2009 Update

Well we have finished the first month of 2009. At least all the market indices are only down less that 10% so far!

This is still a very tough market to pick winners in. Everything looks scary. We have confined ourselves to just trading some our stocks at this point, when they seems to drop for no reason. We have been trading GSL, SPNC, HPOL and a few others a bit—successfully so far.

Last week the DOW was down 1%, NASDAQ was about even and and S+P 500 down about .7%. For the year the DOW is now down 8.8%, NASDAQ 6.4% and the S+P 500 is down 8.6%. The Russell 3000 and the Wilshire 5000 are also down just over 8% this year.

We had a 5.3% gain last week and are back in positive territory again, + 1.6% for the year.

Last week we went 15 stocks up and 7 down. Since inception we are now 23 stocks up, and 22 down.

Since inception 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%

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 23 stocks that we closed out in 2006, 2007 and 2008 the average gain was 22%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Up $.07 to $3.00.
SPNC pre-announced Q4 sales in early January. Sales of $104 million for the year. Not the $107 million they predicted–but still not bad considering “the world ended in Q4”. At the current $96 million market-cap, SPNC is trading at less than 50% of sales, net of $44 million in cash. Cash includes $16 million of auction-rate securities. Based on what we have been reading, these “investments” will likely turn out OK.
SPNC is suffering from the FDA, ICE raids that apparently eminated from an ex-employee whistle-blower trying to collect so money from the company. SPNC has the financial where-with-all to deal with this. Just got to wait this one out.
The company has $44 million in cash ($1.30 per share), no debt and is trading at less than 50% of 2008 revenues (net of cash)and is growing about 25% a year.
Now down 47%. HOLD.

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $11.48 (was $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Down $.21 at $4.89.
Cannell Capital filed a 13D in February 2008, disclosing a 12.9% ownership stake. Cannell has been pushing MEDW management to sell the company. Meanwhile, Constellation Software, a Canadian public company that has been on an acquisition binge filed a 13D in April 2008, disclosing a 6.1% ownership in MEDW (499,000 shares). Constellation has $243 million in revenues and is profitable.
On November 14th, 2008, Constellation filed a 13D/A. One of their subsidiary officers bought over 300,000 MEDW shares in October, bringing their combined owership in MEDW to 17.9%
Looks like something is going to happen here–but when?
Earnings due our next week on February 3rd, before the market opens.
Down 23%. HOLD

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up),
Valuation $4.31 (was $5.88, $8.63, $9.90, $8.69, $11.51)
Up $.12 to $.54
CLZR announced “earnings” in mid-January. Bad as expected. Our valuation fell to $4.31 per share, which is still 10 times the current market price–but they are losing money at an alarming rate, and have decided not to sell the company. They still have $1.29 per share in cash, but at the current burn-rate, this will last about 1 year.
We will give this one 1 more quarter to see if the trend can reverse.
Down 86%. HOLD.

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.79 (was $1.82 before adding $10,000, $2.02 before $10,000 added and $2.15 before double up),
Valuation $4.66 (Was $6.00, $5.96)
Down $.05 at $.50.
Finaciere De Sainte Marine, is a big investor in HPOL. They now own 7,779,000 shares up from 6,640,381 shares in mid-2008, or over 14% of the company.
Earnings due out next week on February 6th, before the market open.
Down 72%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.90 (Was $2.07 before another $10,000 added and $2.15 before double up), Valuation $4.99 (was $4.30, $4.09)
Down $.07 to $1.27.
Foxhill owns 3,844,000 shares or 6.1% of IPASS.
With $1.10 per share in cash, we feel that this has little additional downside.
Earnings due out Monday, February 23rd after the market close.
Down 33%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.62 (Was $4.42)
Up $.06 at $2.06.
Down 14%. HOLD

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (14.3% dividend yield)
Valuation $17.23 (Was $18.36)
Down $.42 to $3.08.
CCA announced in mid-January that they lost $6 million in annual sales to Walmart, as Walmart will no longer carry some of their products. This is about 10% of CCA’s annual sales. When are we going to get some good news? They still have almost $2.60 in cash, and the dividend yield is now over 14%.
CAW declared its quarterly dividend of $.11 last week. Record date is February 3rd.
Down 44%. HOLD

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $4.18 (was $4.15)
Closed up $.06 at $1.25
Formula Systems (NASDAQ-FORTY) filed an amended Schedule 13D in early September 2008. They added 569,000 shares to their position between May and August and now hold 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor, but this is a good sign of course.
Earnings due out Wednesday, February 18th before the market open.
Down 35%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.03
Closed down $.05 at $3.09
Has $1.80 per share in cash.
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 19%. BUY

Noah Educational. (NED-Recommended 10/5/2008)
Buy Price-$3.03(was $3.00 before $10,000 added)
Valuation $7.98 (Was $7.18)
Closed up $.30 at $2.84
Has cash of $3.37 per share. NED traded ex-dividend in late December.
Up 12% (adjusted for $.56 dividend).

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $10.26
Closed up $.03 at $3.45
Cash is $2.08 per share.
Earnings due out next week on February 4th after the market close.
Up 14%. BUY

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price-$3.69
Valuation NA-Dividend yield play
Closed up $.21 at $3.40
Current dividend yield–27%
Fleet utilization is still 98%. Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012. By then, you will have collected more than the current share price in dividends.
Down 14%. HOLD

Middlebrook Pharmaceutical. (MBRK-Recommended 10/12/2008)
Buy Price-$1.16
Valuation-NA-Speculation
Closed up $.14 at $1.40
“Earnings” out in mid-November. $2 million in sales and $12 million loss and $83 million of cash left. They expect 2009 sales to be about $40 million and will lose money. Some possibility of profits in 2010 and they think they have enough cash to last until then. Again, this is a speculation. Increased sales in 2009 will drive this stock.
New management and capital investment at $3.90 a share.
Up 21%. HOLD

SonicWALL. (SNWL-Recommended 10/20/2008)
Buy Price-$4.50
Valuation-$11.09(Was $10.44)
Closed down $.16 at $3.52
$3.02 cash per share.
No news.
Down 22%. BUY

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$9.10
Valuation-$29.49
Closed up $.16 at $7.82
CYNO has $7.33 per share in cash.
CYNO preannounced Q4 in mid-January. Not good of course. Sales will be down around 30% from last year and they expect to lose around $2.5 million or $.20 per share.
They expect to end the year with $95 million in cash–$7.51 per share.
Earnings due out Tuesday, February 10th before the market open.
Down 14%. BUY

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.88 (Was $21.07)
Closed down $.14 at $6.71
Cash per share was $8.56 per share. Our valuation fell to $18.88 per share.
We think that given the low valuations in this sector, that consolidation is just around the corner. Too much cash, high margins and a declining economy.
Trading at just above cash value.
Earnings due out Monday, February 9th after the market close.
Down 15%. HOLD

OB-abies (Bulletin Board Listed Stocks)

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

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.66 (was $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.90, up $.19.
Wake up management–you have a great little company here worth 5X what it is selling for.
Now down 44%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $3.30 (was $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.60, up $.25.
Earnings out in mid-November. Sales down 13%, but they remained profitable. Made $.01versus $.02 last year.
Down 24%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.40 (Was $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price up $.03 at $.12. Closed at $.12.
Their VOIP business continues to struggle and lose money–$604,000 in the last quarter–but they did have some revenues–$38,000!
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value.
Still an “undercover” company and stock.
Down 56%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.22 (Was $1.61, $2.28, $2.08)
Closed at $.32, up $.02
For the 9 months of 2008, EPS is $.13 per share. So looks like we are selling at about 2X earnings. Unusual legal structure, $70 million factory plan, $17 million land deposit all hang over this company. Stock market stinks, Chinese stocks maybe even worse than most.
Down 62%. HOLD

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Cheap Stocks, 1/23/2009 Update

This is like a broken record.

The DOW was down 2.5%, NASDAQ down 3.4 and and S+P 500 2.1%. For the year the DOW is now down 8%, NASDAQ 6.3% and the S+P 500 is down 7.9%. The Russell 3000 and the Wilshire 5000 are also down just over 8% this year.

We had a 3.2% loss last week and are down 3.7% for the year.

Last week we went 8 stocks up and 14 down. Since inception we are now 23 stocks up, and 22 down.

