2012 is history now. We ended up 30.9% for the year.

The Dow was up 7.3%, NASDAQ was up 15.9% and the Russell 3000 was up 14%.

DAEG, BLIN, MRVC, AVNW, GRVY, EXTR, and CBEY, are our favorites for 2013.

Last week we went 10 stocks up and 6 down and 1 even. Since inception we are now 62 stocks up and 15 down for an 80.5% winning percentage (80% is our target win %).

Let’s hope 2013 is a good year for all in the market.

Happy New Year.

We were down 1.3% last week on the heels of the 30% loss in MOTR and are now up 30.4% for the year, just about double NASDAQ.

The year is almost over and we are hoping to keep our 30% gain for the year, but their is still time to fall off the “cliff” on the short market session on Monday.

Some of our stocks are just stupid cheap—compared to their net cash on hand per share divided by their stock price.

Check this list:
EXTR 59%
GRVY 141%
CCUR 60%
SIGM 64%
ASTX 49%
CTIG 33%
MGCD 42%
AVNW 37%

The DOW was down 1.9% last week, NASDAQ was down 2.0% and the Russell 3000 was down 1.9%.

DAEG, BLIN, MRVC, AVNW, GRVY, EXTR, CBEY, and MOTR are our favorites.

For the year, the DOW is up 5.9%, NASDAQ is up 13.6%, and the Russell 3000 is up 12.1%

Last week we went 5 stocks up and 13 down. Since inception we are now 61 stocks up and 16 down for an 79.2% winning percentage (80% is our target win %).

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% (fourth trip on this)
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)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%
2012-BVSN +30%
2012-TISA +137%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98%
2012-AEZS -63%
2012-RIMG -46% (including dividends)
2012-HPOL +34%
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
2012-SPNC +118%
2012-RWWI +1%
2012-MOTR -29% (lost biggest customer contract)

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 59 stocks that we closed out since 2006 (50 were winners) the average net gain was 35%.

Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.20
Valuation $4.00
Closed up $.03 at $1.05
Down 13%, BUY

Motricity Inc. (NASDAQ-MOTR)-Recommended 11/2/2012)
Buy Price $.62
Valuation $3.40
Up 5%, SOLD at $.45

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.56 (Was $2.24)
Closed unchanged at $1.46
Earnings announced in December. Revenues were $6.7 million up from $6.6 million last year, but iAPPS revenue was up 40% and recurring revenue was up 25% as their legacy business continues to decline. They lost $40 thousand on a GAAP basis and made $268 thousand, or $.02 on a Non-GAAP basis. Net cash improved to negative $.18 from negative $.20 last quarter. Our valuation moved up to $2.56 per share. Guidance for next year is revenue of $29 million, which includes 40% growth in iAPPS revenue and positive Non-GAAP income. We see our valuation soaring to over $3.25 if they can make their numbers next year.
Up 18%, BUY

Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed down $.03 at $2.52
TSYS’s patent deal announced in December was selling two patents for “a multi-seven-figure payment”.
TSYS announced in November it was one of 20 companies selected to participate in a 5 year, $10 billion contract with the U.S. government.
Earnings announced in October. They were very good. Revenue was up a massive 24% to $140 million and they made $.07 per share. Our valuation rose to $6.72 per share.
Carlo Cannell, an activist investor filled a 13D in September pointing out how undervalued TSYS is and urged them to put themselves on the block. He points to a valuation done on the company as of August 29th of $7.40 to $11.81 a share. Even the low point here is higher than our valuation.
TSYS announced in September it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Up 84%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.03 (Was $9.37, $8.85, $8.31)
Closed up $.09 at $3.32
Earnings announced in November. Not bad. Sales were up 3% to $115 million and the made $.05 per share (non-GAAP). Cash per share fell to $1.24 due to the timing of collecting some large receivables (collected in October). Our valuation fell a bit to $9.03 per share.
Next quarter they are projecting $115-$120 million in sales and that they will again be profitable on a non-GAAP basis and that cash will return to normal levels (about $96 million or so).
Up 27%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.04 (Was $29.59, $29.58, $29.21)
Closed down $.30 at $8.84
Earnings announced in November. Not bad. Sales were off $1 million to $121 million and they made $.06 a share compared to a $.04 loss last year. They raised their 2012 guidance a bit and gave 2013 guidance that was tepid at best.
“Management expects revenue to be close to 2012 levels with increasing growth in the latter part of the year. Adjusted EBITDA is expected to decline in 2013 due to increased levels of SG&A expense primarily associated with the growing sales force needed to support future levels of revenue growth. With respect to cash capital expenditures, management expects a slightly higher level relative to 2012. As a result, management expects a reduced level of free cash flow when compared with 2012. However, management expects to continue its focus on delivering significant levels of positive free cash flow in 2013 and future years.”
$90 million of EBITDA, no net debt and a $250 market cap. Cheap.
Our valuation fell a tad to $29.04, still way more than the stock is selling for today.
Up 23%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $31.80 (Was $34.60, $28.60, $41.20, $43.20 (after $9.50, $6.00 and $1.40 special dividends), $52.40, $55.80)
Buy Price October 7, 2011- $8.50 ($25.40 before special dividends)
Closed at $10.95 unchanged.
The 20 for 1 stock split happened last week, so all the share information has been adjusted.
Raging Capital bought another 1.6 million shares in the first week of December at $.54 bringing their holdings to 30.7 million shares or 20.1% of the company.
MRV announced a $.07 special dividend, a $10 million share buyback and a reverse 1 for 20 stock split. The share price increased the $.07 out of the gate, but no big gains. A $10 stock price will pave the way for relisting on a major exchange and allow institutions to invest. We think this is good news.
Earnings announced in November. Not bad. Revenues fell a bit to $51 million but it appears that the revenue shortfall was in the divisions that were sold in October. Hard to tell from their press release or 10Q what the real results were excluding the sold divisions so we are still estimating our valuation which dropped to $1.59 per share. Looks like they broke even for the quarter after excluding an asset impairment write-off.
MRVC bought back 5.8 million shares from T-2 at $9.60 a share in August.
Still trading at less than ½ our valuation.
Up 27%- BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed down $.61 at $5.04
Earnings announced in November. Hmmmm. Sales fell $4 million to $64 million (but right on guidance) and they lost $39 million. But wait, it was “only” $9 million on a non-GAAP basis. The CEO swears that they will get to profitability in Q1, 2014 (next quarter is Q4, 2013). We’ll see. Cash fell a bit to $97 million or $2.91 a share and our valuation fell to $11.39. Have to give this another quarter or two I guess.
SIGM announced a big restructuring plan in November. The goal is to cut expenses by $45 million for their FY 2014 which starts in 4 months (1/29/2013). Headcount and expense cuts are the bulk of the savings. They say this will get them to Non-GAAP profitability at a $56 million a quarter run rate. They will take a $1 million charge in Q3. The also said “Sigma is also investigating strategic alternatives for several research and development programs”. Not sure exactly what this means but it sounds like it will be a positive.
Down 41%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $13.10 (Was $10.92, $13.92, $12.81, $15.28, $14.04, $10.39)
Closed down $.23 at $3.06
Earnings announced in December. Pretty good. Revenues were down 6% to $145.5 million, gross margins increased from 53% to 56.2% and adjusted EBITDA increased 17% from $21.4 million to $24.1 million. Our valuation rose to $13.10. Non-GAAP net income rose to $14.2 million from $12.6 million. Non-GAAP net income was $.25 a share and was $.33 for the six months.
The discount to our valuation is huge.
Up 1%, BUY

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $60.41 (Was $70.28, $62.59, $63.94, $63.84, $79.12, $63.99)
Closed down $.51 at $23.01
We have also collected $1.40 a share in dividends here.
LXK now pays a $1.20 annual dividend.
Earning announced in October. Revenues were down about 10% to $921 million (non-GAAP) and they earned $65 million versus $74 million last year (again, non-GAAP). Earnings were apparently better than analyst expectations. Our valuation fell to $60.41 still almost triple the current trading price. Net cash fell to $3.16 per share as they paid their $.30 dividend and bought back 5.8 million shares for $120 million.
LXK announced in September that it was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases
Down 20%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$4.58 (Was $5.08 before $.50 special dividend)
Valuation $15.37 (was $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.02 at $5.48
Pays $.24 annual dividend.
CCUR went ex-dividend last week for their $.50 special dividend.
We have collected $.62 in dividends so far.
Earnings announced in November. Revenues were up 16% from $12.9 million to $15 million and they made a profit of $.325 million versus a loss of $2.6 million last year. Net cash per share was $3.29 and our valuation jumped to $15.37 a share.
Singer/Miller duo own 12.1% of CCUR.
Up 20%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.20 (was $3.16, $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.14 at $2.86
Earnings announced in October. Revenues were $17.2 million compared to $16.9 million last year. They lost $1.8 million after some special charges. Cash was $130 million or $1.40 per share. Based on the current quarter, our valuation rose slightly to $3.20 per share. Based on their 12 month guidance our valuation looks like $3.64 with a $4 million profit. They are projecting $60 million in product revenue next year and they do not project milestone/development revenues. They are projecting a cash loss of maybe $18 million next year—again without any milestone or development revenue.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company, with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 24%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.97 (was $7.46, $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.57 down $.08
Earnings announced in October. Revenues were $76.1 million down 13% from last year. They made $.04 per share on a non-GAAP basis. Cash rose to $202 million or $2.12 per share. So we are getting a $300 million in sales company that is profitable for about $1.10 per share. Crazy. Our valuation fell from last quarter to $6.97-still more than double the current price.
They are projecting next quarter at sales of $78-$85 million and EPS of $.04 to $.07 (non-GAAP).
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 12%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $3.65-(Was $3.41, $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.02 at $1.30
Earnings announced in November. Not bad and better than Q2. Revenues were $12.8 million and they lost about $.2 million (excluding a $2.5 million impairment charge). Cash rose to $51 million or $1.83 per share. Our valuation rose to $3.65 per share.
From their press release:
“Gravity is planning to release Ragnarok Online II in North America and the Philippines in the first half of 2013 after its launch in Singapore and Malaysia in December 2012.
Steal Fighter to be launched in Korea in the first quarter of 2013
Gravity will launch Steal Fighter, an action real-time strategy role playing game, in Korea in the first quarter of 2013. Gravity entered into a license agreement with L-Time Games Co., Ltd., the developer of Steal Fighter, to publish the game in Korea in April 2012 and conducted closed beta testing in September 2012. The Company intends to launch the game in the overseas markets after its launch in Korea.
Ragnarok Online — Uprising: Valkyrie to be launched in China and Taiwan
Ragnarok Online — Uprising: Valkyrie, a mobile massively multiplayer online role playing game, will be released in China and Taiwan by the end of 2012. Gravity has entered into license agreements with local licensees in each market and the game will be available on iOS and Android platform. Ragnarok Online — Uprising: Valkyrie hits more than 600,000 cumulative downloads in Korea since its launch in May 2012.”
It looks like there are lots of good things ahead.
Now trading at way below cash value again.
Down 11%, BUY

