $.43 at $5.47.
Everyone is waitng for the promised FDA resolution.
SPNC is up 110% this year.
SPNC announced FDA approval on a new “lead” management device in December.
Earnings out in October. Pretty good actually. Sales up 7% to $28.8 million (second highest quarterly sales ever). They lost $2.5 million or $.08 per share. Excluding write-offs and litigation costs they made $641k pre-tax.
Got to get past this FDA matter to allow this stock to move up.
A 510(K) filing for in-stent restenosis happened in early Octobber.
Canaccord Adams issued a BUY on SPNC in September. Target price is $8.
Hopefully we are getting close to a settlement with the FDA. Canaccord seems to think so.
SPNC is suffering from the year-ago FDA, ICE raids that apparently eminated from the ex-employee whistle-blower. SPNC has the financial where-with-all to deal with this. Growing nicely in a crappy economy. Just got to wait this one out.
The company has $34 million in cash ($1.04 per share), no debt and is growing about 10% a year.
Down 4%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
Valuation $7.17 (was $7.46, $8.12, $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed down $.05 at $2.36
Earnings out in November. Not bad. Revenue down 14% as you would expect this year, but they maintained profitability and made $.04 a share. Has $.94 a share in cash and our valuation is still $7.17, almost 3 times the current price.
KVO Capital management filed a 13D in September. They own 402,000 shares (just under 7% of the company). Purchases were all in the second half of August from $1.66 to $2.74 per share. Finally, someone else seems to see the value here.
Down 2%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $12.57 (was $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Down $.30 at $6.80.
MEDW announced the acquisition of 2 companies in the home infusion market for $5.5 million in November. These deals were closed last week.
Earnings out in November. Sales were up 9% and EPS more than doubled to $.08 per share. Cash is $2.78 per share and our valuation rose to $12.57 per share. The stock got up to $7.38 before falling back a bit. This should be a $10 stock right now, in our opinion.
Constellation Software filed another 13D/A in late August. Bought 290,000 shares at $5.20 raising their stake to 21.8%. When is the take-over offer??
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 7%. BUY

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $2.17 (was $1.65, $1.89, $5.61, $6.42, $6.84, $7.58, $7.59)
Up $.01 at $.37.
Earnings out in November. Sales were $7.4 million and they lost $1.8 million before a $1.2 million gain from discontinued operations. Cash was about $6.9 million or $.20 per share. Our valuation rose to $2.17 per share. Thet are still saying they think they will get to positive EBITDA in Q4. We’ll see.
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 77%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $.69 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $2.72 (Was $3.09, $2.78, $4.67, $4.66, $6.00, $5.96)
Closed up $.16 at $1.15.
Almost all of this gain came on Friday on good volume-over 200,000 shares.
Earnings out in late October. Not bad at all. While sales were down 23% to $38.8 million, they had a tiny loss of $.01 per share ($.04 loss last year). Adjusted EBITDA was $2.1 million up from $.7 million last year.
Our valuation fell to $2.72 per share.
More interestingly, Mill Road Capital filed a Form 13D/A on 10/29/2009 disclosing that they bought another 742,000 shares at an average price of about $.88 from October 8th to October 28th. This brings their ownership up to 4,178,000 shares or 7.7% of the company (up from 6.4% previously).
Finaciere De Sainte Marine, is a big investor in HPOL. They own over 14% of the company.
Up 66%. HOLD

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.42 (adjusted for $.32 and $.16 dividends) (Was $2.07 before another $10,000 added and $2.15 before double up
Valuation $4.17 (was $4.73, $4.75, $4.12, $4.99, $4.30, $4.09)
Down $.04 at $.97
Down, down, down. Tax selling likely here.
IPASS announced a 80 person layoff in November. This is about 18% of their workforce.
They will take a $4.6 million charge in Q4 and this will supposedly save about $8.6 million a year. We think this is a good move in light of the economy and last quarters loss.
Earning out in November. Hmmmm. Revenues down 12% and they lost $6.1 million. Excluding “dial-up” revenues, revenues were still down 2.3%. $4.8 million of the loss was “one-time”. Apparently they figured out that they should have been charging sales taxes on some or all of their services. It took a state audit to turn this light on. This does not help with their credibility.
They also initiated a share buyback program of $10 million. Any buyback money not used will be dividended to shareholders in April 2010.
At September 30, they had $50 million in cash ($.81 per share) and our valuation fell a bit to $4.17.
Foxhill ownership is 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
Down 24%. BUY

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (6.5% dividend yield)
Valuation $18.89 (Was $17.09, $17.05, $14.51, $17.23, $18.36)
Down $.02 $4.36.
This is definitely a BUY.
CCA announced earnings in October. Revenues were up 8% to $15.3 million and they earned $.23 per share compared to $.16 last year. They also declared their $.07 quarterly dividend. Our valuation moved up slightly to $18.89 per share. Cash was $2.76 per share.
Down 21%. BUY

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $3.78 (was $3.84, $3.80, $3.97, $4.18, $4.15)
Closed up $.07 at $1.98
Earnings out in November. Sales fell 15% to $13.5 million but they were still profitable and made $.03 per share. Our valuation fell $.06 $3.78 per share and cash per share was $1.15.
Formula Systems (NASDAQ-FORTY) holds 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor that at some point will want to sell MGIC.
Up 3%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
NEW Valuation $11.73 (was $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.07 at $3.77
Earnings out last Monday. Sales fell 13% to $6.6 million (but increased from the $6.2 million last quarter) and they lost $600,000 or $.14 per share. Cash increased to $2.71 per share, and our valuation rose to $11.73 (still about 3 times the current share price).
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 1%. HOLD

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.16-(Was $2.59, $3.69 before adding another $10,000 each time)
Valuation NA-Dividend yield play
Closed up $.09 at $1.35
Current dividend yield–suspended
Earnings in November. Good again. Revenues up 57% to $37.6 million. Made $6.2 million or $.12 per share excluding a $8 million “mark-to-market” derivative charge. Everything else seems good.
CGM (their main customer continues to struggle. Trying to restructure their debt, get funding from the French goverment etc. We would think that GSL would be the last “supplier” to CGM to feel any effects of this due to CGM’s equity ownership in GSL.
Big announcements in late August. They finally made a deal with their bank and survived the ordeal. They had the rest of their credit line canceled, were allowed to take delivery of a used ship, no dividend until the loan to ship value is less than 75% and they have to start prepaying their loans. CGM has to stay in as an equity holder until at least November 30, 2010. Meanwhile their business is great. This is definitely going to be long-term though.
Could be the buy of a lifetime if the ecomomy–and ship prices recover.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 35%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$8.57 (Was $8.49, $9.24)
Closed up $.07 at $5.24.
Earnings out in November. Sales fell 32% to $16.6 million. They lost about $2.5 million, excluding a $9.5 million litigation gain. Cash rose to $143 million or $4.34 per share. On a non-GAAP basis they lost about $300,000.
Our valuation rose to $8.57 per share.
We will hang on to this one for a while more.
Up 6%. HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks, especially in this Market.