Since inception we have closed out the following positions:

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 23 stocks that we closed out in 2006, 2007 and 2008 the average gain was 22%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Up $.22 to $2.93.
SPNC pre-announced Q4 sales in early January. Sales of $104 million for the year. Not the $107 million they predicted–but still not bad considering “the world ended in Q4”. At the current $94 million market-cap, SPNC is trading at less than 50% of sales, net of $44 million in cash. Cash includes $16 million of auction-rate securities. Based on what we have been reading, these “investments” will likely turn out OK.
SPNC is suffering from the FDA, ICE raids that apparently eminated from an ex-employee whistle-blower trying to collect so money from the company. SPNC has the financial where-with-all to deal with this. Just got to wait this one out.
The company has $44 million in cash ($1.30 per share), no debt and is trading at less than 50% of 2008 revenues (net of cash)and is growing about 25% a year.
Now down 48%. HOLD.

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $11.48 (was $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up $.51 at $5.10.
Cannell Capital filed a 13D in February 2008, disclosing a 12.9% ownership stake. Cannell has been pushing MEDW management to sell the company. Meanwhile, Constellation Software, a Canadian public company that has been on an acquisition binge filed a 13D in April 2008, disclosing a 6.1% ownership in MEDW (499,000 shares). Constellation has $243 million in revenues and is profitable.
On November 14th, 2008, Constellation filed a 13D/A. One of their subsidiary officers bought over 300,000 MEDW shares in October, bringing their combined owership in MEDW to 17.9%
Looks like something is going to happen here–but when?
Down 20%. HOLD

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up),
NEW Valuation $4.31 (was $5.88, $8.63, $9.90, $8.69, $11.51)
Up $.01 to $.42
CLZR announced “earnings” last week. Bad as expected. Our valuation fell to $4.31 per share, which is still 10 times the current market price–but they are losing money at an alarming rate, and have decided not to sell the company. They still have $1.29 per share in cash, but at the current burn-rate, this will last about 1 year.
We will give this one 1 more quarter to see if the trend can reverse.
Down 89%. HOLD.

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.79 (was $1.82 before adding $10,000, $2.02 before $10,000 added and $2.15 before double up),
Valuation $4.66 (Was $6.00, $5.96)
Down $.10 at $.55.
Finaciere De Sainte Marine, is a big investor in HPOL. They now own 7,779,000 shares up from 6,640,381 shares in mid-2008, or over 14% of the company.
Down 69%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.90 (Was $2.07 before another $10,000 added and $2.15 before double up), Valuation $4.99 (was $4.30, $4.09)
Up $.14 to $1.34.
Foxhill owns 3,844,000 shares or 6.1% of IPASS.
With $1.10 per share in cash, we feel that this has little additional downside.
Down 30%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.62 (Was $4.42)
Down $.32 at $2.00.
No news, but huge volume on Friday–almost 300,000 shares–15X normal daily volume.
Down 17%. HOLD

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (12.6% dividend yield)
Valuation $17.23 (Was $18.36)
Down $.63 to $3.5.
CCA announced last week they lost $6 million in annual sales to Walmart, as Walmart will no longer carry some of their products. This is about 10% of CCA’s annual sales. When are we going to get some good news? They still have almost $2.60 in cash, and the dividend yield is now 12.6%.
Down 37%. HOLD

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $4.18 (was $4.15)
Closed down $.02 at $1.19
Formula Systems (NASDAQ-FORTY) filed an amended Schedule 13D in early September 2008. They added 569,000 shares to their position between May and August and now hold 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor, but this is a good sign of course.
Down 38%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.03
Closed down $.02 at $3.14
Has $1.80 per share in cash.
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 18%. BUY

Noah Educational. (NED-Recommended 10/5/2008)
Buy Price-$3.03(was $3.00 before $10,000 added)
Valuation $7.98 (Was $7.18)
Closed up $.02 at $2.54
Has cash of $3.37 per share. NED traded ex-dividend in late December.
Up 3% (adjusted for $.56 dividend).

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $10.26
Closed up $.18 at $3.42
Cash is $2.08 per share.
Up 13%. BUY

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price-$3.69
Valuation NA-Dividend yield play
Closed down $.14 at $3.19
Current dividend yield–29%
Fleet utilization is still 98%. Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012. By then, you will have collected more than the current share price in dividends.
Down 14%. HOLD

Middlebrook Pharmaceutical. (MBRK-Recommended 10/12/2008)
Buy Price-$1.16
Valuation-NA-Speculation
Closed down $.18 at $1.26
“Earnings” out in mid-November. $2 million in sales and $12 million loss and $83 million of cash left. They expect 2009 sales to be about $40 million and will lose money. Some possibility of profits in 2010 and they think they have enough cash to last until then. Again, this is a speculation. Increased sales in 2009 will drive this stock.
New management and capital investment at $3.90 a share.
Up 9%. HOLD

SonicWALL. (SNWL-Recommended 10/20/2008)
Buy Price-$4.50
Valuation-$11.09(Was $10.44)
Closed down $.10 at $3.68
$3.02 cash per share.
No news.
Down 18%. BUY

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$9.10
Valuation-$29.49
Closed up $.45 at $7.66
CYNO has $7.33 per share in cash.
CYNO preannounced Q4 last week. Not good of course. Sales will be down around 30% from last year and they expect to lose around $2.5 million or $.20 per share.
They expect to end the year with $95 million in cash–$7.51 per share.
Down 16%. BUY

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.88 (Was $21.07)
Closed down $.89 at $6.85
Cash per share was $8.56 per share. Our valuation fell to $18.88 per share.
We think that given the low valuations in this sector, that consolidation is just around the corner. Too much cash, high margins and a declining economy.
Trading at just above cash value.
Down 13%. HOLD

OB-abies (Bulletin Board Listed Stocks)

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

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.66 (was $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.71, down 14%.
Wake up management–you have a great little company here worth 5X what it is selling for.
Now down 56%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $3.30 (was $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.35, down $.05.
Earnings out in mid-November. Sales down 13%, but they remained profitable. Made $.01versus $.02 last year.
Down 56%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.40 (Was $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price down $.05 at $.09. Closed at $.08.
Their VOIP business continues to struggle and lose money–$604,000 in the last quarter–but they did have some revenues–$38,000!
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value.
Still an “undercover” company and stock.
Down 65%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.22 (Was $1.61, $2.28, $2.08)
Closed at $.30, down $.03
For the 9 months of 2008, EPS is $.13 per share. So looks like we are selling at about 2X earnings. Unusual legal structure, $70 million factory plan, $17 million land deposit all hang over this company. Stock market stinks, Chinese stocks maybe even worse than most.
Down 64%. HOLD

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Cheap Stocks, 1/16/2009 Update

Here we go again. Markets tanking, financial stocks (which we don’t buy–ever) tanking. Looks like it could be another long year.

The DOW was down 3.7%, NASDAQ down 2.7 and and S+P 500 4.5%. For the year the DOW is now down 5.6%, NASDAQ 3% and the S+P 500 is down 5.9%. The Russell 3000 and the Wilshire 5000 are also down just over 5% this year.

We had a 6.5% loss last week and have joined the rest of the indices in negative territory at minus .5% for the year.

Last week we went 5 stocks up and 15 down and 2 even. Since inception we are now 23 stocks up, and 22 down.

Since inception we have closed out the following positions:

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 23 stocks that we closed out in 2006, 2007 and 2008 the average gain was 22%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Down $.05 to $2.71.
SPNC pre-announced Q4 sales in early January. Sales of $104 million for the year. Not the $107 million they predicted–but still not bad considering “the world ended in Q4”. At the current $88 million market-cap, SPNC is trading at less than 50% of sales, net of $44 million in cash. Cash includes $16 million of auction-rate securities. Based on what we have been reading, these “investments” will likely turn out OK.
SPNC is suffering from the FDA, ICE raids that apparently eminated from an ex-employee whistle-blower trying to collect so money from the company. SPNC has the financial where-with-all to deal with this. Just got to wait this one out.
The company has $44 million in cash ($1.30 per share), no debt and is trading at less than 50% of 2008 revenues (net of cash)and is growing about 25% a year.
Now down 52%. HOLD.