Inuvo (INUV (was-VTRO, MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $3.82 (was $3.11, $1.84, $8.04, $10.91, $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed at $1.06 down $.04
Earning reported in November. Revenues rose 89% to $15.5 million and they lost $1.3 million ($.06 per share). Adjusted EBITDA was $1 million compared to $.1 million last year. Not a great showing. Our valuation rose to $3.82 a share but we are not that impressed. We will hold this a while longer.
Down 80% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $15.03 (was $12.99, $11.95, $13.36 $15.90, $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.02 at $5.95
Earnings announced in December. Sales were up 4% to $8.232 million and they broke even on an operating basis compared to a profit of $.585 million last year. Net cash was $2.46 per share and our valuation was $15.03 down from $15.90 last year. With the gain from the sale of New Leaf MGCD reported earnings of $.20 a share.
If this company could just show a bit of growth I think we would see $10 in short order—if.
While ANGN is still trading at less than ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 56%, HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

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 $5.97 (was $6.21, $6.13, $5.82, $5.81, $5.72, $5.65, $5.39, $4.86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.55 down $.01
Earnings announced in December. They were good. Revenues were up 10% to $5.9 million and they made $300,000 or $.01 per share down from $.03 last year. Gross margins rose 2% to 76.3%. Our valuation fell by a bit less than the cost of their August acquisition of Ready2Ride, to $5.97 a share.
ARIS closed the purchase of “Fifty Below”. In their press release they even said it was a “game changer” which is what we said earlier.
Earlier in November ARIS announced that it was buying the retail assets of “Fifty Below Sales and Marketing” for about $5 million out of bankruptcy.
The retail division of 50 Below is a leading provider of eCommerce websites in the powersports, automotive tire & wheel aftermarket, medical equipment and pool and spa industries. Fifty Below had about $10 million in revenue for the first 9 months of 2012 and has over 3,500 dealer websites. At less than 50% of revenues the deal looks good. The financing will not be cheap on the $3.5 million it is borrowing from a private investor—14% interest rate and 400,000 shares of ARI stock. Despite this cost, the deal should add over 50% to ARI’s sales and hopefully at least that much to its income. There was no disclosure of projected profits on this deal.
Douglas Singer a private investor filed a Form 13D/A in October disclosing he sold about 90,000 shares at prices of $1.00 to $1.16 from 9/6/2012 to October 12, 2012. He still owns 510,000 shares or 6.3%.
Now down 4%, BUY, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.17 (Was $1.34, $1.34, $1.37, $1.36, $1.23, $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.27 closed at $.24
No reason that we can see for the 30% haircut from the stocks highs.
John Birbeck the CEO bought another 2,500 shares at $.385 on 12/6/2012 and now owns 747,000 shares.
Earning announced in November. The good news was that they were again profitable, making $.01 versus losing $.01 last year. However revenue fell 10% from $4.4 million to $4 million. Net cash fell to $.09 per share and our valuation fell to $1.17.
CTI recently announced that it had partnered with BroadSoft (NASDQ-BSFT) to sell CTI’s Call Center Express solution. Very reputable company to partner with.
Five profitable quarters in a row. .
Still an “undercover” company and stock.
EVEN. HOLD

We were up .7% last week and are now up 31.7% for the year, just about double NASDAQ.

After the close on Friday MOTR announced that AT+T (40% of their business) canceled their contract with them. The stock plunged in afterhours to about $.39. Ugg. We would sell on Monday. This will wipe out our gain this week and a little more. We had over 100,000 shares of MOTR personally.

Some of our stocks are just stupid cheap—compared to their net cash on hand per share divided by their stock price.
Check this list:
EXTR 58%
GRVY 138%
CCUR 55%
SIGM 57%
ASTX 51%
CTIG 32%
MRVC 63%
MGCD 42%
AVNW 38%

The DOW was up .4% last week, NASDAQ was up 1.7% and the Russell 3000 was up 1.4%.

ARI and MGCD earnings last week.

DAEG, BLIN, MRVC, AVNW, GRVY, EXTR, CBEY, and MOTR are our favorites.

For the year, the DOW is up 8%, NASDAQ is up 16%, and the Russell 3000 is up 14.2%

Last week we went 13 stocks up and 5 down. Since inception we are now 62 stocks up and 15 down for an 80.5% winning percentage (80% is our target win %).

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% (fourth trip on this)
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)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%
2012-BVSN +30%
2012-TISA +137%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98%
2012-AEZS -63%
2012-RIMG -46% (including dividends)
2012-HPOL +34%
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
2012-SPNC +118%
2012-RWWI +1%

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 59 stocks that we closed out since 2006 (50 were winners) the average net gain was 35%.

Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.20
Valuation $4.00
Closed up $.06 at $1.02
Down 15%, BUY

Motricity Inc. (NASDAQ-MOTR)-Recommended 11/2/2012)
Buy Price $.62
Valuation $3.40
Closed down $.06 at $.66
Sell at $.40 for a loss of 35%.

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.56 (Was $2.24)
Closed unchanged at $1.46
Earnings announced in December. Revenues were $6.7 million up from $6.6 million last year, but iAPPS revenue was up 40% and recurring revenue was up 25% as their legacy business continues to decline. They lost $40 thousand on a GAAP basis and made $268 thousand, or $.02 on a Non-GAAP basis. Net cash improved to negative $.18 from negative $.20 last quarter. Our valuation moved up to $2.56 per share. Guidance for next year is revenue of $29 million, which includes 40% growth in iAPPS revenue and positive Non-GAAP income. We see our valuation soaring to over $3.25 if they can make their numbers next year.
Up 18%, BUY

Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed up $.19 at $2.55
TSYS announced some kind of patent deal last week but no financial details, so we don’t know what to make of it yet.
TSYS announced in November it was one of 20 companies selected to participate in a 5 year, $10 billion contract with the U.S. government.
Earnings announced in October. They were very good. Revenue was up a massive 24% to $140 million and they made $.07 per share. Our valuation rose to $6.72 per share.
Carlo Cannell, an activist investor filled a 13D in September pointing out how undervalued TSYS is and urged them to put themselves on the block. He points to a valuation done on the company as of August 29th of $7.40 to $11.81 a share. Even the low point here is higher than our valuation.
TSYS announced in September it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Up 86%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.03 (Was $9.37, $8.85, $8.31)
Closed up $.31 at $3.23
Earnings announced in November. Not bad. Sales were up 3% to $115 million and the made $.05 per share (non-GAAP). Cash per share fell to $1.24 due to the timing of collecting some large receivables (collected in October). Our valuation fell a bit to $9.03 per share.
Next quarter they are projecting $115-$120 million in sales and that they will again be profitable on a non-GAAP basis and that cash will return to normal levels (about $96 million or so).
Up 23%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.04 (Was $29.59, $29.58, $29.21)
Closed up $1.05 at $9.14
Earnings announced in November. Not bad. Sales were off $1 million to $121 million and they made $.06 a share compared to a $.04 loss last year. They raised their 2012 guidance a bit and gave 2013 guidance that was tepid at best.
“Management expects revenue to be close to 2012 levels with increasing growth in the latter part of the year. Adjusted EBITDA is expected to decline in 2013 due to increased levels of SG&A expense primarily associated with the growing sales force needed to support future levels of revenue growth. With respect to cash capital expenditures, management expects a slightly higher level relative to 2012. As a result, management expects a reduced level of free cash flow when compared with 2012. However, management expects to continue its focus on delivering significant levels of positive free cash flow in 2013 and future years.”
$90 million of EBITDA, no net debt and a $250 market cap. Cheap.
Our valuation fell a tad to $29.04, still way more than the stock is selling for today.
Up 28%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.59 (Was $1.73, $1.43, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.55 unchanged.
Raging Capital bought another 1.6 million shares in the first week of December at $.54 bringing their holdings to 30.7 million shares or 20.1% of the company.
MRV announced a $.07 special dividend, a $10 million share buyback and a reverse 1 for 20 stock split. The share price increased the $.07 out of the gate, but no big gains. A $10 stock price will pave the way for relisting on a major exchange and allow institutions to invest. We think this is good news.
Earnings announced in November. Not bad. Revenues fell a bit to $51 million but it appears that the revenue shortfall was in the divisions that were sold in October. Hard to tell from their press release or 10Q what the real results were excluding the sold divisions so we are still estimating our valuation which dropped to $1.59 per share. Looks like they broke even for the quarter after excluding an asset impairment write-off.
MRV closed the sale or their two remaining for-sale subsidiaries in October. Proceeds look to be about $25 million. We estimate MRV will have about $.44 a share of net cash after these sales. This is about 80% of their market cap and brings our estimated valuation to $1.55 a share.
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Still trading at less than ½ our valuation.
Up 9%- BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed up $.16 at $5.65
Earnings announced in November. Hmmmm. Sales fell $4 million to $64 million (but right on guidance) and they lost $39 million. But wait, it was “only” $9 million on a non-GAAP basis. The CEO swears that they will get to profitability in Q1, 2014 (next quarter is Q4, 2013). We’ll see. Cash fell a bit to $97 million or $2.91 a share and our valuation fell to $11.39. Have to give this another quarter or two I guess.
SIGM announced a big restructuring plan in November. The goal is to cut expenses by $45 million for their FY 2014 which starts in 4 months (1/29/2013). Headcount and expense cuts are the bulk of the savings. They say this will get them to Non-GAAP profitability at a $56 million a quarter run rate. They will take a $1 million charge in Q3. The also said “Sigma is also investigating strategic alternatives for several research and development programs”. Not sure exactly what this means but it sounds like it will be a positive.
Down 34%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $13.10 (Was $10.92, $13.92, $12.81, $15.28, $14.04, $10.39)
Closed up $.11 at $3.29
Earnings announced in December. Pretty good. Revenues were down 6% to $145.5 million, gross margins increased from 53% to 56.2% and adjusted EBITDA increased 17% from $21.4 million to $24.1 million. Our valuation rose to $13.10. Non-GAAP net income rose to $14.2 million from $12.6 million. Non-GAAP net income was $.25 a share and was $.33 for the six months.
The discount to our valuation is huge.
Up 8%, BUY

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $60.41 (Was $70.28, $62.59, $63.94, $63.84, $79.12, $63.99)
Closed up $.34 at $23.52
We have also collected $1.40 a share in dividends here.
LXK now pays a $1.20 annual dividend.
Earning announced in October. Revenues were down about 10% to $921 million (non-GAAP) and they earned $65 million versus $74 million last year (again, non-GAAP). Earnings were apparently better than analyst expectations. Our valuation fell to $60.41 still almost triple the current trading price. Net cash fell to $3.16 per share as they paid their $.30 dividend and bought back 5.8 million shares for $120 million.
LXK announced in September that it was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases
Down 18%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$4.58 (Was $5.08 before $.50 special dividend)
Valuation $15.37 (was $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed up $.46 at $5.50
Pays $.24 annual dividend.
CCUR went ex-dividend last week for their $.50 special dividend.
We have collected $.12 in dividends so far.
Earnings announced in November. Revenues were up 16% from $12.9 million to $15 million and they made a profit of $.325 million versus a loss of $2.6 million last year. Net cash per share was $3.29 and our valuation jumped to $15.37 a share.
Singer/Miller duo own 12.1% of CCUR.
Up 18%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.20 (was $3.16, $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed down $.05 at $2.72
Earnings announced in October. Revenues were $17.2 million compared to $16.9 million last year. They lost $1.8 million after some special charges. Cash was $130 million or $1.40 per share. Based on the current quarter, our valuation rose slightly to $3.20 per share. Based on their 12 month guidance our valuation looks like $3.64 with a $4 million profit. They are projecting $60 million in product revenue next year and they do not project milestone/development revenues. They are projecting a cash loss of maybe $18 million next year—again without any milestone or development revenue.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company, with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 18%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.97 (was $7.46, $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.65 down $.04
Earnings announced in October. Revenues were $76.1 million down 13% from last year. They made $.04 per share on a non-GAAP basis. Cash rose to $202 million or $2.12 per share. So we are getting a $300 million in sales company that is profitable for about $1.10 per share. Crazy. Our valuation fell from last quarter to $6.97-still more than double the current price.
They are projecting next quarter at sales of $78-$85 million and EPS of $.04 to $.07 (non-GAAP).
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 15%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)

Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $3.65-(Was $3.41, $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed up $.01 at $1.32
Earnings announced in November. Not bad and better than Q2. Revenues were $12.8 million and they lost about $.2 million (excluding a $2.5 million impairment charge). Cash rose to $51 million or $1.83 per share. Our valuation rose to $3.65 per share.
From their press release:
“Gravity is planning to release Ragnarok Online II in North America and the Philippines in the first half of 2013 after its launch in Singapore and Malaysia in December 2012.
Steal Fighter to be launched in Korea in the first quarter of 2013
Gravity will launch Steal Fighter, an action real-time strategy role playing game, in Korea in the first quarter of 2013. Gravity entered into a license agreement with L-Time Games Co., Ltd., the developer of Steal Fighter, to publish the game in Korea in April 2012 and conducted closed beta testing in September 2012. The Company intends to launch the game in the overseas markets after its launch in Korea.
Ragnarok Online — Uprising: Valkyrie to be launched in China and Taiwan
Ragnarok Online — Uprising: Valkyrie, a mobile massively multiplayer online role playing game, will be released in China and Taiwan by the end of 2012. Gravity has entered into license agreements with local licensees in each market and the game will be available on iOS and Android platform. Ragnarok Online — Uprising: Valkyrie hits more than 600,000 cumulative downloads in Korea since its launch in May 2012.”
It looks like there are lots of good things ahead.
Now trading at way below cash value again.
Down 9%, BUY

Inuvo (INUV (was-VTRO, MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $3.82 (was $3.11, $1.84, $8.04, $10.91, $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed at $1.10 down $.18
Earning reported in November. Revenues rose 89% to $15.5 million and they lost $1.3 million ($.06 per share). Adjusted EBITDA was $1 million compared to $.1 million last year. Not a great showing. Our valuation rose to $3.82 a share but we are not that impressed. We will hold this a while longer.
Down 79% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
NEW Valuation $15.03 (was $12.99, $11.95, $13.36 $15.90, $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.47 at $5.97
Earnings announced last week. Sales were up 4% to $8.232 million and they broke even on an operating basis compared to a profit of $.585 million last year. Net cash was $2.46 per share and our valuation was $15.03 down from $15.90 last year. With the gain from the sale of New Leaf MGCD reported earnings of $.20 a share.
If this company could just show a bit of growth I think we would see $10 in short order—if.
While ANGN is still trading at less than ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 56%, HOLD

OB-abies (Bulletin Board Listed Stocks)
As proven by OPTIO, patience is necessary with these stocks.

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 $5.97 (was $6.21, $6.13, $5.82, $5.81, $5.72, $5.65, $5.39, $4.86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.56 up $.01
Earnings announced last week. They were good. Revenues were up 10% to $5.9 million and they made $300,000 or $.01 per share down from $.03 last year. Gross margins rose 2% to 76.3%. Our valuation fell by a bit less than the cost of their August acquisition of Ready2Ride, to $5.97 a share.
ARIS closed the purchase of “Fifty Below”. In their press release they even said it was a “game changer” which is what we said earlier.
Earlier in November ARIS announced that it was buying the retail assets of “Fifty Below Sales and Marketing” for about $5 million out of bankruptcy.
The retail division of 50 Below is a leading provider of eCommerce websites in the powersports, automotive tire & wheel aftermarket, medical equipment and pool and spa industries. Fifty Below had about $10 million in revenue for the first 9 months of 2012 and has over 3,500 dealer websites. At less than 50% of revenues the deal looks good. The financing will not be cheap on the $3.5 million it is borrowing from a private investor—14% interest rate and 400,000 shares of ARI stock. Despite this cost, the deal should add over 50% to ARI’s sales and hopefully at least that much to its income. There was no disclosure of projected profits on this deal.
Douglas Singer a private investor filed a Form 13D/A in October disclosing he sold about 90,000 shares at prices of $1.00 to $1.16 from 9/6/2012 to October 12, 2012. He still owns 510,000 shares or 6.3%.
Now down 3%, BUY, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.17 (Was $1.34, $1.34, $1.37, $1.36, $1.23, $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.28 closed at $.26
No reason that we can see for the 30% haircut last week.
John Birbeck the CEO bought another 2,500 shares at $.385 on 12/6/2012 and now owns 747,000 shares.
Earning announced in November. The good news was that they were again profitable, making $.01 versus losing $.01 last year. However revenue fell 10% from $4.4 million to $4 million. Net cash fell to $.09 per share and our valuation fell to $1.17.
CTI recently announced that it had partnered with BroadSoft (NASDQ-BSFT) to sell CTI’s Call Center Express solution. Very reputable company to partner with.
Five profitable quarters in a row. .
Still an “undercover” company and stock.
Up 4%. HOLD

Another market beating week for us–up .9% last week and are now up 30.9% for the year.

Some of our stocks are just stupid cheap—compared to their net cash on hand per share divided by their stock price.

Check this list:
EXTR 57%
GRVY 140%
CCUR 59%
SIGM 59%
ASTX 50%
CTIG 22%
MRVC 63%
ANGN 45%
AVNW 42%

The DOW was down .2% last week, NASDAQ was down .2% and the Russell 3000 was down .3%.

No earnings last week.

DAEG, BLIN, MRVC, AVNW, GRVY, EXTR, CBEY, and MOTR are our favorites.

For the year, the DOW is up 7.5%, NASDAQ is up 14.1%, and the Russell 3000 is up 12.7%

Last week we went 13 stocks up and 5 down. Since inception we are now 62 stocks up and 15 down for an 80.5% winning percentage (80% is our target win %).

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% (fourth trip on this)
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)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%
2012-BVSN +30%
2012-TISA +137%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98%
2012-AEZS -63%
2012-RIMG -46% (including dividends)
2012-HPOL +34%
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
2012-SPNC +118%
2012-RWWI +1%

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 59 stocks that we closed out since 2006 (50 were winners) the average net gain was 35%.

Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.20
Valuation $4.00
Closed down $.19 at $.96
Down 20%, BUY

Motricity Inc. (NASDAQ-MOTR)-Recommended 11/2/2012)
Buy Price $.62
Valuation $3.40
Closed down $.08 at $.72
Up 14%, BUY

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
NEW Valuation $2.56 (Was $2.24)
Closed down $.22 at $1.46
Earnings announced the prior week. Revenues were $6.7 million up from $6.6 million last year, but iAPPS revenue was up 40% and recurring revenue was up 25% as their legacy business continues to decline. They lost $40 thousand on a GAAP basis and made $268 thousand, or $.02 on a Non-GAAP basis. Net cash improved to negative $.18 from negative $.20 last quarter. Our valuation moved up to $2.56 per share. Guidance for next year is revenue of $29 million, which includes 40% growth in iAPPS revenue and positive Non-GAAP income. We see our valuation soaring to over $3.25 if they can make their numbers next year.
Up 18%, BUY

Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed up $.11 at $2.36
TSYS announced in November it was one of 20 companies selected to participate in a 5 year, $10 billion contract with the U.S. government.
Earnings announced in October. They were very good. Revenue was up a massive 24% to $140 million and they made $.07 per share. Our valuation rose to $6.72 per share.
Carlo Cannell, an activist investor filled a 13D in September pointing out how undervalued TSYS is and urged them to put themselves on the block. He points to a valuation done on the company as of August 29th of $7.40 to $11.81 a share. Even the low point here is higher than our valuation.
TSYS announced in September it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Up 72%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.03 (Was $9.37, $8.85, $8.31)
Closed up $.16 at $2.92
Earnings announced in November. Not bad. Sales were up 3% to $115 million and the made $.05 per share (non-GAAP). Cash per share fell to $1.24 due to the timing of collecting some large receivables (collected in October). Our valuation fell a bit to $9.03 per share.
Next quarter they are projecting $115-$120 million in sales and that they will again be profitable on a non-GAAP basis and that cash will return to normal levels (about $96 million or so).
Up 12%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.04 (Was $29.59, $29.58, $29.21)
Closed up $.85 at $8.09
Earnings announced in November. Not bad. Sales were off $1 million to $121 million and they made $.06 a share compared to a $.04 loss last year. They raised their 2012 guidance a bit and gave 2013 guidance that was tepid at best.
“Management expects revenue to be close to 2012 levels with increasing growth in the latter part of the year. Adjusted EBITDA is expected to decline in 2013 due to increased levels of SG&A expense primarily associated with the growing sales force needed to support future levels of revenue growth. With respect to cash capital expenditures, management expects a slightly higher level relative to 2012. As a result, management expects a reduced level of free cash flow when compared with 2012. However, management expects to continue its focus on delivering significant levels of positive free cash flow in 2013 and future years.”
$90 million of EBITDA, no net debt and a $250 market cap. Cheap.
Our valuation fell a tad to $29.04, still way more than the stock is selling for today.
Up 13%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.59 (Was $1.73, $1.43, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.55 up $.07
Raging Capital bought another 1.6 million shares in the first week of December at $.54 bringing their holdings to 30.7 million shares or 20.1% of the company.
MRV announced a $.07 special dividend, a $10 million share buyback and a reverse 1 for 20 stock split. The share price increased the $.07 out of the gate, but no big gains. A $10 stock price will pave the way for relisting on a major exchange and allow institutions to invest. We think this is good news.
Earnings announced in November. Not bad. Revenues fell a bit to $51 million but it appears that the revenue shortfall was in the divisions that were sold in October. Hard to tell from their press release or 10Q what the real results were excluding the sold divisions so we are still estimating our valuation which dropped to $1.59 per share. Looks like they broke even for the quarter after excluding an asset impairment write-off.
MRV closed the sale or their two remaining for-sale subsidiaries in October. Proceeds look to be about $25 million. We estimate MRV will have about $.44 a share of net cash after these sales. This is about 80% of their market cap and brings our estimated valuation to $1.55 a share.
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Still trading at less than ½ our valuation.
Up 9%- BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed up $.10 at $5.49
Earnings announced last week. Hmmmm. Sales fell $4 million to $64 million (but right on guidance) and they lost $39 million. But wait, it was “only” $9 million on a non-GAAP basis. The CEO swears that they will get to profitability in Q1, 2014 (next quarter is Q4, 2013). We’ll see. Cash fell a bit to $97 million or $2.91 a share and our valuation fell to $11.39. Have to give this another quarter or two I guess.
SIGM announced a big restructuring plan in November. The goal is to cut expenses by $45 million for their FY 2014 which starts in 4 months (1/29/2013). Headcount and expense cuts are the bulk of the savings. They say this will get them to Non-GAAP profitability at a $56 million a quarter run rate. They will take a $1 million charge in Q3. The also said “Sigma is also investigating strategic alternatives for several research and development programs”. Not sure exactly what this means but it sounds like it will be a positive.
Down 35%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
NEW Valuation $13.10 (Was $10.92, $13.92, $12.81, $15.28, $14.04, $10.39)
Closed up $.04 at $3.18
Earnings announced in the prior week. Pretty good. Revenues were down 6% to $145.5 million, gross margins increased from 53% to 56.2% and adjusted EBITDA increased 17% from $21.4 million to $24.1 million. Our valuation rose to $13.10. Non-GAAP net income rose to $14.2 million from $12.6 million. Non-GAAP net income was $.25 a share and was $.33 for the six months.
The discount to our valuation is huge.
Up 5%, BUY