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 $5.74 (was $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 $.80 up $.02.
Earnings out last week. Sales up 35% to $5.5 million and they made $162,000 or $.02 per share.
Our valuation backed off a bit to $5.74 per share. No one cares.
Wake up management–you have a great little company here worth 5-6X what it is selling for.
Now down 50%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.38 (was $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.60, unchanged.
Earnings out in November. Sales down 28% to $7.8 million, but they still made $127,000 of income. Our valuation fell to $2.38 per share, which is still 4X the current price. Market cap is about $9 million. AVSO sales are over $30 million, with decent margins, profitable and with $.11 in net cash.
Down 24%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.93 (Was $.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 $.095 down $.005. Closed at $.095.
At a $2 million market cap, this is stupidly cheap. Their itellectual property is probably worth 10 times this price. They need to liquify this value somehow.
Earnings out in November. Sales down 54% to $3.6. million (down from $4.1 in Q2) and they lost $320,000 (essentially breakeven excluding depreciation). They blame the sales decline on currency issues and the economy. Our valuation rose to $.93 ( 11 times the current selling price) as losses were reduced and margins gapped up over 70%.
Their VOIP business continues to struggle and lose money, sales were $112,000 down from $188,000 last quarter. They VOIP loss was $675,000. They also spent $129,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 65%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.00 (Was $1.84, $1.56, $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $1.15, up $.10.
Lotus is up 475% from the stupidly low price at the end of 2008.
Remember our $2 valuation is a true “value” calculation. EPS is not given much weight. But LTUS looks like it will earn $.40 this year, fully diluted. So at even a measly 8 multiple we could see over $3 per share.
Earnings out in November. Sales fell only 13% from last year, but they were up from Q2. They made $5.5 million in profit or $.11 per share. For the nine months they have now earned $.28 per share. Our valuation headed back up again to $2.00 per share. Also selling under 3 times earnings.
Lotus announced in February 2009 that it bought the land use rights in Mongolia for $26 million, subject to contruction approvals etc. If the project is not approved, they get the money back. They paid for this out of internally generated funds. Pretty impressive. 3 years and $58 million to go to build this plant. They are also looking to sell or rent up to 80% of the land to other pharma companies to create a pharma industrial park.
This may work out ok. Unusual legal structure, $58 million construction project all hang over this company.
UP 38%. BUY

Back down again this week. Off 5.35%.

Now up 68.8% this year.

IPAS, MEDW, DWCH, MGIC, LTUS.ob and CAW still are our favorites.

Expect tax loss selling and slow trading as we are deep in the holiday vacation season. We have 4 stocks (out of 26) that are down this year-GSL, AEZS, ARIS.ob and CTIG.ob. We expect tax selling pressure on GSL and AEZS.

The DOW was up .8%, NASDAQ was down .2% and the S+P 500 was about even. For the year the DOW is up 19.3%. NASDAQ is up 38.9% and the S+P 500 is up 22.5%. The Russell 3000 and the Wilshire 5000 are up 24-25% this year.

Last week we went 5 stocks up, 10 down and 1 even. Since inception we are now 37stocks up and 13 down (we are trying hard to get to our 80% winner target) .

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%
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)

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).

For the 34 stocks that we closed out since 2006 the average net gain was 27%.

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed down $.25 at $.87.
Well Cetrorelix looks like it is dead. AEZS announced on Monday that it basically did nothing. How Sandofi will react to this remains to be seen. On the other hand Kerx (AEZS partner in U.S. on Perifosine) announced positive news “The data presented here further supports the planned Phase 3 trial design which has been granted Special Protocol Assessment by the FDA”. Nevertheless, the stock got hammered. This is still a “lottery ticket”.
Earnings out in November. Revenues about $8.5 million and they lost $11.3 million. This of course all means nothing yet. Still has $45 million of cash.
Their pipeline and the related announcements will be what drives this stock.
Just waiting for some more good developement news here.
They stil have $45 million in cash, marketed products and a good pipeline
Down 39% HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Closed down $.34 at $5.90.
Slow trading last week–average volume was only 63,000 shares. Seems like everyone is waitng for the promised FDA resoltion.
SPNC is up 126% this year.
SPNC announced FDA approval on a new “lead” management device in December.
Earnings out in October. Pretty good actually. Sales up 7% to $28.8 million (second highest quarterly sales ever). They lost $2.5 million or $.08 per share. Excluding write-offs and litigation costs they made $641k pre-tax.
Got to get past this FDA matter to allow this stock to move up.
A 510(K) filing for in-stent restenosis happened in early Octobber.
Canaccord Adams issued a BUY on SPNC in September. Target price is $8.
Hopefully we are getting close to a settlement with the FDA. Canaccord seems to think so.
SPNC is suffering from the year-ago FDA, ICE raids that apparently eminated from the ex-employee whistle-blower. SPNC has the financial where-with-all to deal with this. Growing nicely in a crappy economy. Just got to wait this one out.
The company has $34 million in cash ($1.04 per share), no debt and is growing about 10% a year.
Up 4%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
Valuation $7.17 (was $7.46, $8.12, $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed down $.08 at $2.41
Earnings out in November. Not bad. Revenue down 14% as you would expect this year, but they maintained profitability and made $.04 a share. Has $.94 a share in cash and our valuation is still $7.17, almost 3 times the current price.
KVO Capital management filed a 13D in September. They own 402,000 shares (just under 7% of the company). Purchases were all in the second half of August from $1.66 to $2.74 per share. Finally, someone else seems to see the value here.
Up less than 1%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $12.57 (was $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up $.34 at $7.10.
MEDW announced the acquisition of 2 companies in the home infusion market for $5.5 million in November. Both should close in December.
Earnings out in November. Sales were up 9% and EPS more than doubled to $.08 per share. Cash is $2.78 per share and our valuation rose to $12.57 per share. The stock got up to $7.38 before falling back a bit. This should be a $10 stock right now, in our opinion.
Constellation Software filed another 13D/A in late August. Bought 290,000 shares at $5.20 raising their stake to 21.8%. When is the take-over offer??
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 12%. BUY