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $11.48 (was $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up $.03 at $4.59.
Cannell Capital filed a 13D in February 2008, disclosing a 12.9% ownership stake. Cannell has been pushing MEDW management to sell the company. Meanwhile, Constellation Software, a Canadian public company that has been on an acquisition binge filed a 13D in April 2008, disclosing a 6.1% ownership in MEDW (499,000 shares). Constellation has $243 million in revenues and is profitable.
On November 14th, 2008, Constellation filed a 13D/A. One of their subsidiary officers bought over 300,000 MEDW shares in October, bringing their combined owership in MEDW to 17.9%
Looks like something is going to happen here–but when?
Down 28%. HOLD

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $5.88 (was $8.63, $9.90, $8.69, $11.51)
Down $.17 to $.41
CLZR has hired an investment banker to sell the company. We’ll see. Maybe Palomar will buy it to cut both there legal fees ($3.2 million this quarter for CLZR).
Looks like Palomar’s lawsuit against CLZR has been “stayed” by the courts for a while. Legal expense should drop for maybe a couple of years.
Down 89%. HOLD, we may get lucky and this thing will be sold for North of $1.

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.79 (was $1.82 before adding $10,000, $2.02 before $10,000 added and $2.15 before double up),
Valuation $4.66 (Was $6.00, $5.96)
Down $.05 at $.65.
Finaciere De Sainte Marine, is a big investor in HPOL. They now own 7,779,000 shares up from 6,640,381 shares in mid-2008, or just over 14% of the company.
Trading at 13% of our valuation.
Down 67%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.90 (Was $2.07 before another $10,000 added and $2.15 before double up), Valuation $4.99 (was $4.30, $4.09)
Down $.07 to $1.20.
Foxhill owns 3,844,000 shares or 6.1% of IPASS.
With $1.10 per share in cash, we feel that this has little additional downside.
Down 37%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.62 (Was $4.42)
Up $.04 at $2.32.
No news
Down 3%. HOLD

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (10.6% dividend yield)
Valuation $17.23 (Was $18.36)
Down $.02 to $4.13.
No news.
Down 25%. BUY

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $4.18 (was $4.15)
Closed down $.01 at $1.21
Formula Systems (NASDAQ-FORTY) filed an amended Schedule 13D in early September 2008. They added 569,000 shares to their position between May and August and now hold 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor, but this is a good sign of course.
Down 37%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.03
Closed up $.11 at $3.16
Has $1.80 per share in cash.
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 17%. BUY

Noah Educational. (NED-Recommended 10/5/2008)
Buy Price-$3.03(was $3.00 before $10,000 added)
Valuation $7.98 (Was $7.18)
Closed down $.65 at $2.52
Has cash of $3.37 per share.NED traded ex-dividend in late December.
Up 2% (adjusted for $.56 dividend). BUY (we did on Friday)

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $10.26
Closed up $.01 at $3.33
Cash is $2.08 per share.
Up 7%. BUY

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price-$3.69
Valuation NA-Dividend yield play
Closed down $.16 at $3.33
Current dividend yield–28%
Fleet utilization is still 98%. Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012. By then, you will have collected more than the current share price in dividends.
Down 10%. HOLD

Middlebrook Pharmaceutical. (MBRK-Recommended 10/12/2008)
Buy Price-$1.16
Valuation-NA-Speculation
Closed down $.20 at $1.44
“Earnings” out in mid November. $2 million in sales and $12 million loss and $83 million of cash left. They expect 2009 sales to be about $40 million and will lose money. Some possibility of profits in 2010 and they think they have enough cash to last until then. Again, this is a speculation. Increased sales in 2009 will drive this stock.
New management and capital investment at $3.90 a share.
Up 24%. HOLD

SonicWALL. (SNWL-Recommended 10/20/2008)
Buy Price-$4.50
Valuation-$11.09(Was $10.44)
Closed up $.09 at $3.78
$3.02 cash per share.
No news.
Down 16%. BUY

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$9.10
Valuation-$29.49
Closed down $1.17 at $7.21
CYNO has $7.33 per share in cash.
CYNO preannounced Q4 last week. Not good of course. Sales will be down around 30% from last year and they expect to lose around $2.5 million or $.20 per share.
They expect to end the year with $95 million in cash–$7.51 per share. We are now below cash value.
Down 21%. BUY

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.88 (Was $21.07)
Closed down $.27 at $7.74
Cash per share was $8.56 per share. Our valuation fell to $18.88 per share.
We think that given the low valuations in this sector, that consolidation is just around the corner. Too much cash, high margins and a declining economy.
Trading at just above cash value.
Down 2%. HOLD

OB-abies (Bulletin Board Listed Stocks)

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

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.66 (was $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.85, unchanged.
Wake up management–you have a great little company here worth 5X what it is selling for.
Now down 47%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $3.30 (was $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.40, down $.10.
Earnings out in mid-November. Sales down 13%, but they remained profitable. Made $.01versus $.02 last year.
Down 50%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.40 (Was $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price up $.06 at $.14. Closed at $.12.
Their VOIP business continues to struggle and lose money–$604,000 in the last quarter–but they did have some revenues–$38,000!
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value.
Still an “undercover” company and stock.
Down 48%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.22 (Was $1.61, $2.28, $2.08)
Closed at $.33, down $.05
For the 9 months of 2008, EPS is $.13 per share. So looks like we are selling at about 2X earnings. Unusual legal structure, $70 million factory plan, $17 million land deposit all hang over this company. Stock market stinks, Chinese stocks maybe even worse than most.
Down 61%. BUY

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Cheap Stocks, 1/9/2009 Update

After a promising start, the markets tanked again last week.
The DOW was down 4.8%, NASDAQ down 3.7 and and S+P 500 4.5%. For the year the DOW is now down 2%, NASDAQ .3% and the S+P 500 was down 1.4%. The Russell 3000 and the Wilshire 5000 are also down just over 1% this year.

We had a 2.7% gain last week and are up 6% for the year.

Last week we went 11 stocks up and 11 down. Since inception we are now 23 stocks up, and 22 down.

Since inception we have closed out the following positions:

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 23 stocks that we closed out in 2006, 2007 and 2008 the average gain was 22%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Up $.04 to $2.76.
SPNC pre-announced Q4 sales last week. Sales of $104 million for the year. Not the $107 million they predicted–but still not bad considering “the world ended in Q4”. At the current $88 million market-cap, SPNC is trading at less than 50% of sales, net of $44 million in cash. Cash includes $16 million of auction-rate securities. Based on what we have been reading, these “investments” will likely turn out OK.
SPNC is suffering from the FDA, ICE raids that apparently eminated from an ex-employee whistle-blower trying to collect so money from the company. SPNC has the financial where-with-all to deal with this. Just got to wait this one out.
The company has $44 million in cash ($1.30 per share), no debt and is trading at less than 50% of 2008 revenues (net of cash)and is growing about 25% a year.
Now down 51%. HOLD.

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $11.48 (was $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Down $.15 at $4.56.
Cannell Capital filed a 13D in February 2008, disclosing a 12.9% ownership stake. Cannell has been pushing MEDW management to sell the company. Meanwhile, Constellation Software, a Canadian public company that has been on an acquisition binge filed a 13D in April 2008, disclosing a 6.1% ownership in MEDW (499,000 shares). Constellation has $243 million in revenues and is profitable.
On November 14th, 2008, Constellation filed a 13D/A. One of their subsidiary officers bought over 300,000 MEDW shares in October, bringing their combined owership in MEDW to 17.9%
Looks like something is going to happen here–but when?
Down 28%. HOLD

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $5.88 (was $8.63, $9.90, $8.69, $11.51)
Up $.07 to $.58
CLZR has hired an investment banker to sell the company. We’ll see. Maybe Palomar will buy it to cut both there legal fees ($3.2 million this quarter for CLZR).
Looks like Palomar’s lawsuit against CLZR has been “stayed” by the courts for a while. Legal expense should drop for maybe a couple of years.
Down 85%. HOLD, we may get lucky and this thing will be sold for North of $1.