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $60.41 (Was $70.28, $62.59, $63.94, $63.84, $79.12, $63.99)
Closed down $1.78 at $23.18
We have also collected $1.40 a share in dividends here.
LXK now pays a $1.20 annual dividend.
Earning announced in October. Revenues were down about 10% to $921 million (non-GAAP) and they earned $65 million versus $74 million last year (again, non-GAAP). Earnings were apparently better than analyst expectations. Our valuation fell to $60.41 still almost triple the current trading price. Net cash fell to $3.16 per share as they paid their $.30 dividend and bought back 5.8 million shares for $120 million.
LXK announced in September that it was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases
Down 20%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $15.37 (was $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed up $.09 at $5.54
Pays $.24 annual dividend.
We have collected $.12 in dividends so far.
CCUR announced a special $.50 dividend payable before the tax rates go up.
Earnings announced in November. Revenues were up 16% from $12.9 million to $15 million and they made a profit of $.325 million versus a loss of $2.6 million last year. Net cash per share was $3.29 and our valuation jumped to $15.37 a share.
Singer/Miller duo own 12.1% of CCUR.
Up 9%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.20 (was $3.16, $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.07 at $2.77
Earnings announced in October. Revenues were $17.2 million compared to $16.9 million last year. They lost $1.8 million after some special charges. Cash was $130 million or $1.40 per share. Based on the current quarter, our valuation rose slightly to $3.20 per share. Based on their 12 month guidance our valuation looks like $3.64 with a $4 million profit. They are projecting $60 million in product revenue next year and they do not project milestone/development revenues. They are projecting a cash loss of maybe $18 million next year—again without any milestone or development revenue.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company, with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 20%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.97 (was $7.46, $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.69 up $.16
Earnings announced in October. Revenues were $76.1 million down 13% from last year. They made $.04 per share on a non-GAAP basis. Cash rose to $202 million or $2.12 per share. So we are getting a $300 million in sales company that is profitable for about $1.10 per share. Crazy. Our valuation fell from last quarter to $6.97-still more than double the current price.
They are projecting next quarter at sales of $78-$85 million and EPS of $.04 to $.07 (non-GAAP).
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 16%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $3.65-(Was $3.41, $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed up $.14 at $1.31
Earnings announced in November. Not bad and better than Q2. Revenues were $12.8 million and they lost about $.2 million (excluding a $2.5 million impairment charge). Cash rose to $51 million or $1.83 per share. Our valuation rose to $3.65 per share.
From their press release:
“Gravity is planning to release Ragnarok Online II in North America and the Philippines in the first half of 2013 after its launch in Singapore and Malaysia in December 2012.
Steal Fighter to be launched in Korea in the first quarter of 2013
Gravity will launch Steal Fighter, an action real-time strategy role playing game, in Korea in the first quarter of 2013. Gravity entered into a license agreement with L-Time Games Co., Ltd., the developer of Steal Fighter, to publish the game in Korea in April 2012 and conducted closed beta testing in September 2012. The Company intends to launch the game in the overseas markets after its launch in Korea.
Ragnarok Online — Uprising: Valkyrie to be launched in China and Taiwan
Ragnarok Online — Uprising: Valkyrie, a mobile massively multiplayer online role playing game, will be released in China and Taiwan by the end of 2012. Gravity has entered into license agreements with local licensees in each market and the game will be available on iOS and Android platform. Ragnarok Online — Uprising: Valkyrie hits more than 600,000 cumulative downloads in Korea since its launch in May 2012.”
It looks like there are lots of good things ahead.
Now trading at way below cash value again.
Down 10%, BUY

Inuvo (INUV (was-VTRO, MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $3.82 (was $3.11, $1.84, $8.04, $10.91, $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed at $1.28 up $.02
Earning reported in November. Revenues rose 89% to $15.5 million and they lost $1.3 million ($.06 per share). Adjusted EBITDA was $1 million compared to $.1 million last year. Not a great showing. Our valuation rose to $3.82 a share but we are not that impressed. We will hold this a while longer.
Down 76% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $12.99 (was $11.95, $13.36 $15.90, $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.25 at $5.50
Next earnings due out Wednesday, December 19th before the market opens.
Earnings announced in August. Revenues were up from $6.4 million to $6.8 million. However they lost $.28 million versus a profit of $.14 million last year. Cash (adding the $1 million they just received from the sale of their New Leaf business) is $2.52 a share and our valuation rose to $12.99.
If this company could just show a bit of growth I think we would see $10 in short order—if.
While ANGN is still trading at less than ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 44%, HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

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 $6.21 (was $6.13, $5.82, $5.81, $5.72, $5.65, $5.39, $4.86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.55 up $.03
Earnings due out Monday, December 17th after the market closes.
ARIS closed the purchase of “Fifty Below”. In their press release they even said it was a “game changer” which is what we said earlier.
Earlier in November ARIS announced that it was buying the retail assets of “Fifty Below Sales and Marketing” for about $5 million out of bankruptcy.
The retail division of 50 Below is a leading provider of eCommerce websites in the powersports, automotive tire & wheel aftermarket, medical equipment and pool and spa industries. Fifty Below had about $10 million in revenue for the first 9 months of 2012 and has over 3,500 dealer websites. At less than 50% of revenues the deal looks good. The financing will not be cheap on the $3.5 million it is borrowing from a private investor—14% interest rate and 400,000 shares of ARI stock. Despite this cost, the deal should add over 50% to ARI’s sales and hopefully at least that much to its income. There was no disclosure of projected profits on this deal.
Earnings announced in October. Revenues were up 8% to $5.841 million and they made $354,000 pre-tax compared to $182,000 last year. Our valuation rose to $6.21 per share-the highest ever.
Douglas Singer a private investor filed a Form 13D/A in October disclosing he sold about 90,000 shares at prices of $1.00 to $1.16 from 9/6/2012 to October 12, 2012. He still owns 510,000 shares or 6.3%.
Now down 4%, BUY, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.17 (Was $1.34, $1.34, $1.37, $1.36, $1.23, $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.41 closed at $.34
John Birbeck the CEO bought another 2,500 shares at $.385 on 12/6/2012 and now owns 747,000 shares.
Earning announced in November. The good news was that they were again profitable, making $.01 versus losing $.01 last year. However revenue fell 10% from $4.4 million to $4 million. Net cash fell to $.09 per share and our valuation fell to $1.17.
CTI recently announced that it had partnered with BroadSoft (NASDQ-BSFT) to sell CTI’s Call Center Express solution. Very reputable company to partner with.
Five profitable quarters in a row. .
Still an “undercover” company and stock.
Up 52%. HOLD

On vacation this weekend. We were down 2.7% but are still up 30% for the year. BLIN got whacked 22% after reporting good earnings, good forecast for next year. Our valuation rose to $2.56 and if they make their 2013 numbers our valuation will be over $3.25. BUY.

Another market beating week for us–up 2.4% last week and are now up 32.8% for the year.

Some of our stocks are just stupid cheap—compared to their net cash on hand per share divided by their stock price.
Check this list:
EXTR 59%
GRVY 152%
CCUR 62%
SIGM 56%
ASTX 50%
CTIG 23%
MRVC 77%
ANGN 38%
AVNW 45%

The DOW was up .1% last week, NASDAQ was up 1.5% and the Russell 3000 was up .7%.
MITL earnings last week.
AVNW, CBEY and MITL moved back into the plus column last week.
AVNW, BLIN, GRVY, EXTR, CBEY, and MOTR are our favorites.
For the year, the DOW is up 6.6%, NASDAQ is up 15.6%, and the Russell 3000 is up 12.8%
Last week we went 9 stocks up, 6 down and 3 even. Since inception we are now 63 stocks up and 14 down for a 81.8% winning percentage (80% is our target win %).
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% (fourth trip on this)
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)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%
2012-BVSN +30%
2012-TISA +137%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98%
2012-AEZS -63%
2012-RIMG -46% (including dividends)
2012-HPOL +34%
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
2012-SPNC +118%
2012-RWWI +1%

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 59 stocks that we closed out since 2006 (50 were winners) the average net gain was 35%.

Daegis Inc. (NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.20
Valuation $4.00
Closed unchanged at $1.20
EVEN, BUY

Motricity Inc. (NASDAQ-MOTR)-Recommended 11/2/2012)
Buy Price $.62
Valuation $3.40
Closed up $.15 at $.85
Up 35%, BUY

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.24
Closed down $.23 at $2.17
BLIN will announce Q4 and year results on Tuesday, December 4th after the market close.
Up 75%, BUY

Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed down $.07 at $2.25
TSYS announced in November it was one of 20 companies selected to participate in a 5 year, $10 billion contract with the U.S. government.
Earnings announced in October. They were very good. Revenue was up a massive 24% to $140 million and they made $.07 per share. Our valuation rose to $6.72 per share.
Carlo Cannell, an activist investor filled a 13D in September pointing out how undervalued TSYS is and urged them to put themselves on the block. He points to a valuation done on the company as of August 29th of $7.40 to $11.81 a share. Even the low point here is higher than our valuation.
TSYS announced in September it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Up 64%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.03 (Was $9.37, $8.85, $8.31)
Closed up $.34 at $2.75
Earnings announced in November. Not bad. Sales were up 3% to $115 million and the made $.05 per share (non-GAAP). Cash per share fell to $1.24 due to the timing of collecting some large receivables (collected in October). Our valuation fell a bit to $9.03 per share.
Next quarter they are projecting $115-$120 million in sales and that they will again be profitable on a non-GAAP basis and that cash will return to normal levels (about $96 million or so).
Up 5%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.04 (Was $29.59, $29.58, $29.21)
Closed up $.46 at $7.43
Earnings announced in November. Not bad. Sales were off $1 million to $121 million and they made $.06 a share compared to a $.04 loss last year. They raised their 2012 guidance a bit and gave 2013 guidance that was tepid at best.
“Management expects revenue to be close to 2012 levels with increasing growth in the latter part of the year. Adjusted EBITDA is expected to decline in 2013 due to increased levels of SG&A expense primarily associated with the growing sales force needed to support future levels of revenue growth. With respect to cash capital expenditures, management expects a slightly higher level relative to 2012. As a result, management expects a reduced level of free cash flow when compared with 2012. However, management expects to continue its focus on delivering significant levels of positive free cash flow in 2013 and future years.”
$90 million of EBITDA, no net debt and a $250 market cap. Cheap.
Our valuation fell a tad to $29.04, still way more than the stock is selling for today.
Up 4%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.59 (Was $1.73, $1.43, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.51 unchanged
Earnings announced in November. Not bad. Revenues fell a bit to $51 million but it appears that the revenue shortfall was in the divisions that were sold in October. Hard to tell from their press release or 10Q what the real results were excluding the sold divisions so we are still estimating our valuation which dropped to $1.59 per share. Looks like they broke even for the quarter after excluding an asset impairment write-off.
MRV closed the sale or their two remaining for-sale subsidiaries in October. Proceeds look to be about $25 million. We estimate MRV will have about $.44 a share of net cash after these sales. This is about 80% of their market cap and brings our estimated valuation to $1.55 a share.
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Still trading at less than ½ our valuation.
Raging Capital owns over 27 million shares or about 18% of MRV.
Up 1%- BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed down $.03 at $5.75
Next earning due out Wednesday, December 5th after the market close.
SIGM announced a big restructuring plan in November. The goal is to cut expenses by $45 million for their FY 2014 which starts in 4 months (1/29/2013). Headcount and expense cuts are the bulk of the savings. They say this will get them to Non-GAAP profitability at a $56 million a quarter run rate. They will take a $1 million charge in Q3. The also said “Sigma is also investigating strategic alternatives for several research and development programs”. Not sure exactly what this means but it sounds like it will be a positive.
Earnings announced in September. Revenues spiked up to $68.3 million including $26.6 million from their latest acquisition of Trident. They lost $13.3 million on a GAAP basis and $4.1 million on a Non-GAAP basis. Cash was $106 million or $3.22 a share after putting out $42 million for the Earnings announced in May. Overall our valuation increased another 25% to $13.05. They are projecting sales for next quarter (Q3) to be between $60-$65 million with 50% GAAP margins.
So we are trading at a market cap of about $120 million (excluding cash) for a $$200+ million a year chip company with 50% margins. Still pretty stupid we think. We plan to hold on for another couple of quarters to see if they can turn this around.
Down 32%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
NEW Valuation $13.10 (Was $10.92, $13.92, $12.81, $15.28, $14.04, $10.39)
Closed up $.51 at $3.31
Earnings announced last week. Pretty good. Revenues were down 6% to $145.5 million, gross margins increased from 53% to 56.2% and adjusted EBITDA increased 17% from $21.4 million to $24.1 million. Our valuation rose to $13.10. Non-GAAP net income rose to $14.2 million from $12.6 million. Non-GAAP net income was $.25 a share and was $.33 for the six months.
The discount to our valuation is huge.
Up 9%, BUY