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $2.17 (was $1.65, $1.89, $5.61, $6.42, $6.84, $7.58, $7.59)
Down $.04 at $.36.
Earnings out in November. Sales were $7.4 million and they lost $1.8 million before a $1.2 million gain from discontinued operations. Cash was about $6.9 million or $.20 per share. Our valuation rose to $2.17 per share. Thet are still saying they think they will get to positive EBITDA in Q4. We’ll see.
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 78%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $.69 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $2.72 (Was $3.09, $2.78, $4.67, $4.66, $6.00, $5.96)
Closed down $.04 at $.99.
Earnings out in late October. Not bad at all. While sales were down 23% to $38.8 million, they had a tiny loss of $.01 per share ($.04 loss last year). Adjusted EBITDA was $2.1 million up from $.7 million last year.
Our valuation fell to $2.72 per share.
More interestingly, Mill Road Capital filed a Form 13D/A on 10/29/2009 disclosing that they bought another 742,000 shares at an average price of about $.88 from October 8th to October 28th. This brings their ownership up to 4,178,000 shares or 7.7% of the company (up from 6.4% previously).
Finaciere De Sainte Marine, is a big investor in HPOL. They own over 14% of the company.
Up 43%. HOLD

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.42 (adjusted for $.32 and $.16 dividends) (Was $2.07 before another $10,000 added and $2.15 before double up
Valuation $4.17 (was $4.73, $4.75, $4.12, $4.99, $4.30, $4.09)
Down $.05 at $1.01
IPASS announced a 80 person layoff in November. This is about 18% of their workforce.
They will take a $4.6 million charge in Q4 and this will supposedly save about $8.6 million a year. We think this is a good move in light of the economy and last quarters loss.
Earning out in November. Hmmmm. Revenues down 12% and they lost $6.1 million. Excluding “dial-up” revenues, revenues were still down 2.3%. $4.8 million of the loss was “one-time”. Apparently they figured out that they should have been charging sales taxes on some or all of their services. It took a state audit to turn this light on. This does not help with their credibility.
They also initiated a share buyback program of $10 million. Any buyback money not used will be dividended to shareholders in April 2010.
At September 30, they had $50 million in cash ($.81 per share) and our valuation fell a bit to $4.17.
Foxhill ownership is 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
Down 22%. BUY

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (6.5% dividend yield)
Valuation $18.89 (Was $17.09, $17.05, $14.51, $17.23, $18.36)
Up $.07 $4.38.
This is definitely a BUY.
CCA announced earnings in October. Revenues were up 8% to $15.3 million and they earned $.23 per share compared to $.16 last year. They also declared their $.07 quarterly dividend. Our valuation moved up slightly to $18.89 per share. Cash was $2.76 per share.
Down 21%. BUY

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $3.78 (was $3.84, $3.80, $3.97, $4.18, $4.15)
Closed up $.04 at $1.91
Earnings out in November. Sales fell 15% to $13.5 million but they were still profitable and made $.03 per share. Our valuation fell $.06 $3.78 per share and cash per share was $1.15.
Formula Systems (NASDAQ-FORTY) holds 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor that at some point will want to sell MGIC.
Down less than 1%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.47 (was $11.16, $9.53, $13.30, $13.03)
Closed down $.02 at $3.70
Next earnings out Monday, December 14th after the close.
Earnings out in late August. Sales fell 18% to $6.2 million and they essentially broke-even. Cash was $2.56 per share, and our valuation rose to $11.47 (still about 3 times the current share price).
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 3%. HOLD

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.16-(Was $2.59, $3.69 before adding another $10,000 each time)
Valuation NA-Dividend yield play
Closed down $.07 at $1.26
Current dividend yield–suspended
Earnings in November. Good again. Revenues up 57% to $37.6 million. Made $6.2 million or $.12 per share excluding a $8 million “mark-to-market” derivative charge. Everything else seems good.
CGM (their main customer continues to struggle. Trying to restructure their debt, get funding from the French goverment etc. We would think that GSL would be the last “supplier” to CGM to feel any effects of this due to CGM’s equity ownership in GSL.
Big announcements in late August. They finally made a deal with their bank and survived the ordeal. They had the rest of their credit line canceled, were allowed to take delivery of a used ship, no dividend until the loan to ship value is less than 75% and they have to start prepaying their loans. CGM has to stay in as an equity holder until at least November 30, 2010. Meanwhile their business is great. This is definitely going to be long-term though.
Could be the buy of a lifetime if the ecomomy–and ship prices recover.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 43%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
Valuation-$8.57 (Was $8.49, $9.24)
Closed up $.10 at $5.17.
Earnings out in November. Sales fell 32% to $16.6 million. They lost about $2.5 million, excluding a $9.5 million litigation gain. Cash rose to $143 million or $4.34 per share. On a non-GAAP basis they lost about $300,000.
Our valuation rose to $8.57 per share.
We will hang on to this one for a while more.
Up 5%. HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks, especially in this Market.

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 $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 $.78 down $.12.
Next earnings out Tuesday, December 15th before the market open.
Earnings out in late October. Sales up 24% to $5.3 million and they lost $114,000 or $.02 per share.
Our valuation soared to $5.96 per share. No one cares.
Wake up management–you have a great little company here worth 5-6X what it is selling for.
Now down 52%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.38 (was $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.60, unchanged.
Earnings out in November. Sales down 28% to $7.8 million, but they still made $127,000 of income. Our valuation fell to $2.38 per share, which is still 4X the current price. Market cap is about $9 million. AVSO sales are over $30 million, with decent margins, profitable and with $.11 in net cash.
Down 24%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.93 (Was $.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 $.10 up $.01. Closed at $.08.
At a $2 million market cap, this is stupidly cheap. Their itellectual property is probably worth 10 times this price. They need to liquify this value somehow.
Earnings out in November. Sales down 54% to $3.6. million (down from $4.1 in Q2) and they lost $320,000 (essentially breakeven excluding depreciation). They blame the sales decline on currency issues and the economy. Our valuation rose to $.93 ( 11 times the current selling price) as losses were reduced and margins gapped up over 70%.
Their VOIP business continues to struggle and lose money, sales were $112,000 down from $188,000 last quarter. They VOIP loss was $675,000. They also spent $129,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 63%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.00 (Was $1.84, $1.56, $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $1.05, down $.05.
Lotus is up 425% from the stupidly low price at the end of 2008.
Remember our $2 valuation is a true “value” calculation. EPS is not given much weight. But LTUS looks like it will earn $.40 this year, fully diluted. So at even a measly 8 multiple we could see over $3 per share.
Earnings out in November. Sales fell only 13% from last year, but they were up from Q2. They made $5.5 million in profit or $.11 per share. For the nine months they have now earned $.28 per share. Our valuation headed back up again to $2.00 per share. Also selling under 3 times earnings.
Lotus announced in February 2009 that it bought the land use rights in Mongolia for $26 million, subject to contruction approvals etc. If the project is not approved, they get the money back. They paid for this out of internally generated funds. Pretty impressive. 3 years and $58 million to go to build this plant. They are also looking to sell or rent up to 80% of the land to other pharma companies to create a pharma industrial park.
This may work out ok. Unusual legal structure, $58 million construction project all hang over this company.
UP 26%. BUY