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.79 (was $1.82 before adding $10,000, $2.02 before $10,000 added and $2.15 before double up),
Valuation $4.66 (Was $6.00, $5.96)
Up $.02 at $.65.
Finaciere De Sainte Marine, is a big investor in HPOL. They now own 7,779,000 shares up from 6,640,381 shares in mid-2008, or just over 14% of the company.
Trading at 14% of our valuation.
Down 64%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.90 (Was $2.07 before another $10,000 added and $2.15 before double up), Valuation $4.99 (was $4.30, $4.09)
Up $.08 to $1.27.
They still have $1.10 per share in cash.
Foxhill owns 3,844,000 shares or 6.1% of IPASS.
With $1.10 per share in cash, we feel that this has little additional downside.
Down 33%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.62 (Was $4.42)
Up $.05 at $2.28.
No news
Down 5%. HOLD

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $4.18 (was $4.15)
Closed down $.24 at $1.22
Formula Systems (NASDAQ-FORTY) filed an amended Schedule 13D in early September 2008. They added 569,000 shares to their position between May and August and now hold 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor, but this is a good sign of course.
Down 37%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.03
Closed down $.09 at $3.05
Has $1.80 per share in cash.
Blueline Partners filed a 13D on ANGN on June 23, 2008. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 20%. BUY

Noah Educational. (NED-Recommended 10/5/2008)
Buy Price-$3.03(was $3.00 before $10,000 added)
Valuation $7.98 (Was $7.18)
Closed down $.12 at $3.17
Has cash of $3.93 per share (before special dividend).NED traded ex-dividend in late December.
Up 23% (adjusted for $.56 dividend). HOLD

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $10.26
Closed up $.12 at $3.32
Cash is $2.08 per share.
Up 10%. BUY

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price-$3.69
Valuation NA-Dividend yield play
Closed down $.01 at $3.49
Current dividend yield–26%
Fleet utilization is still 98%. Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012. By then, you will have collected more than the current share price in dividends.
Down 5%. HOLD

Middlebrook Pharmaceutical. (MBRK-Recommended 10/12/2008)
Buy Price-$1.16
Valuation-NA-Speculation
Closed up $.06 at $1.64
“Earnings” out in mid November. $2 million in sales and $12 million loss and $83 million of cash left. They expect 2009 sales to be about $40 million and will lose money. Some possibility of profits in 2010 and they think they have enough cash to last until then. Again, this is a speculation. Increased sales in 2009 will drive this stock.
New management and capital investment at $3.90 a share.
Up 41%. HOLD

SonicWALL. (SNWL-Recommended 10/20/2008)
Buy Price-$4.50
Valuation-$11.09(Was $10.44)
Closed down $.44 at $3.69
$3.02 cash per share.
No news.
Down 18%. BUY

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$9.10
Valuation-$29.49
Closed down $1.09 at $8.38
CYNO has $7.33 per share in cash.
Down 8%. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.88 (Was $21.07)
Closed down $.70 at $8.01
Cash per share was $8.56 per share. Our valuation fell to $18.88 per share.
We think that given the low valuations in this sector, that consolidation is just around the corner. Too much cash, high margins and a declining economy.
Trading at just above cash value.
Up 2%. 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 $5.66 (was $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.85, down $.23.
Wake up management–you have a great little company here worth 5X what it is selling for.
Now down 47%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $3.30 (was $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.50, down $.01.
Earnings out in mid-November. Sales down 13%, but they remained profitable. Made $.01versus $.02 last year.
Down 37%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.40 (Was $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price down $.05 at $.08. Closed at $.07.
Their VOIP business continues to struggle and lose money–$604,000 in the last quarter–but they did have some revenues–$38,000!
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value.
Still an “undercover” company and stock.
This is still trading at only 6% of our latest valuation.
Down 70%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.22 (Was $1.61, $2.28, $2.08)
Closed at $.38, up $.14
For the 9 months of 2008, EPS is $.13 per share. So looks like we are selling at about 2X earnings. Unusual legal structure, $70 million factory plan, $17 million land deposit all hang over this company. Stock market stinks, Chinese stocks maybe even worse than most.
Down 55%. BUY

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Cheap Stocks, 1/2/2009 Update

Short stub-week, so short update. Markets were all up on Friday in this holiday shortened week–on low volume. The DOW was up 2.9%, NASDAQ was up 3.5% and the S&P500was up 3.1%.

We managed to hang in there with a 3.4% gain for the day of 2009.

While the black cloud of ICE etc. still hangs over SPNC, we are adding another $10,000 here ($2.72). The price seems too compelling–but there is still high risk here if the investigation turns up some bad things. The new average buy price will be–$5.68.

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Cheap Stocks, 12/31/2008 Update

Whew. Glad 2008 is finally over. Worst year since 1987 that I have seen. Valuations of many stocks are still anticipating a dismal 2009–which well could happen. I don’t see too many businesses that are expecting a good 2009, which means they are all pulling back on spending/purchasing. So this will likely be a self-fulfilling prophesy.

The last week of 2008 ended on an up note. Tax loss selling waited to abate until the last days of the year, before the bargain hunters finally stepped up a bit. The DOW was up 3.1%, NASDAQ 3.1 and and S+P 500 3.5%. For the year the DOW was now down 34%, NASDAQ 41% and the S+P 500 was down 39%. The Russell 3000 and the Wilshire 5000 were also down about 39% this year.

We had a 4.9% gain last week and are down 46% for the year.

Last week we went 15 stocks up and 7 down. Since inception we are now 25 stocks up, and 20 down.

Since inception we have closed out the following positions:

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 23 stocks that we closed out in 2006, 2007 and 2008 the average gain was 22%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $8.90 (was $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Down $.32 to $2.61.
They are still predicting at least $107 million in sales for the year, which means Q4will be over $27 million in sales. At the current $83 million market-cap, SPNC is trading at less than 50% of sales, net of $44 million in cash. Cash includes $16 million of auction-rate securities. Based on what we have been reading, these “investments” will likely turn out OK.
SPNC is suffering from the FDA, ICE raids that apparently eminated from an ex-employee whistle-blower trying to collect so money from the company. SPNC has the financial where-with-all to deal with this. Just got to wait this one out.
The company has $44 million in cash ($1.30 per share), no debt and is trading at less than 50% of 2008 revenues (net of cash)and is growing about 25% a year.
Now down 71%. HOLD.

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $11.48 (was $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up $.70 at $4.80.
Cannell Capital filed a 13D on February 19th, disclosing a 12.9% ownership stake. Cannell is pushing MEDW management to sell the company. Meanwhile, Constellation Software, a Canadian public company that has been on an acquisition binge filed a 13D in April, disclosing a 6.1% ownership in MEDW (499,000 shares). Constellation has $243 million in revenues and is profitable.
In early May, Constellation increased its bank credit line to $105 million from $50 million.
On November 14th, Constellation filed a 13D/A. One of their subsidiary officers bought over 300,000 MEDW shares in October, bringing their combined owership in MEDW to 17.9%
Looks like something is going to happen here–but when?
Down 24%. HOLD

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $5.88 (was $8.63, $9.90, $8.69, $11.51)
Up $.07 to $.49
CLZR has hired an investment banker to sell the company. We’ll see. Maybe Palomar will buy it to cut both there legal fees ($3.2 million this quarter for CLZR).
Looks like Palomar’s lawsuit against CLZR has been “stayed” by the courts for a while. Legal expense should drop for maybe a couple of years.
Down 87%. HOLD, we may get lucky and this thing will be sold for North of $1.

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.79 (was $1.82 before adding $10,000, $2.02 before $10,000 added and $2.15 before double up),
Valuation $4.66 (Was $6.00, $5.96)
Up $.02 at $.65.
Finaciere De Sainte Marine, is a big investor in HPOL. They now own 7,779,000 shares up from 6,640,381 shares in mid-2008, or just over 14% of the company.
Trading at 14% of our valuation.
Down 64%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.90 (Was $2.07 before another $10,000 added and $2.15 before double up), Valuation $4.99 (was $4.30, $4.09)
Up $.08 to $1.22.
They still have $1.10 per share in cash.
Foxhill now owns 3,844,000 shares or 6.1% of IPASS.
With $1.10 per share in cash (over 90% of market cap), we feel that this has little additional downside.
Down 36%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.62 (Was $4.42)
Up $.23 at $2.33.
No news
Down 3%. HOLD

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $4.18 (was $4.15)
Closed up $.19 at $1.28
Formula Systems (NASDAQ-FORTY) filed an amended Schedule 13D in early September. They added 569,000 shares to their position between May and August and now hold 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor, but this is a good sign of course.
Down 34%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.03
Closed up $.46 at $3.15
Has $1.80 per share in cash.
Blueline Partners filed a 13D on ANGN on June 23. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 18%. BUY

Noah Educational. (NED-Recommended 10/5/2008)
Buy Price-$3.03(was $3.00 before $10,000 added)
Valuation $7.98 (Was $7.18)
Closed down $.05 at $3.15
Has cash of $3.93 per share (before special dividend).NED traded ex-dividend in late December.
Up 23% (adjusted for $.56 dividend). HOLD

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $10.26
Closed up $.27 at $3.20
Cash is $2.08 per share.
Up 6%. BUY