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $60.41 (Was $70.28, $62.59, $63.94, $63.84, $79.12, $63.99)
Closed down $1.28 at $24.33
We have also collected $1.40 a share in dividends here.
LXK now pays a $1.20 annual dividend.
Earning announced in October. Revenues were down about 10% to $921 million (non-GAAP) and they earned $65 million versus $74 million last year (again, non-GAAP). Earnings were apparently better than analyst expectations. Our valuation fell to $60.41 still almost triple the current trading price. Net cash fell to $3.16 per share as they paid their $.30 dividend and bought back 5.8 million shares for $120 million.
LXK announced in September that it was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases
Down 16%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $15.37 (was $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed up $.11 at $5.28
Pays $.24 annual dividend.
We have collected $.12 in dividends so far.
Earnings announced in November. Revenues were up 16% from $12.9 million to $15 million and they made a profit of $.325 million versus a loss of $2.6 million last year. Net cash per share was $3.29 and our valuation jumped to $15.37 a share.
Singer/Miller bought another 33,000 shares in early July at $3.88. They now own 12.1% of CCUR.
Up 4%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.20 (was $3.16, $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.17 at $2.78
Earnings announced in October. Revenues were $17.2 million compared to $16.9 million last year. They lost $1.8 million after some special charges. Cash was $130 million or $1.40 per share. Based on the current quarter, our valuation rose slightly to $3.20 per share. Based on their 12 month guidance our valuation looks like $3.64 with a $4 million profit. They are projecting $60 million in product revenue next year and they do not project milestone/development revenues. They are projecting a cash loss of maybe $18 million next year—again without any milestone or development revenue.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company, with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 21%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.97 (was $7.46, $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.59 up $.10
Earnings announced in October. Revenues were $76.1 million down 13% from last year. They made $.04 per share on a non-GAAP basis. Cash rose to $202 million or $2.12 per share. So we are getting a $300 million in sales company that is profitable for about $1.10 per share. Crazy. Our valuation fell from last quarter to $6.97-still more than double the current price.
They are projecting next quarter at sales of $78-$85 million and EPS of $.04 to $.07 (non-GAAP).
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 13%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $3.65-(Was $3.41, $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed unchanged at $1.20
Earnings announced in November. Not bad and better than Q2. Revenues were $12.8 million and they lost about $.2 million (excluding a $2.5 million impairment charge). Cash rose to $51 million or $1.83 per share. Our valuation rose to $3.65 per share.
From their press release:
“Gravity is planning to release Ragnarok Online II in North America and the Philippines in the first half of 2013 after its launch in Singapore and Malaysia in December 2012.
Steal Fighter to be launched in Korea in the first quarter of 2013
Gravity will launch Steal Fighter, an action real-time strategy role playing game, in Korea in the first quarter of 2013. Gravity entered into a license agreement with L-Time Games Co., Ltd., the developer of Steal Fighter, to publish the game in Korea in April 2012 and conducted closed beta testing in September 2012. The Company intends to launch the game in the overseas markets after its launch in Korea.
Ragnarok Online — Uprising: Valkyrie to be launched in China and Taiwan
Ragnarok Online — Uprising: Valkyrie, a mobile massively multiplayer online role playing game, will be released in China and Taiwan by the end of 2012. Gravity has entered into license agreements with local licensees in each market and the game will be available on iOS and Android platform. Ragnarok Online — Uprising: Valkyrie hits more than 600,000 cumulative downloads in Korea since its launch in May 2012.”
It looks like there are lots of good things ahead.
Now trading at way below cash value again.
Down 11%, BUY

Inuvo (INUV (was-VTRO, MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $3.82 (was $3.11, $1.84, $8.04, $10.91, $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed at $1.30 down $.03
Earning reported in November. Revenues rose 89% to $15.5 million and they lost $1.3 million ($.06 per share). Adjusted EBITDA was $1 million compared to $.1 million last year. Not a great showing. Our valuation rose to $3.82 a share but we are not that impressed. We will hold this a while longer.
Down 75% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $12.99 (was $11.95, $13.36 $15.90, $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.29 at $6.40
Earnings announced in August. Revenues were up from $6.4 million to $6.8 million. However they lost $.28 million versus a profit of $.14 million last year. Cash (adding the $1 million they just received from the sale of their New Leaf business) is $2.52 a share and our valuation rose to $12.99.
If this company could just show a bit of growth I think we would see $10 in short order—if.
While ANGN is still trading at less than ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 67%, HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

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 $6.21 (was $6.13, $5.82, $5.81, $5.72, $5.65, $5.39, $4.86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.45 up $.15
ARIS closed the purchase of “Fifty Below” last week. In their press release they even said it was a “game changer” which is what we said last week.
Earlier in November ARIS announced that it was buying the retail assets of “Fifty Below Sales and Marketing” for about $5 million out of bankruptcy.
The retail division of 50 Below is a leading provider of eCommerce websites in the powersports, automotive tire & wheel aftermarket, medical equipment and pool and spa industries. Fifty Below had about $10 million in revenue for the first 9 months of 2012 and has over 3,500 dealer websites. At less than 50% of revenues the deal looks good. The financing will not be cheap on the $3.5 million it is borrowing from a private investor—14% interest rate and 400,000 shares of ARI stock. Despite this cost, the deal should add over 50% to ARI’s sales and hopefully at least that much to its income. There was no disclosure of projected profits on this deal.
Earnings announced in October. Revenues were up 8% to $5.841 million and they made $354,000 pre-tax compared to $182,000 last year. Our valuation rose to $6.21 per share-the highest ever.
Douglas Singer a private investor filed a Form 13D/A in October disclosing he sold about 90,000 shares at prices of $1.00 to $1.16 from 9/6/2012 to October 12, 2012. He still owns 510,000 shares or 6.3%.
Now down 10%, BUY, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.17 (Was $1.34, $1.34, $1.37, $1.36, $1.23, $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.385 closed at $.36
John Birbeck the CEO bought another 80,000 shares at $.23 on 11/15/2012 and now owns 745,000
Earning announced in November. The good news was that they were again profitable, making $.01 versus losing $.01 last year. However revenue fell 10% from $4.4 million to $4 million. Net cash fell to $.09 per share and our valuation fell to $1.17.
CTI recently announced that it had partnered with BroadSoft (NASDQ-BSFT) to sell CTI’s Call Center Express solution. Very reputable company to partner with.
Five profitable quarters in a row. .
Still an “undercover” company and stock.
Up 43%. HOLD

Daegis Inc. (NASDAQ–DAEG)

Valuation-$4.00
Price November 30, 2012-$1.20

We have watched DAEG for a few years now. Their performance and debt pay down have finally moved this into the BUY category for us.

They released earnings yesterday also. Sales fell from $11.1 million to $10.3 million but they made $252,000 or $.01 per share compared to $795,000 or $.05 per share. Not stellar we know but it makes two profitable quarters in a row. Also, debt has been paid down by about $2.7 million since April. Net cash is negative $14.5 million or negative $.98 per share. This is down from negative $22.8 million at January 31, 2011.

Gross margins are about 66% and from their press release: “During the first two quarters of the fiscal year, we rebuilt the eDiscovery executive team, significantly enhanced our cloud-based eDiscovery Platform, and added experienced sales professionals. We delivered a major new release of the Daegis eDiscovery Platform with enhanced self-service usability and our innovative technology assisted review solution known as Acumen. In addition, we right sized our cost structure to deliver profitability as we implement our plans to grow. We are extremely focused on execution and expect to see improved results in the second half of the year. In our database, archive and migration business segment, we saw stronger than anticipated performance with 14% growth quarter over quarter and 13% sequentially. We launched a major release of our AXS-One archive product, achieved significant archive and migration wins, and continued our trend of strong maintenance renewals.”

Sounds like some good things to come.

There are about 14.7 million shares outstanding but it only trades about 10,000 shares a day so patient buying is needed.

About Daegis:
Daegis delivers eDiscovery and information management solutions. Daegis’ eDiscovery Platform combines technology and on-demand services to deliver end-to-end and cost-effective solutions for corporations and law firms. The Company’s information management business delivers solutions for developing, managing, modernizing, and archiving applications and business data.

We were up 5.25% last week and are now up 30.4% for the year. This was better than the market again last week

Some of our stocks are just stupid cheap—compared to their net cash on hand per share divided by their stock price.
Check this list:
EXTR 61%
GRVY 152%
CCUR 64%
SIGM 56%
ASTX 53%
CTIG 24%
MRVC 77%
ANGN 37%
AVNW 51%

The DOW was up 3.4% last week, NASDAQ was up 4% and the Russell 3000 was up 3.7%.
CTIG, GRVY and MITL earnings last week.

AVNW, BLIN, GRVY, EXTR, CBEY, and MOTR are our favorites.

For the year, the DOW is up 6.5%, NASDAQ is up 13.9%, and the Russell 3000 is up 12.1%

Last week we went 15 stocks up, 1 down and 1 even. Since inception we are now 59 stocks up and 17 down for a 77.6% winning percentage (80% is our target win %).

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% (fourth trip on this)
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)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%
2012-BVSN +30%
2012-TISA +137%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98%
2012-AEZS -63%
2012-RIMG -46% (including dividends)
2012-HPOL +34%
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
2012-SPNC +118%
2012-RWWI +1%

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 59 stocks that we closed out since 2006 (50 were winners) the average net gain was 35%.