We recouped our losses for the last 2 weeks–and then some. Our portfolio was up 7.1% last week.

Now up 74.2% this year.

IPAS, MEDW, DWCH, MGIC, LTUS.ob and CAW still are our favorites

The DOW was up .8%, NASDAQ was up 2.6% and the S+P 500 was up 1.3%. For the year the DOW is up 18.4%. NASDAQ is up 39.1% and the S+P 500 is up 22.4%. The Russell 3000 and the Wilshire 5000 are up 24-25% this year.

Last week we went 9 stocks up, 4 down and 3 even. Since inception we are now 36stocks up and 14 down (we are trying hard to get to our 80% winner target) .

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%
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)

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).

For the 34 stocks that we closed out since 2006 the average net gain was 27%.

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed up $.11 at $1.12.
AEZS announced that the FDA had “fast tracked” one of their compounds that they license partially to Kerx. Well as least we got a 10% gain out that. It should have been 30-40% in our opinion.
Earnings out in November. Revenues about $8.5 million and they lost $11.3 million. This of course all means nothing yet. Still has $45 million of cash.
Their pipeline and the related announcements will be what drives this stock.
Just waiting for some more good developement news here.
They stil have $45 million in cash, marketed products and a good pipeline
Down 21% HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Closed up $.69 at $6.24.
SPNC announced FDA approval on a new “lead” management device. Recouped last weeks lost and a little more.
Earnings out in October. Pretty good actually. Sales up 7% to $28.8 million (second highest quarterly sales ever). They lost $2.5 million or $.08 per share. Excluding write-offs and litigation costs they made $641k pre-tax.
Got to get past this FDA matter to allow this stock to move up.
A 510(K) filing for in-stent restenosis happened in early Octobber.
Canaccord Adams issued a BUY on SPNC in September. Target price is $8.
Hopefully we are getting close to a settlement with the FDA. Canaccord seems to think so.
SPNC is suffering from the year-ago FDA, ICE raids that apparently eminated from the ex-employee whistle-blower. SPNC has the financial where-with-all to deal with this. Growing nicely in a crappy economy. Just got to wait this one out.
The company has $34 million in cash ($1.04 per share), no debt and is growing about 10% a year.
Up 10%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
Valuation $7.17 (was $7.46, $8.12, $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed up $.39 at $2.49.
Earnings out in November. Not bad. Revenue down 14% as you would expect this year, but they maintained profitability and made $.04 a share. Has $.94 a share in cash and our valuation is still $7.17, almost 3 times the current price.
KVO Capital management filed a 13D in September. They own 402,000 shares (just under 7% of the company). Purchases were all in the second half of August from $1.66 to $2.74 per share. Finally, someone else seems to see the value here.
Up 4%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $12.57 (was $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Down $.36 at $6.76.
MEDW announced the acquisition of 2 companies in the home infusion market for $5.5 million in November. Both should close in December.
Earnings out in November. Sales were up 9% and EPS more than doubled to $.08 per share. Cash is $2.78 per share and our valuation rose to $12.57 per share. The stock got up to $7.38 before falling back a bit. This should be a $10 stock right now, in our opinion.
Constellation Software filed another 13D/A in late August. Bought 290,000 shares at $5.20 raising their stake to 21.8%. When is the take-over offer??
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 7%. BUY

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $2.17 (was $1.65, $1.89, $5.61, $6.42, $6.84, $7.58, $7.59)
Up $.03 at $.40.
Earnings out in November. Sales were $7.4 million and they lost $1.8 million before a $1.2 million gain from discontinued operations. Cash was about $6.9 million or $.20 per share. Our valuation rose to $2.17 per share. Thet are still saying they think they will get to positive EBITDA in Q4. We’ll see.
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 75%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $.69 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $2.72 (Was $3.09, $2.78, $4.67, $4.66, $6.00, $5.96)
Unchanged at $1.03.
Earnings out in late October. Not bad at all. While sales were down 23% to $38.8 million, they had a tiny loss of $.01 per share ($.04 loss last year). Adjusted EBITDA was $2.1 million up from $.7 million last year.
Our valuation fell to $2.72 per share.
More interestingly, Mill Road Capital filed a Form 13D/A on 10/29/2009 disclosing that they bought another 742,000 shares at an average price of about $.88 from October 8th to October 28th. This brings their ownership up to 4,178,000 shares or 7.7% of the company (up from 6.4% previously).
Finaciere De Sainte Marine, is a big investor in HPOL. They own over 14% of the company.
Up 49%. HOLD

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.42 (adjusted for $.32 and $.16 dividends) (Was $2.07 before another $10,000 added and $2.15 before double up
Valuation $4.17 (was $4.73, $4.75, $4.12, $4.99, $4.30, $4.09)
Up $.04 at $1.06
IPAS went ex-dividend last week ($.16).
IPASS announced a 80 person layoff in November. This is about 18% of their workforce.
They will take a $4.6 million charge in Q4 and this will supposedly save about $8.6 million a year. We think this is a good move in light of the economy and last quarters loss.
Earning out in November. Hmmmm. Revenues down 12% and they lost $6.1 million. Excluding “dial-up” revenues, revenues were still down 2.3%. $4.8 million of the loss was “one-time”. Apparently they figured out that they should have been charging sales taxes on some or all of their services. It took a state audit to turn this light on. This does not help with their credibility.
They also announced another special dividend of $.16 per share ($10 million) payable December 18th and initiated a share buyback program of $10 million. Any buyback money not used will be dividended to shareholders in April 2010.
At September 30, they had $50 million in cash ($.81 per share) and our valuation fell a bit to $4.17 ($4.49 adding back the $.32 dividend paid).
Foxhill ownership is 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
Down 19%. BUY