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price-$3.69
Valuation NA-Dividend yield play
Closed up $.46 at $2.86
Current dividend yield–39%
Fleet utilization is still 98%. Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012. By then, you will have collected more than the current share price in dividends.
Down 23%. BUY

Middlebrook Pharmaceutical. (MBRK-Recommended 10/12/2008)
Buy Price-$1.16
Valuation-NA-Speculation
Closed down $.23 at $1.50
“Earnings” out in mid November. $2 million in sales and $12 million loss and $83 million of cash left. They expect 2009 sales to be about $40 million and will lose money. Some possibility of profits in 2010 and they think they have enough cash to last until then. Again, this is a speculation. Increased sales in 2009 will drive this stock.
New management and capital investment at $3.90 a share.
Up 29%. HOLD

SonicWALL. (SNWL-Recommended 10/20/2008)
Buy Price-$4.50
Valuation-$11.09(Was $10.44)
Closed up $.18 at $3.98
$3.02 cash per share.
No news.
Down 12%. HOLD

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$9.10
Valuation-$29.49
Closed up $1.19 at $9.13
CYNO has $7.33 per share in cash.
EVEN. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.88 (Was $21.07)
Closed down $.09 at $8.87
Cash per share was $8.56 per share. Our valuation fell to $18.88 per share.
We think that given the low valuations in this sector, that consolidation is just around the corner. Too much cash, high margins and a declining economy.
Trading at just above cash value.
Up 13%. 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 $5.66 (was $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $1.08, up $.18.
Wake up management–you have a great little company here worth 5X what it is selling for.
Now down 33%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $3.30 (was $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.51, up $.11.
Earnings out in mid-November. Sales down 13%, but they remained profitable. Made $.01versus $.02 last year. Trading at only 12% of our valuation.
Down 36%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.40 (Was $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price up $.03 at $.13. Closed at $.13.
Their VOIP business continues to struggle and lose money–$604,000 in the last quarter–but they did have some revenues–$38,000!
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value.
Still an “undercover” company and stock.
This is still trading at only 9% of our latest valuation.
Down 52%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.22 (Was $1.61, $2.28, $2.08)
Closed at $.20, down $.04
For the 9 months of 2008, EPS is $.13 per share. So looks like we are selling at less than 2X earnings. Unusual legal structure, $70 million factory plan, $17 million land deposit all hang over this company. Stock market stinks, Chinese stocks maybe even worse than most.
Down 76%. BUY

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Cheap Stocks, 12/26/2008 Update

Again we apologize for our recent hiatus. Not much has changed in the market since our last update, but at least we seem to have leveled off and are not getting the 400point plunges–at least for a while.

Last week The DOW was down 1.3%, NASDAQ .7 and and S+P 500 .8%. For the year the DOW is now down 36%, NASDAQ 42% and the S+P 500 is down 41%. The Russell 3000 and the Wilshire 5000 are also down about 41% this year.

We had a .2% loss last week and are down 51% for the year.

Last week we went 7 stocks up, 14 down and 1 even. Since inception we are now 23 stocks up, and 22 down.

Since inception we have closed out the following positions:

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 23 stocks that we closed out in 2006, 2007 and 2008 the average gain was 22%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $8.90 (was $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Up $.18 to $2.93.
They are still predicting at least $107 million in sales for the year, which means Q4will be over $27 million in sales. At the current $94 million market-cap, SPNC is trading at about 50% of sales, net of $44 million in cash. Cash includes $16 million of auction-rate securities. Based on what we have been reading, these “investments” will likely turn out OK.
SPNC is suffering from the FDA, ICE raids that apparently eminated from an ex-employee whistle-blower trying to collect so money from the company. SPNC has the financial where-with-all to deal with this. Just got to wait this one out.
The company has $44 million in cash ($1.30 per share), no debt and is trading at about 50% of 2008 revenues (net of cash)and is growing about 25% a year.
Now down 67%. HOLD.

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $11.48 (was $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Down $.23 at $4.10.
Cannell Capital filed a 13D on February 19th, disclosing a 12.9% ownership stake. Cannell is pushing MEDW management to sell the company. Meanwhile, Constellation Software, a Canadian public company that has been on an acquisition binge filed a 13D in April, disclosing a 6.1% ownership in MEDW (499,000 shares). Constellation has $243 million in revenues and is profitable.
In early May, Constellation increased its bank credit line to $105 million from $50 million.
On November 14th, Constellation filed a 13D/A. One of their subsidiary officers bought over 300,000 MEDW shares in October, bringing their combined owership in MEDW to 17.9%
Looks like something is going to happen here–but when?
Down 35%. HOLD

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $5.88 (was $8.63, $9.90, $8.69, $11.51)
Down $.08 to $.42
CLZR has hired an investment banker to sell the company. We’ll see. Maybe Palomar will buy it to cut both there legal fees ($3.2 million this quarter for CLZR).
Looks like Palomar’s lawsuit against CLZR was “stayed” by the courts last week. Legal expense should drop for maybe a couple of years.
Down 89%. HOLD, we may get lucky and this thing will be sold for North of $1.

MIVA. (MIVA-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $5.61 (was $6.42, $6.84, $7.58, $7.59)
Down $.03 to $.22.
Blinkx, a U.K. company made an all cash offer to buy MIVA in early August for $1.20. MIVA rejected the offer almost immediately saying it was too low and they think they can do better.
They better, or there will be shareholder lawsuits on this one.
Even though MIVA is a money losing mess, they are at such a low price to valuation that we will hold for another quarter.
Blinkx recently came back with a $.55 offer to buy MIVA. Not much can make a stock go up these days–even a 100% premium take-over offer.
Trading at 4% of our latest valuation
Down 87%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.79 (was $1.82 before adding $10,000, $2.02 before $10,000 added and $2.15 before double up),
Valuation $4.66 (Was $6.00, $5.96)
Down $.02 at $.63.
Finaciere De Sainte Marine, is a big investor in HPOL. They now own 7,779,000 shares up from 6,640,381 shares just a few months ago, or just over 14% of the company.
Trading at 14% of our valuation.
Down 65%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.90 (Was $2.07 before another $10,000 added and $2.15 before double up), Valuation $4.99 (was $4.30, $4.09)
Down $.01 to $1.14.
They still have $1.10 per share in cash.
Foxhill now owns 3,844,000 shares or 6.1% of IPASS.
With $1.10 per share in cash (96% of market cap), we feel that this has little additional downside.
Down 40%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.62 (Was $4.42)
Down $.07 at $2.10.
No news
Down 13%. HOLD

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (12.1% dividend yield)
Valuation $17.23 (Was $18.36)
Up $.12 to $3.62.
No news.
Down 34%. BUY

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $4.18 (was $4.15)
Closed down $.06 at $1.09
Formula Systems (NASDAQ-FORTY) filed an amended Schedule 13D in early September. They added 569,000 shares to their position between May and August and now hold 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor, but this is a good sign of course.
Down 43%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.03
Closed down $.03 at $2.69
Has $1.80 per share in cash.
Blueline Partners filed a 13D on ANGN on June 23. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
Down 30%. BUY

Noah Educational. (NED-Recommended 10/5/2008)
Buy Price-$3.03(was $3.00 before $10,000 added)
Valuation $7.98 (Was $7.18)
Closed up $.24 at $3.20
Has cash of $3.93 per share (before special dividend).NED traded ex-dividend on Friday.
Up 24% (adjusted for $.56 dividend). HOLD

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $10.26
Closed up $.05 at $2.93
Cash is $2.08 per share–71% of the current market cap.
Down 3%. BUY

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price-$3.69
Valuation NA-Dividend yield play
Closed down $.10 at $2.40
Current dividend yield–38%
Fleet utilization is still 98%. Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012. By then, you will have collected more than the current share price in dividends.
Down 35%. BUY

Middlebrook Pharmaceutical. (MBRK-Recommended 10/12/2008)
Buy Price-$1.16
Valuation-NA-Speculation
Closed down $.03 at $1.73
“Earnings” out in mid November. $2 million in sales and $12 million loss and $83 million of cash left. They expect 2009 sales to be about $40 million and will lose money. Some possibility of profits in 2010 and they think they have enough cash to last until then. Again, this is a speculation. Increased sales in 2009 will drive this stock.
New management and capital investment at $3.90 a share.
Up 49%. HOLD

SonicWALL. (SNWL-Recommended 10/20/2008)
Buy Price-$4.50
Valuation-$11.09(Was $10.44)
Closed down $.21 at $3.80
$3.02 cash per share.
No news.
Down 16%. HOLD