Motricity Inc. (NASDAQ-MOTR)-Recommended 11/2/2012)
Buy Price $.62
Valuation $3.40
Closed up $.15 at $.70
Up 11%, BUY

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.24
Closed up $.40 at $2.40
BLIN will announce Q4 and year results on Tuesday, December 4th after the market close.
Up 94%, BUY

Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed up $.06 at $2.32
TSYS announced in November it was one of 20 companies selected to participate in a 5 year, $10 billion contract with the U.S. government.
Earnings announced in October. They were very good. Revenue was up a massive 24% to $140 million and they made $.07 per share. Our valuation rose to $6.72 per share.
Carlo Cannell, an activist investor filled a 13D in September pointing out how undervalued TSYS is and urged them to put themselves on the block. He points to a valuation done on the company as of August 29th of $7.40 to $11.81 a share. Even the low point here is higher than our valuation.
TSYS announced in September it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Up 69%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.03 (Was $9.37, $8.85, $8.31)
Closed unchanged at $2.41
Earnings announced in November. Not bad. Sales were up 3% to $115 million and the made $.05 per share (non-GAAP). Cash per share fell to $1.24 due to the timing of collecting some large receivables (collected in October). Our valuation fell a bit to $9.03 per share.
Next quarter they are projecting $115-$120 million in sales and that they will again be profitable on a non-GAAP basis and that cash will return to normal levels (about $96 million or so).
Down 8%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.04 (Was $29.59, $29.58, $29.21)
Closed up $.13 at $6.97
Earnings announced in November. Not bad. Sales were off $1 million to $121 million and they made $.06 a share compared to a $.04 loss last year. They raised their 2012 guidance a bit and gave 2013 guidance that was tepid at best.
“Management expects revenue to be close to 2012 levels with increasing growth in the latter part of the year. Adjusted EBITDA is expected to decline in 2013 due to increased levels of SG&A expense primarily associated with the growing sales force needed to support future levels of revenue growth. With respect to cash capital expenditures, management expects a slightly higher level relative to 2012. As a result, management expects a reduced level of free cash flow when compared with 2012. However, management expects to continue its focus on delivering significant levels of positive free cash flow in 2013 and future years.”
$90 million of EBITDA, no net debt and a $250 market cap. Cheap.
Our valuation fell a tad to $29.04, still way more than the stock is selling for today.
Down 3%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.59 (Was $1.73, $1.43, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.51 up $.01
Earnings announced in November. Not bad. Revenues fell a bit to $51 million but it appears that the revenue shortfall was in the divisions that were sold in October. Hard to tell from their press release or 10Q what the real results were excluding the sold divisions so we are still estimating our valuation which dropped to $1.59 per share. Looks like they broke even for the quarter after excluding an asset impairment write-off.
MRV closed the sale or their two remaining for-sale subsidiaries in October. Proceeds look to be about $25 million. We estimate MRV will have about $.44 a share of net cash after these sales. This is about 80% of their market cap and brings our estimated valuation to $1.55 a share.
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Still trading at less than ½ our valuation.
Raging Capital owns over 27 million shares or about 18% of MRV.
Up 1%- BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed up $.27 at $5.78
SIGM announced a big restructuring plan in November. The goal is to cut expenses by $45 million for their FY 2014 which starts in 4 months (1/29/2013). Headcount and expense cuts are the bulk of the savings. They say this will get them to Non-GAAP profitability at a $56 million a quarter run rate. They will take a $1 million charge in Q3. The also said “Sigma is also investigating strategic alternatives for several research and development programs”. Not sure exactly what this means but it sounds like it will be a positive.
Earnings announced in September. Revenues spiked up to $68.3 million including $26.6 million from their latest acquisition of Trident. They lost $13.3 million on a GAAP basis and $4.1 million on a Non-GAAP basis. Cash was $106 million or $3.22 a share after putting out $42 million for the Earnings announced in May. Overall our valuation increased another 25% to $13.05. They are projecting sales for next quarter (Q3) to be between $60-$65 million with 50% GAAP margins.
So we are trading at a market cap of about $120 million (excluding cash) for a $$200+ million a year chip company with 50% margins. Still pretty stupid we think. We plan to hold on for another couple of quarters to see if they can turn this around.
Down 32%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $13.92 (Was $13.92, $12.81, $15.28, $14.04, $10.39)
Closed up $.07 at $2.80
Next earnings due out Thursday, November 29th after the market close.
Latest earnings announced in August. Our valuation fell to $10.95 which is still more than triple the current price.
Down 8%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $60.41 (Was $70.28, $62.59, $63.94, $63.84, $79.12, $63.99)
Closed up $2.51 at $25.61
We have also collected $1.10 a share in dividends here.
LXK now pays a $1.20 annual dividend.
Earning announced in October. Revenues were down about 10% to $921 million (non-GAAP) and they earned $65 million versus $74 million last year (again, non-GAAP). Earnings were apparently better than analyst expectations. Our valuation fell to $60.41 still almost triple the current trading price. Net cash fell to $3.16 per share as they paid their $.30 dividend and bought back 5.8 million shares for $120 million.
LXK announced in September that it was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases
Down 11%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $15.37 (was $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed up $.36 at $5.17
Pays $.24 annual dividend.
We have collected $.12 in dividends so far.
Earnings announced in November. Revenues were up 16% from $12.9 million to $15 million and they made a profit of $.325 million versus a loss of $2.6 million last year. Net cash per share was $3.29 and our valuation jumped to $15.37 a share.
Singer/Miller bought another 33,000 shares in early July at $3.88. They now own 12.1% of CCUR.
Up 2%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.20 (was $3.16, $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.34 at $2.61
Earnings announced in October. Revenues were $17.2 million compared to $16.9 million last year. They lost $1.8 million after some special charges. Cash was $130 million or $1.40 per share. Based on the current quarter, our valuation rose slightly to $3.20 per share. Based on their 12 month guidance our valuation looks like $3.64 with a $4 million profit. They are projecting $60 million in product revenue next year and they do not project milestone/development revenues. They are projecting a cash loss of maybe $18 million next year—again without any milestone or development revenue.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 13%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.97 (was $7.46, $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.49 up $.05
Earnings announced in October. Revenues were $76.1 million down 13% from last year. They made $.04 per share on a non-GAAP basis. Cash rose to $202 million or $2.12 per share. So we are getting a $300 million in sales company that is profitable for about $1.10 per share. Crazy. Our valuation fell from last quarter to $6.97-still more than double the current price.
They are projecting next quarter at sales of $78-$85 million and EPS of $.04 to $.07 (non-GAAP).
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 10%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
NEW Valuation $3.65-(Was $3.41, $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.10 at $1.20
Earnings announced last week. Not bad and better than Q2. Revenues were $12.8 million and they lost about $.2 million (excluding a $2.5 million impairment charge). Cash rose to $51 million or $1.83 per share. Our valuation rose to $3.65 per share.
From their press release:
“Gravity is planning to release Ragnarok Online II in North America and the Philippines in the first half of 2013 after its launch in Singapore and Malaysia in December 2012.
Steal Fighter to be launched in Korea in the first quarter of 2013
Gravity will launch Steal Fighter, an action real-time strategy role playing game, in Korea in the first quarter of 2013. Gravity entered into a license agreement with L-Time Games Co., Ltd., the developer of Steal Fighter, to publish the game in Korea in April 2012 and conducted closed beta testing in September 2012. The Company intends to launch the game in the overseas markets after its launch in Korea.
Ragnarok Online — Uprising: Valkyrie to be launched in China and Taiwan
Ragnarok Online — Uprising: Valkyrie, a mobile massively multiplayer online role playing game, will be released in China and Taiwan by the end of 2012. Gravity has entered into license agreements with local licensees in each market and the game will be available on iOS and Android platform. Ragnarok Online — Uprising: Valkyrie hits more than 600,000 cumulative downloads in Korea since its launch in May 2012.”
It looks like there are lots of good things ahead.
Now trading at way below cash value again.
Down 11%, BUY

Inuvo (INUV (was-VTRO, MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $3.82 (was $3.11, $1.84, $8.04, $10.91, $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed at $1.33 up $.22
Earning reported in November. Revenues rose 89% to $15.5 million and they lost $1.3 million ($.06 per share). Adjusted EBITDA was $1 million compared to $.1 million last year. Not a great showing. Our valuation rose to $3.82 a share but we are not that impressed. We will hold this a while longer.
Down 75% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $12.99 (was $11.95, $13.36 $15.90, $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.24 at $6.69
Earnings announced in August. Revenues were up from $6.4 million to $6.8 million. However they lost $.28 million versus a profit of $.14 million last year. Cash (adding the $1 million they just received from the sale of their New Leaf business) is $2.52 a share and our valuation rose to $12.99.
If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
While ANGN is still trading at less than ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 75%, HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

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 $6.21 (was $6.13, $5.82, $5.81, $5.72, $5.65, $5.39, $4.86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.30 up $.10
Well maybe we have a game changer here. Last week ARIS announced that it was buying the retail assets of “Fifty Below Sales and Marketing” for about $5 million out of bankruptcy.
The retail division of 50 Below is a leading provider of eCommerce websites in the powersports, automotive tire & wheel aftermarket, medical equipment and pool and spa industries. Fifty Below had about $10 million in revenue for the first 9 months of 2012 and has over 3,500 dealer websites. At less than 50% of revenues the deal looks good. The financing will not be cheap on the $3.5 million it is borrowing from a private investor—14% interest rate and 400,000 shares of ARI stock. Despite this cost, the deal should add over 50% to ARI’s sales and hopefully at least that much to its income. There was no disclosure of projected profits on this deal.
Earnings announced in October. Revenues were up 8% to $5.841 million and they made $354,000 pre-tax compared to $182,000 last year. Our valuation rose to $6.21 per share-the highest ever.
Douglas Singer a private investor filed a Form 13D/A in October disclosing he sold about 90,000 shares at prices of $1.00 to $1.16 from 9/6/2012 to October 12, 2012. He still owns 510,000 shares or 6.3%.
Now down 19%, BUY, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.17 (Was $1.34, $1.34, $1.37, $1.36, $1.23, $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.375 closed at $.35
John Birbeck the CEO bought another 80,000 shares at $.23 on 11/15/2012 and now owns 745,000
Earning announced in November. The good news was that they were again profitable, making $.01 versus losing $.01 last year. However revenue fell 10% from $4.4 million to $4 million. Net cash fell to $.09 per share and our valuation fell to $1.17.
CTI recently announced that it had partnered with BroadSoft (NASDQ-BSFT) to sell CTI’s Call Center Express solution. Very reputable company to partner with.
At a $7 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
Up 39%. HOLD

We were actually up .2% last week and are now up 25.1% for the year. This was way better than the market again last week

Some of our stocks are just stupid cheap—compared to their net cash on hand per share divided by their stock price.

Check this list:
EXTR 62%
GRVY 135%
CCUR 68%
SIGM 58%
ASTX 62%
CTIG 34%
MRVC 78%
ANGN 38%
AVNW 51%

The DOW was down 1.8% last week, NASDAQ was down 1.8% and the Russell 3000 was down 1.5%.

CTIG earnings last week.

AVNW, BLIN, GRVY, EXTR, CBEY, and MOTR are our favorites.