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (6.5% dividend yield)
Valuation $18.89 (Was $17.09, $17.05, $14.51, $17.23, $18.36)
Up $.12 $4.31.
This is definitely a BUY.
CCA announced earnings in October. Revenues were up 8% to $15.3 million and they earned $.23 per share compared to $.16 last year. They also declared their $.07 quarterly dividend. Our valuation moved up slightly to $18.89 per share. Cash was $2.76 per share.
Down 22%. BUY

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $3.78 (was $3.84, $3.80, $3.97, $4.18, $4.15)
Closed down $.17 at $1.87
Earnings out in November. Sales fell 15% to $13.5 million but they were still profitable and made $.03 per share. Our valuation fell $.06 $3.78 per share and cash per share was $1.15.
Formula Systems (NASDAQ-FORTY) holds 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor that at some point will want to sell MGIC.
Down 3%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.47 (was $11.16, $9.53, $13.30, $13.03)
Closed up $.45 at $3.72
Next earnings out Monday, December 14th after the close.
Earnings out in late August. Sales fell 18% to $6.2 million and they essentially broke-even. Cash was $2.56 per share, and our valuation rose to $11.47 (still about 3 times the current share price).
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 3%. HOLD

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.16-(Was $2.59, $3.69 before adding another $10,000 each time)
Valuation NA-Dividend yield play
Closed unchanged at $1.33
Current dividend yield–suspended
Earnings in November. Good again. Revenues up 57% to $37.6 million. Made $6.2 million or $.12 per share excluding a $8 million “mark-to-market” derivative charge. Everything else seems good.
CGM (their main customer continues to struggle. Trying to restructure their debt, get funding from the French goverment etc. We would think that GSL would be the last “supplier” to CGM to feel any effects of this due to CGM’s equity ownership in GSL.
Big announcements in late August. They finally made a deal with their bank and survived the ordeal. They had the rest of their credit line canceled, were allowed to take delivery of a used ship, no dividend until the loan to ship value is less than 75% and they have to start prepaying their loans. CGM has to stay in as an equity holder until at least November 30, 2010. Meanwhile their business is great. This is definitely going to be long-term though.
Could be the buy of a lifetime if the ecomomy–and ship prices recover.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 39%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
NEW Valuation-$8.57 (Was $8.49, $9.24)
Closed up $.05 at $5.07.
Earnings out in November. Sales fell 32% to $16.6 million. They lost about $2.5 million, excluding a $9.5 million litigation gain. Cash rose to $143 million or $4.34 per share. On a non-GAAP basis they lost about $300,000.
Our valuation rose to $8.57 per share.
We will hang on to this one for a while more.
Up 3%. HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks, especially in this Market.

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 $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 $.90 down $.05.
Next earnings out Tuesday, December 15th before the market open.
Earnings out in late October. Sales up 24% to $5.3 million and they lost $114,000 or $.02 per share.
Our valuation soared to $5.96 per share. No one cares.
Wake up management–you have a great little company here worth 5-6X what it is selling for.
Now down 44%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.38 (was $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.60, unchanged.
Earnings out in November. Sales down 28% to $7.8 million, but they still made $127,000 of income. Our valuation fell to $2.38 per share, which is still 4X the current price. Market cap is about $9 million. AVSO sales are over $30 million, with decent margins, profitable and with $.11 in net cash.
Down 24%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.93 (Was $.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 $.09 unchanged. Closed at $.09.
At a $2 million market cap, this is stupidly cheap. Their itellectual property is probably worth 10 times this price. They need to liquify this value somehow.
Earnings out in November. Sales down 54% to $3.6. million (down from $4.1 in Q2) and they lost $320,000 (essentially breakeven excluding depreciation). They blame the sales decline on currency issues and the economy. Our valuation rose to $.93 ( 11 times the current selling price) as losses were reduced and margins gapped up over 70%.
Their VOIP business continues to struggle and lose money, sales were $112,000 down from $188,000 last quarter. They VOIP loss was $675,000. They also spent $129,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 63%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.00 (Was $1.84, $1.56, $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $1.10, up $.18.
Finally some action here. Favorable mention in “TheStreet.com” seemed to spark some high volume (3.7 million shares) interest in LTUS. Lots of sellers though. Remember this stock under $.20 earlier this year. So people are booking their 5-6X gains too. Remember our $2 valuation is a true “value” calculation. EPS is not given much weight. But LTUS looks like it will earn $.40 this year, fully diluted. So at even a measly 8 multiple we could see over $3 per share.
Earnings out in November. Sales fell only 13% from last year, but they were up from Q2. They made $5.5 million in profit or $.11 per share. For the nine months they have now earned $.28 per share. Our valuation headed back up again to $2.00 per share. Also selling under 3 times earnings.
Lotus announced in February 2009 that it bought the land use rights in Mongolia for $26 million, subject to contruction approvals etc. If the project is not approved, they get the money back. They paid for this out of internally generated funds. Pretty impressive. 3 years and $58 million to go to build this plant. They are also looking to sell or rent up to 80% of the land to other pharma companies to create a pharma industrial park.
This may work out ok. Unusual legal structure, $58 million construction project all hang over this company.
UP 32%. BUY

Slow trading week, and a slow week for our stocks. Down 3.1% last week on no news.

Now up 67.1% this year.

IPAS, MEDW, DWCH, MGIC, LTUS.ob and CAW still are our favorites

The DOW was down .1%, NASDAQ was down .4% and the S+P 500 was flat. For the year the DOW is up 17.5%. NASDAQ is up 35.6% and the S+P 500 is up 20.8%. The Russell 3000 and the Wilshire 5000 are up 22-23% this year.

Last week we went 6 stocks up, 8 down and 2 even. Since inception we are now 35stocks up and 15 down (we are trying hard to get to our 80% winner target) .

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%
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)

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).

For the 34 stocks that we closed out since 2006 the average net gain was 27%.