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$9.10
Valuation-$29.49
Closed down $.93 at $7.94
CYNO has $7.33 per share in cash–95% of its market-cap. Cheap.
Down 13%. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.88 (Was $21.07)
Closed down $.09 at $8.96
Cash per share was $8.56 per share. Our valuation fell to $18.88 per share.
We think that given the low valuations in this sector, that consolidation is just around the corner. Too much cash, high margins and a declining economy.
Trading at just above cash value.
Up 14%. 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 $5.66 (was $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.90, unchanged.
Wake up management–you have a great little company here worth 5X what it is selling for.
Now down 44%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $3.30 (was $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.40, up $.05.
Earnings out in mid-November. Sales down 13%, but they remained profitable. Made $.01versus $.02 last year. Trading at only 12% of our valuation.
Down 50%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.40 (Was $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price unchanged at $.10. Closed at $.04.
Their VOIP business continues to struggle and lose money–$604,000 in the last quarter–but they did have some revenues–$38,000!
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value.
Still an “undercover” company and stock.
This is still trading at only 7% of our latest valuation.
Down 63%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.22 (Was $1.61, $2.28, $2.08)
Closed at $.24, down $.01
For the 9 months of 2008, EPS is $.13 per share. So looks like we are selling at less than 2X earnings. Unusual legal structure, $70 million factory plan, $17 million land deposit all hang over this company. Stock market stinks, Chinese stocks maybe even worse than most.
Down 67%. HOLD

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12/12/2008

Sorry for the lack of updates. Computer problems, family health problems and a new job have all combined to make it impossible to give you the last 2 weeks updates. I plan to update again next week.

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Cheap Stocks, 11/21/2008 Update

It seems to never end. The markets backed off from double digit losses for the week on Friday, but still ended up with substantial losses. Mutual Fund liquidation, hedge fund, personal fund liquidations, margin calls, tax selling, Q4 earnings warnings.

The DOW was down 5.%, NASDAQ 8.7 and and S+P 500 8.4%. For the year the DOW is now down 39%, NASDAQ 48% and the S+P 500 is down 46%. The Russell 3000 and the Wilshire 5000 are also down about 47% this year.

We had a 6.7% loss last week and are down 50% for the year. Even good earnings and a special dividend barely moved NED last week.

There are a ton of values out there, that, if you assume that our economy will not implode, are once in a lifetime values.

Last week we went 6 stocks up, and 16 down. Since inception we are now 21 stocks up, 23 down and 1 even.

Since inception we have closed out the following positions:

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 23 stocks that we closed out in 2006, 2007 and 2008 the average gain was 22%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $8.90 (was $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Up $.23 to $2.49.
They are still predicting at least $107 million in sales for the year, which means Q4will be over $27 million in sales. At the current $72 million market-cap, SPNC is trading at a little over 25% of sales, net of $44 million in cash. Cash includes $16 million of auction-rate securities. Based on what we have been reading, these “investments” will likely turn out OK.
SPNC is suffering from the FDA, ICE raids that apparently eminated from an ex-employee whistle-blower trying to collect so money from the company. Over the last couple of weeks the bottom feeding securities lawyers decided to target the company’s cash hoard too. Now the CEO has resigned. Perfect storm.
SPNC has the financial where-with-all to deal with this. Just got to wait this one out.
Some insider buying popping up here. Maybe things are not as bad as the stock price reflects?
The company has $44 million in cash ($1.30 per share), no debt and is trading at about 25% of 2008 revenues (net of cash)and is growing about 25% a year.
Now down 72%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
NEW Valuation $8.12 (was $8.64, $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed at $1.36, up $.36.
Earnings last week. So the stock jumped a whopping 36% to a disheartening $1.36
Sales fell from $6.9 million to $5.3 million, but they maintained profitability of $.05 a share versus $.14 last year. Cash moved up to $.82 per share, but our valuation fell to $8.12 from $8.64.
Trading at a measly 17% of our valuation.
Now down 58%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $11.48 (was $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Down $.87 at $3.98.
Cannell Capital filed a 13D on February 19th, disclosing a 12.9% ownership stake. Cannell is pushing MEDW management to sell the company. Meanwhile, Constellation Software, a Canadian public company that has been on an acquisition binge filed a 13D in April, disclosing a 6.1% ownership in MEDW (499,000 shares). Constellation has $243 million in revenues and is profitable.
In early May, Constellation increased its bank credit line to $105 million from $50 million.
On November 14th, Constellation filed a 13D/A. One of their subsidiary officers bought over 300,000 MEDW shares in October, bringing their combined owership in MEDW to 17.9%
MEDW announced a small acquisition in the hospital pharmacy software market last week. Cost about $3.5 million upfront. No revenue details provided.
Looks like something is going to happen here–but when?
Down 37%. HOLD

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $5.88 (was $8.63, $9.90, $8.69, $11.51)
Up $.07 to $.46
Earnings out in mid September. Sales down 24% and they lost $7 million pre-tax. Still have $1.29 per share in cash, but burning through it. New valuation is $5.88 per share. They hired an investment banker to sell the company. We’ll see. Maybe Palomar will buy it to cut both there legal fees ($3.2 million this quarter for CLZR).
Looks like Palomar’s lawsuit against CLZR was “stayed” by the courts last week. Legal expense should drop for maybe a couple of years.
Down 88%. HOLD, we may get lucky and this thing will be sold for North of $1.

MIVA. (MIVA-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $5.61 (was $6.42, $6.84, $7.58, $7.59)
Down $.02 to $.25.
Blinkx, a U.K. company made an all cash offer to buy MIVA in early August for $1.20. MIVA rejected the offer almost immediately saying it was too low and they think they can do better.
They better, or there will be shareholder lawsuits on this one.
Even though MIVA is a money losing mess, they are at such a low price to valuation that we will hold for another quarter. Hopefully we get a better take-over offer above our cost basis.
MIVA issued a press release in early October. Looks like they may be in active discussions to sell the company. Not a great environment to sell–but there is some hope.
Last week Blinkx came back with a $.55 offer to buy MIVA. The stock jumped a bit–but settled back DOWN $.02! Not much can make a stock go up these days–even a 100% premium take-over offer.
Trading at 5% of our latest valuation
Down 85%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.79 (was $1.82 before adding $10,000, $2.02 before $10,000 added and $2.15 before double up),
Valuation $4.66 (Was $6.00, $5.96)
Down $.23 at $.74.
Earnings out in October, not great. Sales down 9% and they had an operating loss of $3.5 million compared to an operating profit of $1.6 million last year. Basically they failed to cut expenses as the $5 million decline in sales, dropped directly to the bottom line. This is likely why they hired a new CEO and pledged to cut expenses.
Finaciere De Sainte Marine, is a big investor in HPOL. They now own 7,779,000 shares up from 6,640,381 shares just a few months ago, or just over 14% of the company.
Trading at 18% of our valuation.
Down 59%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.90 (Was $2.07 before another $10,000 added and $2.15 before double up), Valuation $4.99 (was $4.30, $4.09)
Down $.06 to $1.54.
Earnings out in early November. Not bad. Sales were flat (dial-up revenues dropped only $600,00 and they had a non-GAAP profit of $500,000–down from $700,000 last year. They still have $1.10 per share in cash. They also announced that they were no longer considering selling the company–rats! New CEO announced also. On the conference call, the old CEO was very curt to Foxhill’s pointed questions. Foxhill has been buying more shares (13D/A filed in September for another 272,000 shares). Foxhill now owns 3,844,000 shares or 6.1% of IPASS.
With $1.10 per share in cash (75% of market cap), we feel that this has little additional downside.
Down 19%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.62 (Was $4.42)
Down $.38 at $2.37.
Company buying back shares, insiders buying shares (steadily)–what’s up here.
No news
Down 1%. HOLD

CCA Industries. (CAW-Recommended 8/4/2008)
Buy Price-$5.51 (was $6.14 before $10,000 added, $6.66 before $10,000 added, $7.00 before $10,000 added) (10.8% dividend yield)
Valuation $17.23 (Was $18.36)
Down $.23 to $3.82.
No news.
Down 31%. BUY