For the year, the DOW is up 3%, NASDAQ is up 9.5%, and the Russell 3000 is up 8.1%

Last week we went 5 stocks up, 11 down and 1 even. Since inception we are now 55 stocks up and 21 down for a 72.4% winning percentage (80% is our target win %).

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% (fourth trip on this)
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)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%
2012-BVSN +30%
2012-TISA +137%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98%
2012-AEZS -63%
2012-RIMG -46% (including dividends)
2012-HPOL +34%
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
2012-SPNC +118%
2012-RWWI +1%

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 59 stocks that we closed out since 2006 (50 were winners) the average net gain was 35%.

Motricity Inc. (NASDAQ-MOTR)-Recommended 11/2/2012)
Buy Price $.62
Valuation $3.40
Closed down $.13 at $.55
Down 13%, BUY

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.24
Closed up $.30 at $2.00
Up 61%, BUY

Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed down $.03 at $2.26
TSYS announced in November it was one of 20 companies selected to participate in a 5 year, $10 billion contract with the U.S. government.
Earnings announced in October. They were very good. Revenue was up a massive 24% to $140 million and they made $.07 per share. Our valuation rose to $6.72 per share.
Carlo Cannell, an activist investor filled a 13D in September pointing out how undervalued TSYS is and urged them to put themselves on the block. He points to a valuation done on the company as of August 29th of $7.40 to $11.81 a share. Even the low point here is higher than our valuation.
TSYS announced in September it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Up 65%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.03 (Was $9.37, $8.85, $8.31)
Closed down $.14 at $2.41
Earnings announced in November. Not bad. Sales were up 3% to $115 million and the made $.05 per share (non-GAAP). Cash per share fell to $1.24 due to the timing of collecting some large receivables (collected in October). Our valuation fell a bit to $9.03 per share.
Next quarter they are projecting $115-$120 million in sales and that they will again be profitable on a non-GAAP basis and that cash will return to normal levels (about $96 million or so).
Down 8%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at $6.53)
Valuation $29.04 (Was $29.59, $29.58, $29.21)
Closed down $.37 at $6.84
Earnings announced in November. Not bad. Sales were off $1 million to $121 million and they made $.06 a share compared to a $.04 loss last year. They raised their 2012 guidance a bit and gave 2013 guidance that was tepid at best.
“Management expects revenue to be close to 2012 levels with increasing growth in the latter part of the year. Adjusted EBITDA is expected to decline in 2013 due to increased levels of SG&A expense primarily associated with the growing sales force needed to support future levels of revenue growth. With respect to cash capital expenditures, management expects a slightly higher level relative to 2012. As a result, management expects a reduced level of free cash flow when compared with 2012. However, management expects to continue its focus on delivering significant levels of positive free cash flow in 2013 and future years.”
$90 million of EBITDA, no net debt and a $250 market cap. Cheap.
Our valuation fell a tad to $29.04, still way more than the stock is selling for today.
Down 5%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
Valuation $1.59 (Was $1.73, $1.43, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.55 down $.03
Earnings announced in November. Not bad. Revenues fell a bit to $51 million but it appears that the revenue shortfall was in the divisions that were sold in October. Hard to tell from their press release or 10Q what the real results were excluding the sold divisions so we are still estimating our valuation which dropped to $1.59 per share. Looks like they broke even for the quarter after excluding an asset impairment write-off.
MRV closed the sale or their two remaining for-sale subsidiaries in October. Proceeds look to be about $25 million. We estimate MRV will have about $.44 a share of net cash after these sales. This is about 80% of their market cap and brings our estimated valuation to $1.55 a share.
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Still trading at less than ½ our valuation.
Raging Capital owns over 27 million shares or about 18% of MRV.
EVEN- BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed down $.07 at $5.51
SIGM announced a big restructuring plan in November. The goal is to cut expenses by $45 million for their FY 2014 which starts in 4 months (1/29/2013). Headcount and expense cuts are the bulk of the savings. They say this will get them to Non-GAAP profitability at a $56 million a quarter run rate. They will take a $1 million charge in Q3. The also said “Sigma is also investigating strategic alternatives for several research and development programs”. Not sure exactly what this means but it sounds like it will be a positive.
Earnings announced in September. Revenues spiked up to $68.3 million including $26.6 million from their latest acquisition of Trident. They lost $13.3 million on a GAAP basis and $4.1 million on a Non-GAAP basis. Cash was $106 million or $3.22 a share after putting out $42 million for the Earnings announced in May. Overall our valuation increased another 25% to $13.05. They are projecting sales for next quarter (Q3) to be between $60-$65 million with 50% GAAP margins.
So we are trading at a market cap of about $120 million (excluding cash) for a $$200+ million a year chip company with 50% margins. Still pretty stupid we think. We plan to hold on for another couple of quarters to see if they can turn this around.
Down 35%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $13.92 (Was $13.92, $12.81, $15.28, $14.04, $10.39)
Closed up $.21 at $2.73
Next earnings due out Thursday, November 29th after the market close.
Latest earnings announced in August. Our valuation fell to $10.95 which is still more than triple the current price.
Down 10%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $60.41 (Was $70.28, $62.59, $63.94, $63.84, $79.12, $63.99)
Closed up $1.38 at $23.1
We have also collected $1.10 a share in dividends here.
LXK now pays a $1.20 annual dividend.
Earning announced in October. Revenues were down about 10% to $921 million (non-GAAP) and they earned $65 million versus $74 million last year (again, non-GAAP). Earnings were apparently better than analyst expectations. Our valuation fell to $60.41 still almost triple the current trading price. Net cash fell to $3.16 per share as they paid their $.30 dividend and bought back 5.8 million shares for $120 million.
LXK announced in September that it was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases
Down 20%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $15.37 (was $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.16 at $4.81
Pays $.24 annual dividend.
We have collected $.12 in dividends so far.
Earnings announced in November. Revenues were up 16% from $12.9 million to $15 million and they made a profit of $.325 million versus a loss of $2.6 million last year. Net cash per share was $3.29 and our valuation jumped to $15.37 a share.
Singer/Miller bought another 33,000 shares in early July at $3.88. They now own 12.1% of CCUR.
Down 5%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.20 (was $3.16, $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed down $.04 at $2.27
Earnings announced in October. Revenues were $17.2 million compared to $16.9 million last year. They lost $1.8 million after some special charges. Cash was $130 million or $1.40 per share. Based on the current quarter, our valuation rose slightly to $3.20 per share. Based on their 12 month guidance our valuation looks like $3.64 with a $4 million profit. They are projecting $60 million in product revenue next year and they do not project milestone/development revenues. They are projecting a cash loss of maybe $18 million next year—again without any milestone or development revenue.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Down 2%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.97 (was $7.46, $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.44 down $.05
Earnings announced in October. Revenues were $76.1 million down 13% from last year. They made $.04 per share on a non-GAAP basis. Cash rose to $202 million or $2.12 per share. So we are getting a $300 million in sales company that is profitable for about $1.10 per share. Crazy. Our valuation fell from last quarter to $6.97-still more than double the current price.
They are projecting next quarter at sales of $78-$85 million and EPS of $.04 to $.07 (non-GAAP).
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 8%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $3.41-(Was $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed unchanged at $1.30
Earnings announced in August. Revenues fell 14% to $12.5 million and they incurred a loss of $1 million versus a small profit last year. The Company said that the results from Ragnarok 2 in Korea were below their expectations. Net cash per share was $1.76 and our valuation fell to $3.41 as margins and earnings fell. Lots of news and game release information in their press release, so rather than repeating it all here, please read the PR. It looks like there are lots of good things ahead.
Now trading at below cash value again.
Down 11%, BUY

Inuvo (INUV (was-VTRO, MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $3.82 (was $3.11, $1.84, $8.04, $10.91, $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed at $1.11 up $.07
Earning reported in November. Revenues rose 89% to $15.5 million and they lost $1.3 million ($.06 per share). Adjusted EBITDA was $1 million compared to $.1 million last year. Not a great showing. Our valuation rose to $3.82 a share but we are not that impressed. We will hold this a while longer.
Down 79% HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $12.99 (was $11.95, $13.36 $15.90, $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.31 at $6.45
Earnings announced in August. Revenues were up from $6.4 million to $6.8 million. However they lost $.28 million versus a profit of $.14 million last year. Cash (adding the $1 million they just received from the sale of their New Leaf business) is $2.52 a share and our valuation rose to $12.99.
If this company could just show a bit of growth I think we would see $10 in short order—if.

Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
While ANGN is still trading at less than ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 69%, HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

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 $6.21 (was $6.13, $5.82, $5.81, $5.72, $5.65, $5.39, $4.86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.20 up $.08
Well maybe we have a game changer here. Last week ARIS announced that it was buying the retail assets of “Fifty Below Sales and Marketing” for about $5 million out of bankruptcy.
The retail division of 50 Below is a leading provider of eCommerce websites in the powersports, automotive tire & wheel aftermarket, medical equipment and pool and spa industries. Fifty Below had about $10 million in revenue for the first 9 months of 2012 and has over 3,500 dealer websites. At less than 50% of revenues the deal looks good. The financing will not be cheap on the $3.5 million it is borrowing from a private investor—14% interest rate and 400,000 shares of ARI stock. Despite this cost, the deal should add over 50% to ARI’s sales and hopefully at least that much to its income. There was no disclosure of projected profits on this deal.
Earnings announced in October. Revenues were up 8% to $5.841 million and they made $354,000 pre-tax compared to $182,000 last year. Our valuation rose to $6.21 per share-the highest ever.
Douglas Singer a private investor filed a Form 13D/A in October disclosing he sold about 90,000 shares at prices of $1.00 to $1.16 from 9/6/2012 to October 12, 2012. He still owns 510,000 shares or 6.3%.
Now down 26%, BUY, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
NEW Valuation $1.17 (Was $1.34, $1.34, $1.37, $1.36, $1.23, $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.26 closed at $.24
Earning announced last week. The good news was that they were again profitable, making $.01 versus losing $.01 last year. However revenue fell 10% from $4.4 million to $4 million. Net cash fell to $.09 per share and our valuation fell to $1.17.
CTI recently announced that it had partnered with BroadSoft (NASDQ-BSFT) to sell CTI’s Call Center Express solution. Very reputable company to partner with.
John Birbeck the CEO bought 85,000 shares on 9/12/2012 at $.185. He now owns over 600,000 shares.
Five profitable quarters in a row.
At a $7 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
Down 4%. HOLD

We were down .8% last week and are now up 25% for the year. This was way better than the market last week

Some of our stocks are just stupid cheap—compared to their net cash on hand per share divided by their stock price.
Check this list:
EXTR 61%
GRVY 135%
CCUR 66%
SIGM 58%
ASTX 60%
CTIG 45%
MRVC 68%
ANGN 36%
AVNW 48%

The DOW was down 2.1% last week, NASDAQ was down 2.6% and the Russell 3000 was down 2.4%.

CBEY, MRVC and INUV earnings last week.

AVNW, BLIN, GRVY, EXTR, CBEY, and MOTR are our favorites.

For the year, the DOW is up 4.9%, NASDAQ is up 11.5%, and the Russell 3000 is up 9.8%

Last week we went 5 stocks up, 11 down and 1 even. Since inception we are now 58 stocks up and 18 down for a 76.3% winning percentage (80% is our target win %).