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed up $.02 at $1.01.
AEZS announced positve results on one of their Phase II drugs. Stock barely moved. We don’t get it.
Earnings out in November. Revenues about $8.5 million and they lost $11.3 million. This of course all means nothing yet. Still has $45 million of cash.
Their pipeline and the related announcements will be what drives this stock.
Just waiting for some more good developement news here.
They stil have $45 million in cash, marketed products and a good pipeline
Down 29% HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Closed down $.46 at $5.55.
Earnings out in October. Pretty good actually. Sales up 7% to $28.8 million (second highest quarterly sales ever). They lost $2.5 million or $.08 per share. Excluding write-offs and litigation costs they made $641k pre-tax.
Got to get past this FDA matter to allow this stock to move up.
A 510(K) filing for in-stent restenosis happened in early Octobber.
Canaccord Adams issued a BUY on SPNC in September. Target price is $8.
Hopefully we are getting close to a settlement with the FDA. Canaccord seems to think so.
SPNC is suffering from the year-ago FDA, ICE raids that apparently eminated from the ex-employee whistle-blower. SPNC has the financial where-with-all to deal with this. Growing nicely in a crappy economy. Just got to wait this one out.
The company has $34 million in cash ($1.04 per share), no debt and is growing about 10% a year.
Down 2%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
Valuation $7.17 (was $7.46, $8.12, $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed down $.09 at $2.10.
Earnings out in November. Not bad. Revenue down 14% as you would expect this year, but they maintained profitability and made $.04 a share. Has $.94 a share in cash and our valuation is still $7.17, more than 3 times the current price.
KVO Capital management filed a 13D in September. They own 402,000 shares (just under 7% of the company). Purchases were all in the second half of August from $1.66 to $2.74 per share. Finally, someone else seems to see the value here.
Down 13%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $12.57 (was $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up $.11 at $7.11.
MEDW announced the acquisition of 2 companies in the home infusion market for $5.5 million last week. Both should close in December.
Earnings out in November. Sales were up 9% and EPS more than doubled to $.08 per share. Cash is $2.78 per share and our valuation rose to $12.57 per share. The stock got up to $7.38 before falling back a bit. This should be a $10 stock right now, in our opinion.
Constellation Software filed another 13D/A in late August. Bought 290,000 shares at $5.20 raising their stake to 21.8%. When is the take-over offer??
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 12%. BUY

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $2.17 (was $1.65, $1.89, $5.61, $6.42, $6.84, $7.58, $7.59)
Up $.01 at $.37.
Earnings out in November. Sales were $7.4 million and they lost $1.8 million before a $1.2 million gain from discontinued operations. Cash was about $6.9 million or $.20 per share. Our valuation rose to $2.17 per share. Thet are still saying they think they will get to positive EBITDA in Q4. We’ll see.
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 77%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $.69 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $2.72 (Was $3.09, $2.78, $4.67, $4.66, $6.00, $5.96)
Down $.06 at $1.03.
Earnings out in late October. Not bad at all. While sales were down 23% to $38.8 million, they had a tiny loss of $.01 per share ($.04 loss last year). Adjusted EBITDA was $2.1 million up from $.7 million last year.
Our valuation fell to $2.72 per share.
More interestingly, Mill Road Capital filed a Form 13D/A on 10/29/2009 disclosing that they bought another 742,000 shares at an average price of about $.88 from October 8th to October 28th. This brings their ownership up to 4,178,000 shares or 7.7% of the company (up from 6.4% previously).
Finaciere De Sainte Marine, is a big investor in HPOL. They own over 14% of the company.
Up 49%. HOLD

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.58 (adjusted for $.32 dividend) (Was $2.07 before another $10,000 added and $2.15 before double up
Valuation $4.17 (was $4.73, $4.75, $4.12, $4.99, $4.30, $4.09)
Down $.04 at $1.18
IPASS announced a 80 person layoff in November. This is about 18% of their workforce.
They will take a $4.6 million charge in Q4 and this will supposedly save about $8.6 million a year. We think this is a good move in light of the economy and last quarters loss.
Earning out in November. Hmmmm. Revenues down 12% and they lost $6.1 million. Excluding “dial-up” revenues, revenues were still down 2.3%. $4.8 million of the loss was “one-time”. Apparently they figured out that they should have been charging sales taxes on some or all of their services. It took a state audit to turn this light on. This does not help with their credibility.
They also announced another special dividend of $.16 per share ($10 million) payable December 18th and initiated a share buyback program of $10 million. Any buyback money not used will be dividended to shareholders in April 2010.
At September 30, they had $50 million in cash ($.81 per share) and our valuation fell a bit to $4.17 ($4.49 adding back the $.32 dividend paid).
Foxhill ownership is 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
Down 21%. BUY

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (7% dividend yield)
Valuation $18.89 (Was $17.09, $17.05, $14.51, $17.23, $18.36)
Unchanged $4.19.
This is definitely a BUY.
CCA announced earnings in October. Revenues were up 8% to $15.3 million and they earned $.23 per share compared to $.16 last year. They also declared their $.07 quarterly dividend. Our valuation moved up slightly to $18.89 per share. Cash was $2.76 per share.
Down 24%. BUY

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $3.78 (was $3.84, $3.80, $3.97, $4.18, $4.15)
Closed unchanged at $2.04
Earnings out in November. Sales fell 15% to $13.5 million but they were still profitable and made $.03 per share. Our valuation fell $.06 $3.78 per share and cash per share was $1.15.
Formula Systems (NASDAQ-FORTY) holds 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor that at some point will want to sell MGIC.
Up 6%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.47 (was $11.16, $9.53, $13.30, $13.03)
Closed down $.33 at $3.27
Earnings out in late August. Sales fell 18% to $6.2 million and they essentially broke-even. Cash was $2.56 per share, and our valuation rose to $11.47 (still about 3 times the current share price).
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 15%. HOLD

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.16-(Was $2.59, $3.69 before adding another $10,000 each time)
Valuation NA-Dividend yield play
Closed down $.30 at $1.33
Current dividend yield–suspended
Earnings in November. Good again. Revenues up 57% to $37.6 million. Made $6.2 million or $.12 per share excluding a $8 million “mark-to-market” derivative charge. Everything else seems good.
CGM (their main customer continues to struggle. Trying to restructure their debt, get funding from the French goverment etc. We would think that GSL would be the last “supplier” to CGM to feel any effects of this due to CGM’s equity ownership in GSL.
Big announcements in late August. They finally made a deal with their bank and survived the ordeal. They had the rest of their credit line canceled, were allowed to take delivery of a used ship, no dividend until the loan to ship value is less than 75% and they have to start prepaying their loans. CGM has to stay in as an equity holder until at least November 30, 2010. Meanwhile their business is great. This is definitely going to be long-term though.
Could be the buy of a lifetime if the ecomomy–and ship prices recover.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 39%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
NEW Valuation-$8.57 (Was $8.49, $9.24)
Closed down $.19 at $5.02.
Earnings out in November. Sales fell 32% to $16.6 million. They lost about $2.5 million, excluding a $9.5 million litigation gain. Cash rose to $143 million or $4.34 per share. On a non-GAAP basis they lost about $300,000.
Our valuation rose to $8.57 per share.
We will hang on to this one for a while more.
Up 2%. HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks, especially in this Market.