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
Valuation $4.18 (was $4.15)
Closed down $.32 at $1.28
Earnings out in November. Revenues up 8% to $15.8 million, non-GAAP EPS of $.06 per share. $1.02 in cash also. Our valuation moved up slightly to $4.18 per share.
Formula Systems (NASDAQ-FORTY) filed an amended Schedule 13D in early September. They added 569,000 shares to their position between May and August and now hold 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor, but this is a good sign of course.
Down 34%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.03
Closed down $1.00 at $2.50
Has $1.80 per share in cash.
Blueline Partners filed a 13D on ANGN on June 23. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
No news to account for the plunge–just the relentless selling going on in all sectors.
Down 35%. HOLD

Noah Educational. (NED-Recommended 10/5/2008)
Buy Price-$3.03 (was $3.00 before $10,000 added)
NEW Valuation $7.98 (Was $7.18)
Closed up $.24 at $2.40
Earnings out last week. Not bad.Sales were $29.8 million, down 18%. They made $.14 per share. Next quarter guidance was a bit weak, but they still expect to be profitable. Cash grew to $3.93 per share and our valuation rose to $7.98 (sorry previous valuation of $13.03 was a misprint). NED also announced a special one-time dividend of $.56 per share (this needs shareholder approval–so I approve)
Down 21%. BUY

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $10.26
Closed down $.40 at $2.54
Cash is $2.08 per share–80% of the current market cap.
Down 14%. BUY

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price-$3.69
Valuation NA-Dividend yield play
Closed down $.52 at $2.48
Current dividend yield–39%
Earnings 2 weeks ago were fine. Fleet utilization is still 98%. Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012. By then, you will have collected more than the current share price in dividends.
Down 33%. BUY

Middlebrook Pharmaceutical. (MBRK-Recommended 10/12/2008)
Buy Price-$1.16
Valuation-NA-Speculation
Closed down $.10 at $1.16
“Earnings” out in mid November. $2 million in sales and $12 million loss and $83 million of cash left. They expect 2009 sales to be about $40 million and will lose money. Some possibility of profits in 2010 and they think they have enough cash to last until then. Again, this is a speculation. Increased sales in 2009 will drive this stock.
New management and capital investment at $3.90 a share.
Even. HOLD

SonicWALL. (SNWL-Recommended 10/20/2008)
Buy Price-$4.50
Valuation-$11.09(Was $10.44)
Closed down $.09 at $3.37
$3.02 cash per share.
No news.
Down 25%. HOLD

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$9.10
Valuation-$29.49
Closed down $.81 at $7.59
CYNO has $7.33 per share in cash–95% of its market-cap. Cheap.
Down 17%. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.88 (Was $21.07)
Closed down $1.16 at $7.55
Earnings out in early November. Not good. Sales down 32% to $19.1 million. They actually had positive operating earnings of just over $100,000 (adding back $1.3 million of stock compensation BS). Pretty amazing operating performance considering the sales drop.
Cash per share rose to $8.56 per share. Our valuation fell to $18.88 per share.
We think that given the low valuations in this sector, that consolidation is just around the corner. Too much cash, high margins and a declining economy.
Trading at $1 below cash value.
Down 4%. 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 $5.66 (was $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.99, up $.34.
Earnings announced late October. Sales up 5% and they made $.05 per share. Pre-tax loss was $204,000 versus $180,000 last year. Even so, our valuation moved up to $5.66from $5.63 per share. This is still way too cheap.
Wake up management–you have a great little company here worth 3X what it is selling for.
Now down 39%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
NEW Valuation $3.30 (was $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.35, down $.10.
Earnings out in mid-November. Sales down 13%, but they remained profitable. Made $.01 versus $.02 last year. Our valuation fell to “only” $3.30 a share. Stock fell 39% last week. Illiquid, tax-loss selling we think.
Some insider buying lately.
Trading at only 10% of our valuation.
Down 56%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.40 (Was $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price up $.01 at $.10. Closed at $.07.
Earnings out mid-November. Nobody cared.
Their VOIP business continues to struggle and lose money–$604,000 in the last quarter–but they did have some revenues–$38,000!
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value.
Including a $2.85 million patent settlement gain, CTI earned $.05 in the quarter and $.03 for the nine months.
Even excluding the net patent gain, they had positive operating income for the quarter–despite the VOIP loss. Our valuation rose to $1.40
Still an “undercover” company and stock.
This is still trading at only 7% of our latest valuation.
Down 63%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
Valuation-$2.22 (Was $1.61, $2.28, $2.08)
Closed at $.28, down $.07
As noted last week, earnings were announced.
Sales were up marginally to $16.7 million from $16.6 million LY and they made $.07 per share versus $.05 last year. For the 9 months, EPS is $.13 per share. So looks like we are selling at a bit over 2X earnings. Our valuation spiked back up to $2.22. Hmmm. Unusual legal structure, $70 million factory plan, $17 million land deposit all hang over this company. Stock market stinks, Chinese stocks maybe even worse than most.
Down 67%. HOLD

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Cheap Stocks, 11/14/2008 Update

More of the same. Pretty discouraging for sure. Mutual Fund liquidation, hedge fund, personal fund liquidations, margin calls, tax selling, Q4 earnings warnings.

The DOW was down 5.0%, NASDAQ 7.9% and and S+P 500 6.2%. For the year the DOW is now down 36%, NASDAQ 43% and the S+P 500 is down 41%. The Russell 3000 and the Wilshire 5000 are also down about 41% this year.

We had a 9.3% loss last week and are down 46% for the year. 2/3’s of the loss came from AVSO.ob and ARIS.ob taking 30% hits and MIVA getting whacked 40%— on decent earnings in the case of AVSO and no news in the cases of ARIS and MIVA.

There are a ton of values out there, that, if you assume that our economy will not implode, are once in a lifetime values.

Last week we went 4 stocks up, and 16 down and 2 even. Since inception we are now 23 stocks up, 21 down and 1 even.

Since inception we have closed out the following positions:

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 23 stocks that we closed out in 2006, 2007 and 2008 the average gain was 22%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $8.90 (was $9.40 before adding $10,000,and was $10.65 before double up), Valuation –Suspended.
Down $.37 to $2.26.
They are still predicting at least $107 million in sales for the year, which means Q4will be over $27 million in sales. At the current $72 million market-cap, SPNC is trading at a little over 25% of sales, net of $44 million in cash. Cash includes $16 million of auction-rate securities. Based on what we have been reading, these “investments” will likely turn out OK.
SPNC is suffering from the FDA, ICE raids that apparently eminated from an ex-employee whistle-blower trying to collect so money from the company. Over the last couple of weeks the bottom feeding securities lawyers decided to target the company’s cash hoard too. Now the CEO has resigned. Perfect storm.
SPNC has the financial where-with-all to deal with this. Just got to wait this one out.
The company has $44 million in cash ($1.30 per share), no debt and is trading at about 25% of 2008 revenues (net of cash)and is growing about 25% a year.
Now down 75%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $2.41 (was $3.02 before adding another $10,000,was $3.21 before adding another $10,000, averaged down from $3.66),
Valuation $8.64 (was $8.47, $8.47, $10.30, $9.28, $9.20, $8.32, $7.50, $7.63, $9.31)
Closed at $1.00, down $.15.
They have $.75 a share in cash and are profitable.
Earnings out Thursday, Nov. 20, before the open
Trading at a measly 12% of our valuation.
Now down 58%. BUY

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $11.48 (was $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Up $.07 at $4.85.
Cannell Capital filed a 13D on February 19th, disclosing a 12.9% ownership stake. Cannell is pushing MEDW management to sell the company. Meanwhile, Constellation Software, a Canadian public company that has been on an acquisition binge filed a 13D in April, disclosing a 6.1% ownership in MEDW (499,000 shares). Constellation has $243 million in revenues and is profitable.
In early May, Constellation increased its bank credit line to $105 million from $50 million.
On November 14th, Constellation filed a 13D/A. One of their subsidiary officers bought over 300,000 MEDW shares in October, bringing their combined owership in MEDW to 17.9%
Looks like something is going to happen here–but when?
Down 23%. HOLD

Candela Corp. (CLZR-Recommended 8/30/2007)
Buy Price $3.74 (was $7.26 before double up), Valuation $5.88 (was $8.63, $9.90, $8.69, $11.51)
Down $.02 to $.39
Earnings out in mid September. Sales down 24% and they lost $7 million pre-tax. Still have $1.29 per share in cash, but burning through it. New valuation is $5.88 per share. They hired an investment banker to sell the company. We’ll see. Maybe Palomar will buy it to cut both there legal fees ($3.2 million this quarter for CLZR).
Down 89%. HOLD, we may get lucky and this thing will be sold for North of $1.