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% (fourth trip on this)
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)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%
2012-BVSN +30%
2012-TISA +137%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98%
2012-AEZS -63%
2012-RIMG -46% (including dividends)
2012-HPOL +34%
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
2012-SPNC +118%
2012-RWWI +1%

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 59 stocks that we closed out since 2006 (50 were winners) the average net gain was 35%.

Motricity Inc. (NASDAQ-MOTR)-Recommended 11/2/2012)
Buy Price $.62
Valuation $3.40
Closed up $.06 at $.68
UP 8%, BUY

Bridgeline Digital Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.24
Valuation $2.24
Closed up $.12 at $1.70
Up 37%, BUY

Telecommunications Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $6.72 (Was $5.49)
Closed down $.01 at $2.29
TSYS announced it was one of 20 companies selected to participate in a 5 year, $10 billion contract with the U.S. government in November.
Earnings announced in October. They were very good. Revenue was up a massive 24% to $140 million and they made $.07 per share. Our valuation rose to $6.72 per share.
Carlo Cannell, an activist investor filled a 13D in September pointing out how undervalued TSYS is and urged them to put themselves on the block. He points to a valuation done on the company as of August 29th of $7.40 to $11.81 a share. Even the low point here is higher than our valuation.
TSYS announced in September it was selected as part of a group of 8 companies to participate in a $2.6 million government contract.
Up 67%, HOLD

Aviat Networks Inc. (NASDAQ-AVNW)-Recommended 2/27/2012)
Buy Price- $2.62
Valuation $9.03 (Was $9.37, $8.85, $8.31)
Closed down $.10 at $2.55
Earnings announced in November. Not bad. Sales were up 3% to $115 million and the made $.05 per share (non-GAAP). Cash per share fell to $1.24 due to the timing of collecting some large receivables (collected in October). Our valuation fell a bit to $9.03 per share.
Next quarter they are projecting $115-$120 million in sales and that they will again be profitable on a non-GAAP basis and that cash will return to normal levels (about $96 million or so).
Down 3%, BUY

CBeyond Inc. (NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at $6.53)
NEW Valuation $29.04 (Was $29.59, $29.58, $29.21)
Closed down $.45 at $7.21
Earnings announced last week. Not bad. Sales were off $1 million to $121 million and they made $.06 a share compared to a $.04 loss last year. They raised their 2012 guidance a bit and gave 2013 guidance that was tepid at best.
“Management expects revenue to be close to 2012 levels with increasing growth in the latter part of the year. Adjusted EBITDA is expected to decline in 2013 due to increased levels of SG&A expense primarily associated with the growing sales force needed to support future levels of revenue growth. With respect to cash capital expenditures, management expects a slightly higher level relative to 2012. As a result, management expects a reduced level of free cash flow when compared with 2012. However, management expects to continue its focus on delivering significant levels of positive free cash flow in 2013 and future years.”
$90 million of EBITDA, no net debt and a $250 market cap. Cheap.
Our valuation fell a tad to $29.04, still way more than the stock is selling for today.
Up 1%, BUY

MRV Communications (Pink Sheets-MRVC.pk)
NEW Valuation $1.59 (Was $1.73, $1.43, $2.06, $2.16 (after $.475 and $.30 special dividends), $2.62, $2.79)
Buy Price October 7, 2011- $.50 ($1.27 before special dividends)
Closed at $.58 down $.03
Earnings announced last week. Not bad. Revenues fell a bit to $51 million but it appears that the revenue shortfall was in the divisions that were sold in October. Hard to tell from their press release or 10Q what the real results were excluding the sold divisions so we are still estimating our valuation which dropped to $1.59 per share. Looks like they broke even for the quarter after excluding an asset impairment write-off.
MRV closed the sale or their two remaining for-sale subsidiaries in October. Proceeds look to be about $25 million. We estimate MRV will have about $.44 a share of net cash after these sales. This is about 80% of their market cap and brings our estimated valuation to $1.55 a share.
MRVC bought back 5.8 million shares from T-2 at $.48 a share in August.
Still trading at less than ½ our valuation.
Raging Capital owns over 27 million shares or about 18% of MRV.
Up 6% BUY

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.05 (Was $10.67, $8.41 $12.10, $13.40, $16.02)
Closed down $.21 at $5.58
SIGM announced a big restructuring plan in November. The goal is to cut expenses by $45 million for their FY 2014 which starts in 4 months (1/29/2013). Headcount and expense cuts are the bulk of the savings. They say this will get them to Non-GAAP profitability at a $56 million a quarter run rate. They will take a $1 million charge in Q3. The also said “Sigma is also investigating strategic alternatives for several research and development programs”. Not sure exactly what this means but it sounds like it will be a positive.
Earnings announced in September. Revenues spiked up to $68.3 million including $26.6 million from their latest acquisition of Trident. They lost $13.3 million on a GAAP basis and $4.1 million on a Non-GAAP basis. Cash was $106 million or $3.22 a share after putting out $42 million for the Earnings announced in May. Overall our valuation increased another 25% to $13.05. They are projecting sales for next quarter (Q3) to be between $60-$65 million with 50% GAAP margins.
So we are trading at a market cap of about $120 million (excluding cash) for a $$200+ million a year chip company with 50% margins. Still pretty stupid we think. We plan to hold on for another couple of quarters to see if they can turn this around.
Down 34%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $13.92 (Was $13.92, $12.81, $15.28, $14.04, $10.39)
Closed down $.10 at $2.52
Latest earnings announced in August. Our valuation fell to $10.95 which is still more than triple the current price.
Down 17%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $60.41 (Was $70.28, $62.59, $63.94, $63.84, $79.12, $63.99)
Closed up $.32 at $21.72
We have also collected $1.10 a share in dividends here.
LXK now pays a $1.20 annual dividend.
Earning announced in October. Revenues were down about 10% to $921 million (non-GAAP) and they earned $65 million versus $74 million last year (again, non-GAAP). Earnings were apparently better than analyst expectations. Our valuation fell to $60.41 still almost triple the current trading price. Net cash fell to $3.16 per share as they paid their $.30 dividend and bought back 5.8 million shares for $120 million.
LXK announced in September that it was getting out of the inkjet printer business and cutting 1,700 employees. There was also speculation that they would get bought out.
They reiterated their intent to return over 50% of their free cash flow to shareholders in dividends and share repurchases
Down 25%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $15.37 (was $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.31 at $4.97
Pays $.24 annual dividend.
We have collected $.12 in dividends so far.
Earnings announced in November. Revenues were up 16% from $12.9 million to $15 million and they made a profit of $.325 million versus a loss of $2.6 million last year. Net cash per share was $3.29 and our valuation jumped to $15.37 a share.
Singer/Miller bought another 33,000 shares in early July at $3.88. They now own 12.1% of CCUR.
Down 2%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.20 (was $3.16, $3.44, $3.42, $3.22, $3.11, $5.21, $4.89, $4.37, $3.48)
Closed up $.02 at $2.31
Earnings announced in October. Revenues were $17.2 million compared to $16.9 million last year. They lost $1.8 million after some special charges. Cash was $130 million or $1.40 per share. Based on the current quarter, our valuation rose slightly to $3.20 per share. Based on their 12 month guidance our valuation looks like $3.64 with a $4 million profit. They are projecting $60 million in product revenue next year and they do not project milestone/development revenues. They are projecting a cash loss of maybe $18 million next year—again without any milestone or development revenue.
So we have a company losing maybe $5 million in cash a year, or 25 years of cash, about $80 million in revenues and a huge drug pipeline. Any good news on the clinical trials front ought to set this stock on fire.
It is not easy to find a small drug company with substantial revenues, that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Up 1%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.97 (was $7.46, $6.31, $7.01, $6.72, $6.45, $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed at $3.49 down $.05
Earnings announced in October. Revenues were $76.1 million down 13% from last year. They made $.04 per share on a non-GAAP basis. Cash rose to $202 million or $2.12 per share. So we are getting a $300 million in sales company that is profitable for about $1.10 per share. Crazy. Our valuation fell from last quarter to $6.97-still more than double the current price.
They are projecting next quarter at sales of $78-$85 million and EPS of $.04 to $.07 (non-GAAP).
Starboard owns 9.7%, Soros 8.8% and Blackrock owns 5.5% of EXTR.
Up 10%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $3.41-(Was $5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.02 at $1.30
Earnings announced in August. Revenues fell 14% to $12.5 million and they incurred a loss of $1 million versus a small profit last year. The Company said that the results from Ragnarok 2 in Korea were below their expectations. Net cash per share was $1.76 and our valuation fell to $3.41 as margins and earnings fell. Lots of news and game release information in their press release, so rather than repeating it all here, please read the PR. It looks like there are lots of good things ahead.
Now trading at below cash value again.
Down 11%, BUY

Inuvo (INUV (was-VTRO, MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
NEW Valuation $3.82 (was $3.11, $1.84, $8.04, $10.91, $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed at $1.04 down $.07
Earning reported last week. Revenues rose 89% to $15.5 million and they lost $1.3 million ($.06 per share). Adjusted EBITDA was $1 million compared to $.1 million last year. Not a great showing. Our valuation rose to $3.82 a share but we are not that impressed. We will hold this a while longer.
Down 80%  HOLD

Medical Graphics Corporation (Was ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $12.99 (was $11.95, $13.36 $15.90, $13.13, $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.06 at $6.76
Earnings announced in August. Revenues were up from $6.4 million to $6.8 million. However they lost $.28 million versus a profit of $.14 million last year. Cash (adding the $1 million they just received from the sale of their New Leaf business) is $2.52 a share and our valuation rose to $12.99.
If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
While ANGN is still trading at about ½ our valuation, we are switching to a HOLD until we gets some results or news that improves the prospects here.
Up 77%, HOLD

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

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 $6.21 (was $6.13, $5.82, $5.81, $5.72, $5.65, $5.39, $4.86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.12 down $.03
Earnings announced in October. Revenues were up 8% to $5.841 million and they made $354,000 pre-tax compared to $182,000 last year. Our valuation rose to $6.21 per share-the highest ever.
Douglas Singer a private investor filed a Form 13D/A in October disclosing he sold about 90,000 shares at prices of $1.00 to $1.16 from 9/6/2012 to October 12, 2012. He still owns 510,000 shares or 6.3%.
ARI announced an acquisition in August. They acquired the assets of Ready2Ride Inc., of Floyds Knobs, Ind., the first-to-market and leading provider of enhanced aftermarket fitment data for the power sports industry. Terms of the transaction were not disclosed.
Now down 31%, BUY, Still a Huge valuation gap here.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.34 (Was $1.34, $1.37, $1.36, $1.23, $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.24 closed at $.21
CTI announced that it had partnered with BroadSoft (NASDQ-BSFT) to sell CTI’s Call Center Express solution. Very reputable company to partner with.
John Birbeck the CEO bought 85,000 shares on 9/12/2012 at $.185. He now owns over 600,000 shares.
Earnings announced in August. Another good quarter and no one cares. Revenues were up 11% to $4.5 million and they made $.3 million or $.01 per share. Cash per share was $.11 and our valuation stayed at $1.34.
CTIG announced a product deal with Mitel in June. Any PR is good news here.
Four profitable quarters in a row.
At a $7 million market cap, this is stupidly cheap. Their intellectual property is probably worth 3 times this price. They need to liquefy this value somehow.
Still an “undercover” company and stock.
Down 11%. BUY