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 $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 $.95 up $.14.
Earnings out in late October. Sales up 24% to $5.3 million and they lost $114,000 or $.02 per share.
Our valuation soared to $5.96 per share. No one cares.
Wake up management–you have a great little company here worth 5-6X what it is selling for.
Now down 41%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.38 (was $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.60, up $.05.
Earnings out in November. Sales down 28% to $7.8 million, but they still made $127,000 of income. Our valuation fell to $2.38 per share, which is still 4X the current price. Market cap is about $9 million. AVSO sales are over $30 million, with decent margins, profitable and with $.11 in net cash.
Down 24%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.93 (Was $.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 $.09 up $.01. Closed at $.07.
At a $2 million market cap, this is stupidly cheap. Their itellectual property is probably worth 10 times this price. They need to liquify this value somehow.
Earnings out in November. Sales down 54% to $3.6. million (down from $4.1 in Q2) and they lost $320,000 (essentially breakeven excluding depreciation). They blame the sales decline on currency issues and the economy. Our valuation rose to $.93 ( 11 times the current selling price) as losses were reduced and margins gapped up over 70%.
Their VOIP business continues to struggle and lose money, sales were $112,000 down from $188,000 last quarter. They VOIP loss was $675,000. They also spent $129,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 63%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.00 (Was $1.84, $1.56, $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $.92, down $.04.
Earnings out in November. Sales fell only 13% from last year, but they were up from Q2. They made $5.5 million in profit or $.11 per share. For the nine months they have now earned $.28 per share. Our valuation headed back up again to $2.00 per share. Also selling under 3 times earnings.
Lotus announced in February 2009 that it bought the land use rights in Mongolia for $26 million, subject to contruction approvals etc. If the project is not approved, they get the money back. They paid for this out of internally generated funds. Pretty impressive. 3 years and $58 million to go to build this plant. They are also looking to sell or rent up to 80% of the land to other pharma companies to create a pharma industrial park.
This may work out ok. Unusual legal structure, $58 million construction project all hang over this company.
UP 10%. BUY

Slightly down week (.87%) for us, and not too exciting. DWCH and AVSO.ob earnings last week.

Now up 70.2% this year.

IPAS, MEDW, DWCH, MGIC, LTUS.ob and CAW still are our favorites

The DOW was up .5%, NASDAQ was down 1% and the S+P 500 was down .2%. For the year the DOW is up 17.6%. NASDAQ is up 36.1% and the S+P 500 is up 20.8%. The Russell 3000 and the Wilshire 5000 are up 22-23% this year.

Last week we went 5 stocks up, 9 down and 2 even. Since inception we are now 36stocks up and 14 down (we are trying hard to get to our 80% winner target) .

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%
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)

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).

For the 34 stocks that we closed out since 2006 the average net gain was 27%.

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed down $.04 at $.99.
Earnings out in November. Revenues about $8.5 million and they lost $11.3 million. This of course all means nothing yet. Still has $45 million of cash.
Their pipeline and the related announcements will be what drives this stock.
Just waiting for some more good developement news here.
They stil have $45 million in cash, marketed products and a good pipeline
Down 30% HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Closed up $.72 at $6.01.
Earnings out in October. Pretty good actually. Sales up 7% to $28.8 million (second highest quarterly sales ever). They lost $2.5 million or $.08 per share. Excluding write-offs and litigation costs they made $641k pre-tax.
Got to get past this FDA matter to allow this stock to move up.
A 510(K) filing for in-stent restenosis happened in early Octobber.
Canaccord Adams issued a BUY on SPNC in September. Target price is $8.
Hopefully we are getting close to a settlement with the FDA. Canaccord seems to think so.
SPNC is suffering from the year-ago FDA, ICE raids that apparently eminated from the ex-employee whistle-blower. SPNC has the financial where-with-all to deal with this. Growing nicely in a crappy economy. Just got to wait this one out.
The company has $34 million in cash ($1.04 per share), no debt and is growing about 10% a year.
Up 6%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
NEW Valuation $7.17 (was $7.46, $8.12, $8.07, $8.12, $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed down $.31 at $2.19.
Earnings out last week. Not bad. Revenue down 14% as you would expect this year, but they maintained profitability and made $.04 a share. Has $.94 a share in cash and our valuation is still $7.17, more than 3 times the current price.
KVO Capital management filed a 13D in September. They own 402,000 shares (just under 7% of the company). Purchases were all in the second half of August from $1.66 to $2.74 per share. Finally, someone else seems to see the value here.
Down 9%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $12.57 (was $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Down $.38 at $7.00.
Earnings out in November. Sales were up 9% and EPS more than doubled to $.08 per share. Cash is $2.78 per share and our valuation rose to $12.57 per share. The stock got up to $7.38 before falling back a bit. This should be a $10 stock right now, in our opinion.
Constellation Software filed another 13D/A in late August. Bought 290,000 shares at $5.20 raising their stake to 21.8%. When is the take-over offer??
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 11%. BUY

Vertro. (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $2.17 (was $1.65, $1.89, $5.61, $6.42, $6.84, $7.58, $7.59)
Up $.01 at $.36.
Earnings out in November. Sales were $7.4 million and they lost $1.8 million before a $1.2 million gain from discontinued operations. Cash was about $6.9 million or $.20 per share. Our valuation rose to $2.17 per share. Thet are still saying they think they will get to positive EBITDA in Q4. We’ll see.
We have no hope that we will ever make money on this one, nor are we sure they will survive at all. This one is teetering on the sell list–but not yet.
Down 78%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $.69 (was $1.79, $1.82 before adding $10,000 each time, $2.02 before $10,000 added and $2.15 before double up),
Valuation $2.72 (Was $3.09, $2.78, $4.67, $4.66, $6.00, $5.96)
Unchanged at $1.09.
Earnings out in late October. Not bad at all. While sales were down 23% to $38.8 million, they had a tiny loss of $.01 per share ($.04 loss last year). Adjusted EBITDA was $2.1 million up from $.7 million last year.
Our valuation fell to $2.72 per share.
More interestingly, Mill Road Capital filed a Form 13D/A on 10/29/2009 disclosing that they bought another 742,000 shares at an average price of about $.88 from October 8th to October 28th. This brings their ownership up to 4,178,000 shares or 7.7% of the company (up from 6.4% previously).
Finaciere De Sainte Marine, is a big investor in HPOL. They own over 14% of the company.
Up 58%. HOLD