MIVA. (MIVA-Recommended 10/21/2007)
Buy Price $1.63 (Was $2.38 before adding another $20,000, $2.62 before another $10,000 and was $3.00 before double up),
Valuation $5.61 (was $6.42, $6.84, $7.58, $7.59)
Down $.18 to $.27.
Blinkx, a U.K. company made an all cash offer to buy MIVA in early August for $1.20. MIVA rejected the offer almost immediately saying it was too low and they think they can do better.
They better, or there will be shareholder lawsuits on this one.
Even though MIVA is a money losing mess, they are at such a low price to valuation that we will hold for another quarter. Hopefully we get a better take-over offer above our cost basis.
MIVA issued a press release in early October. Looks like they may be in active discussions to sell the company. Not a great environment to sell–but there is some hope.
Trading at 5% of our latest valuation
Down 84%. HOLD

Harris Interactive. (HPOL-Recommended 5/25/2008)
Buy Price $1.79 (was $1.82 before adding $10,000, $2.02 before $10,000 added and $2.15 before double up),
Valuation $4.66 (Was $6.00, $5.96)
No change at $.97.
Earnings out in October, not great. Sales down 9% and they had an operating loss of $3.5 million compared to an operating profit of $1.6 million last year. Basically they failed to cut expenses as the $5 million decline in sales, dropped directly to the bottom line. This is likely why they hired a new CEO and pledged to cut expenses.
Finaciere De Sainte Marine, is a big investor in HPOL. They now own 7,779,000 shares up from 6,640,381 shares just a few months ago, or just over 14% of the company.
Trading at 16% of our valuation.
Down 45%. BUY

IPASS. (IPAS-Recommended 6/1/2008)
Buy Price-$1.90 (Was $2.07 before another $10,000 added and $2.15 before double up), Valuation $4.99 (was $4.30, $4.09)
Down $.03 to $1.60.
Earnings out in early November. Not bad. Sales were flat (dial-up revenues dropped only $600,00 and they had a non-GAAP profit of $500,000–down from $700,000 last year. They still have $1.10 per share in cash. They also announced that they were no longer considering selling the company–rats! New CEO announced also. On the conference call, the old CEO was very curt to Foxhill’s pointed questions. Our valuation rose however to $4.99 a share from $4.30.
Foxhill has been buying more shares (13D/A filed in September for another 272,000 shares). Foxhill now owns 3,844,000 shares or 6.1% of IPASS.
With $1.10 per share in cash (75% of market cap), we feel that this has little additional downside.
Down 16%. BUY

Healthstream Inc. (HSTM-Recommended 8/4/2008)
Buy Price-$2.40
Valuation $4.62 (Was $4.42)
Up $.47 at $2.75.
Company buying back shares, insiders buying shares–what’s up here. Up 21% in a crap market. No news though
Up 15%. HOLD

Magic Software Enterprises. (MGIC-Recommended 8/18/2008)
Buy Price-$1.93 (was $2.08 before another $10,000 added, $2.00 before $10,000 added at $2.16)
NEW Valuation $4.18 (was $4.15)
Closed up $.30 at $1.60
Earnings out last week. Not bad. Revenues up 8% to $15.8 million, non-GAAP EPS of $.06 per share. $1.02 in cash also. Our valuation moved up slightly to $4.18 per share.
Formula Systems (NASDAQ-FORTY) filed an amended Schedule 13D in early September. They added 569,000 shares to their position between May and August and now hold 17,605,000 shares of MGIC or 55.4%. FORTY is a long-term investor, but this is a good sign of course.
Down 17%. BUY

Angeion Corporation. (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.03
Closed down $.19 at $3.50
Has $1.80 per share in cash.
Blueline Partners filed a 13D on ANGN on June 23. They own 216,000 shares or about 5.3% of the company. All of their purchases were well North of the current price.
No news.
Down 9%. HOLD

Noah Educational. (NED-Recommended 10/5/2008)
Buy Price-$3.03 (was $3.00 before $10,000 added)
Valuation $13.03
Closed down $.37 at $2.16
Still trading at below cash value of $3.62 and profitable. Current valuation is pretty stupid unless there is something that hasn’t been announced by the company.
Earnings out Nov. 20th before the open.
Down 29%. BUY

Datalink . (DTLK-Recommended 10/12/2008)
Buy Price-$3.02
Valuation $10.26
Closed up $.05 at $2.94
Cash is $2.08 per share–70% of the current market cap.
Down 3%. BUY

Global Shipping . (GSL-Recommended 10/12/2008)
Buy Price-$3.69
Valuation NA-Dividend yield play
Closed down $.31 at $3.00
Current dividend yield–31%
Earnings last week were fine. Fleet utilization is still 98%. Their average ship charter life is around 10 years and the closest-in renewal is at the end of 2012. By then, you will have collected more than the current share price in dividends.
Down 19%. BUY

Middlebrook Pharmaceutical. (MBRK-Recommended 10/12/2008)
Buy Price-$1.16
Valuation-NA-Speculation
Closed down $.11 at $1.26
“Earnings” out last week. $2 million in sales and $12 million loss and $83 million of cash left. They expect 2009 sales to be about $40 million and will lose money. Some possibility of profits in 2010 and they think they have enough cash to last until then. Again, this is a speculation. Increased sales in 2009 will drive this stock.
New management and capital investment at $3.90 a share.
Up 9%. HOLD

SonicWALL. (SNWL-Recommended 10/20/2008)
Buy Price-$4.50
Valuation-$11.09(Was $10.44)
Closed down $.53 at $3.46
$3.02 cash per share.
No news.
Down 23%. HOLD

Cynosure. (SNWL-Recommended 10/29/2008)
Buy Price-$9.10
Valuation-$29.49
Closed down $.67 at $8.40
CYNO has $7.33 per share in cash–87% of its market-cap. Cheap.
Down 8%. HOLD

Cutera. (CUTR-Recommended 10/29/2008)
Buy Price-$7.88
Valuation-$ 18.88 (Was $21.07)
Closed up $.31 at $8.71
Earnings out in early November. Not good. Sales down 32% to $19.1 million. They actually had positive operating earnings of just over $100,000 (adding back $1.3 million of stock compensation BS). Pretty amazing operating performance considering the sales drop.
Cash per share rose to $8.56 per share. Our valuation fell to $18.88 per share.
We think that given the low valuations in this sector, that consolidation is just around the corner. Too much cash, high margins and a declining economy.
Up 11%. 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 $5.66 (was $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.65, down $.30.
One trade on Friday of 8,500 share took this down 32%. Tax loss/liquidity selling we think.
Earnings announced late October. Sales up 5% and they made $.05 per share. Pre-tax loss was $204,000 versus $180,000 last year. Even so, our valuation moved up to $5.66from $5.63 per share. This is still way too cheap.
Wake up management–you have a great little company here worth 3X what it is selling for.
Now down 60%. BUY. Still a Huge valuation gap here.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
NEW Valuation $3.30 (was $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.45, down $.29.
Earnings out last week. Sales down 13%, but they remained profitable. Made $.01 versus $.02 last year. Our valuation fell to “only” $3.30 a share. Stock fell 39% last week. Illiquid, tax-loss selling we think.
Trading at only 13% of our valuation.
Down 43%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
NEW Valuation $1.40 (Was $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price unchanged at $.09. Closed at $.07.
Earnings out last week. Nobody cared.
Their VOIP business continues to struggle and lose money–$604,000 in the last quarter–but they did have some revenues–$38,000!
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value.
Including a $2.85 million patent settlement gain, CTI earned $.05 in the quarter and $.03 for the nine months.
Even excluding the net patent gain, they had positive operating income for the quarter–despite the VOIP loss. Our valuation rose to $1.40
Still an “undercover” company and stock.
This is still trading at only 6% of our latest valuation.
Down 67%. BUY

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $.84 (Was $.95 before $10,000 adder, $1.08 before double-up)
NEW Valuation-$2.22 (Was $1.61, $2.28, $2.08)
Closed at $.35, down $.02
10Q filed on Friday (conference call not till this coming Tuesday though).
Sales were up marginally to $16.7 million from $16.6 million LY and they made $.07 per share versus $.05 last year. For the 9 months, EPS is $.13 per share. So looks like we are selling at a bit over 2X earnings. Our valuation spiked back up to $2.22. Hmmm. Unusual legal structure, $70 million factory plan, $17 million land deposit all hang over this company. Stock market stinks, Chinese stocks maybe even worse than most.
Down 58%. HOLD

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