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.58 (adjusted for $.32 dividend) (Was $2.07 before another $10,000 added and $2.15 before double up
Valuation $4.17 (was $4.73, $4.75, $4.12, $4.99, $4.30, $4.09)
Up $.05 at $1.22
IPASS announced a 80 person layoff last week. This is about 18% of their workforce.
They will take a $4.6 million charge in Q4 and this will supposedly save about $8.6 million a year. We think this is a good move in light of the economy and last quarters loss.
Earning out in November. Hmmmm. Revenues down 12% and they lost $6.1 million. Excluding “dial-up” revenues, revenues were still down 2.3%. $4.8 million of the loss was “one-time”. Apparently they figured out that they should have been charging sales taxes on some or all of their services. It took a state audit to turn this light on. This does not help with their credibility.
They also announced another special dividend of $.16 per share ($10 million) payable December 18th and initiated a share buyback program of $10 million. Any buyback money not used will be dividended to shareholders in April 2010.
At September 30, they had $50 million in cash ($.81 per share) and our valuation fell a bit to $4.17 ($4.49 adding back the $.32 dividend paid).
Foxhill ownership is 6.7%. Shamrock owns 9.8%, Royce 5.9% and Federated, 5.5%.
Down 19%. BUY

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (7% dividend yield)
Valuation $18.89 (Was $17.09, $17.05, $14.51, $17.23, $18.36)
Down $.06 to $4.19.
This is definitely a BUY.
CCA announced earnings in October. Revenues were up 8% to $15.3 million and they earned $.23 per share compared to $.16 last year. They also declared their $.07 quarterly dividend. Our valuation moved up slightly to $18.89 per share. Cash was $2.76 per share.
Down 24%. BUY

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $3.78 (was $3.84, $3.80, $3.97, $4.18, $4.15)
Closed down $.05 at $2.04
Earnings out in November. Sales fell 15% to $13.5 million but they were still profitable and made $.03 per share. Our valuation fell $.06 $3.78 per share and cash per share was $1.15.
Formula Systems (NASDAQ-FORTY) holds 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor that at some point will want to sell MGIC.
Up 6%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $11.47 (was $11.16, $9.53, $13.30, $13.03)
Closed down $.24 at $3.60
Earnings out in late August. Sales fell 18% to $6.2 million and they essentially broke-even. Cash was $2.56 per share, and our valuation rose to $11.47 (still about 3 times the current share price).
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 6%. HOLD

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price $2.16-(Was $2.59, $3.69 before adding another $10,000 each time)
Valuation NA-Dividend yield play
Closed up $.39 at $1.53
Current dividend yield–suspended
Earnings in November. Good again. Revenues up 57% to $37.6 million. Made $6.2 million or $.12 per share excluding a $8 million “mark-to-market” derivative charge. Everything else seems good.
CGM (their main customer continues to struggle. Trying to restructure their debt, get funding from the French goverment etc. We would think that GSL would be the last “supplier” to CGM to feel any effects of this due to CGM’s equity ownership in GSL.
Big announcements in late August. They finally made a deal with their bank and survived the ordeal. They had the rest of their credit line canceled, were allowed to take delivery of a used ship, no dividend until the loan to ship value is less than 75% and they have to start prepaying their loans. CGM has to stay in as an equity holder until at least November 30, 2010. Meanwhile their business is great. This is definitely going to be long-term though.
Could be the buy of a lifetime if the ecomomy–and ship prices recover.
Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012.
Down 30%. HOLD

DIVX Inc. (DIVX-Recommended 5/26/2009)
Buy Price-$4.94
NEW Valuation-$8.57 (Was $8.49, $9.24)
Closed down $.05 at $5.21.
Earnings out in November. Sales fell 32% to $16.6 million. They lost about $2.5 million, excluding a $9.5 million litigation gain. Cash rose to $143 million or $4.34 per share. On a non-GAAP basis they lost about $300,000.
Our valuation rose to $8.57 per share.
We will hang on to this one for a while more.
Up 6%. HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks, especially in this Market.

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 $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 $.81 down $.24.
Earnings out in late October. Sales up 24% to $5.3 million and they lost $114,000 or $.02 per share.
Our valuation soared to $5.96 per share. No one cares.
Wake up management–you have a great little company here worth 5-6X what it is selling for.
Now down 50%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
NEW Valuation $2.38 (was $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.55, unchanged.
Earnings out last week. Sales down 28% to $7.8 million, but they still made $127,000 of income. Our valuation fell to $2.38 per share, which is still 4X the current price. Market cap is about $9 million. AVSO sales are over $30 million, with decent margins, profitable and with $.11 in net cash.
Down 31%. HOLD.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $.93 (Was $.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 $.08 down $.03. Closed at $.065.
At a $2 million market cap, this is stupidly cheap. Their itellectual property is probably worth 10 times this price. They need to liquify this value somehow.
Earnings out in November. Sales down 54% to $3.6. million (down from $4.1 in Q2) and they lost $320,000 (essentially breakeven excluding depreciation). They blame the sales decline on currency issues and the economy. Our valuation rose to $.93 ( 11 times the current selling price) as losses were reduced and margins gapped up over 70%.
Their VOIP business continues to struggle and lose money, sales were $112,000 down from $188,000 last quarter. They VOIP loss was $675,000. They also spent $129,000 on patent enforcement, which may result in some future gains for the company but there is no way to tell for sure.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 70%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
NEW Valuation-$2.00 (Was $1.84, $1.56, $1.99, $2.22, $1.61, $1.06, $2.28, $2.08)
Closed at $.96, up $.11.
Earnings out in November. Sales fell only 13% from last year, but they were up from Q2. They made $5.5 million in profit or $.11 per share. For the nine months they have now earned $.28 per share. Our valuation headed back up again to $2.00 per share. Also selling under 3 times earnings.
Lotus announced in February 2009 that it bought the land use rights in Mongolia for $26 million, subject to contruction approvals etc. If the project is not approved, they get the money back. They paid for this out of internally generated funds. Pretty impressive. 3 years and $58 million to go to build this plant. They are also looking to sell or rent up to 80% of the land to other pharma companies to create a pharma industrial park.
This may work out ok. Unusual legal structure, $58 million construction project all hang over this company.
UP 15%. BUY