Cheap Stocks

We focus on undervalued small-cap stocks. Usually with a large cash cushion. We have developed a valuation formula that has been highly successful, especially on small tech stocks. Since 2006, we have closed out 49 stock positions with an average gain of 37%. 9 stocks have been taken over.

Saturday, June 23, 2007

6/22/2007 Update--good week for CSI +3.2%

Last week we went 4 up and 6 down and 4 even. LINN.ob holds first place on our "biggest dog" list (by far) followed by PARL, BDR, ILOG, ARIS.ob and BDAY. For the week, 2007 year-to-date, and since we started this Blog in January 2006, our model portfolio is +3.2%,+25.1% and +44.3% respectively. Since inception we are now 17 stocks up and 6 down (3 of which are down less than 10%) and 1 even.

We were up 3.2% this past week and are now up 25.1% so far in 2007. The DOW, NASDAQ and the S+P 500 were all down with losses ranging from 1.4% (NASDAQ) to 1.9% (NASDAQ + S+P 500) last week, and are all now up from 6.0% (S+P 500) to 7.4% (DOW) for the year. We are now up more than triple all these averages in 2007.

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)

The model portfolio assumes $10,000 invested in each stock, less $10 commission each way (TD Ameritrade rate).

For the 10 stocks that we have closed out in 2006 and 2007 the average gain was 35%. We are tired of watching our stocks go up--and then down. So we are planning to take profits a bit sooner than in 2006. We have already closed out 6 positions in 2007 compared to 4 in all of 2006.

News on SPNC, AVSO.ob. 13D filed on MEDW also.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $10.65, Valuation $18-$20
Up $1.21 to $11.23 last week.
Nice jump in a bad market--finally. Piper Jaffray issued an "outperform" opinion on SPNC with a measley $13 price target--but it helped. Maybe they are just prepping for the TURBO-booster approval, and will then up their target price.
Short interest is 4.4 million shares. We are just waiting for FDA approval. If the TURBO-Booster is approved (no reason to expect it will not be), this should be huge.
Now up 5% so far. BUY.

QAD Inc. (QADI-Recommended 6/14/2006)
Buy price $6.93, Valuation $11.27 (was $15.92, $13.69, $13.73 and $11.86)
Closed at $8.19, down $.07.
Our valuation has fallen from $15.92 to $11.27, but if they can hit their guidance for the year, the valuation would be approximately $14.60--78% above the current price. But since they seem to have trouble hitting their numbers--we will hold for now.
No news
Up 18% so far. HOLD.

PDL BioPharma Inc. (PDLI-Recommended 5/21/2006)
Buy price $19.31, Valuation > $30
Closed at $23.61, down $1.07.
Our gains are slipping away on this one, and it makes no sense to us.
Activist investment firm Third Point LLC, owns 11.2 million shares or 9.7% of the company and has more than $200 million invested. They continue to exert pressure on PDL to improve shareholder value. This however, remains a very volatile stock.
If this reaches $30, without a buy-out, we would sell.
Now up 22%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $3.21 (averaged down from $3.66), Valuation $9.20 (was $8.32, $7.50, $7.63, $9.31)
Closed at $5.86, up $.62 for the week. DWCH did pop over $6 last week, but couldn't hold there.
If this gets to $7 we would sell.
No news.
Now up 83%. HOLD.

Parlux Fragrances (PARL-Recommended 11/30/2006)
Buy price $6.12 (was $6.65 before double up), Valuation $8.63 (Was $13.77)
PARL closed at $4.55, unchanged last week.
New management needs to get to work on this one fast.
The new management has 2.2 million reasons to make this stock go up. Glenn Nussdorf paid $6 for his shares.
Down 26%. HOLD.

Blonder Tongue Laboratories (BDR-Recommended 3/4/2007)
Buy price $1.83, Valuation $4.01 (was $5.12, $5.88).
Closed at $1.56 down $.04 for the week.
Our valuation has dropped to $4.01. BDR is still cheap in our opinion, but they need a decent quarter to get this stock moving up.
No news.
Trading at 40% of our valuation.
Down 15%. HOLD

ILOG SA (ILOG-recommended 3/26/2007)
Buy price $13.60, Valuation $20.99 (was $20.52)
Closed at $12.44 last week, down $.18.
No news.
Down 9%. BUY

Celebrate Express (BDAY-recommended 4/17/2007
Buy Price $8.82, Valuation $18.18
Down $.40 to $8.51 last week
With the insider buying in the last couple of months, we like this stock alot.
Down 4%. BUY

Mediware (MEDW-Recommended 6/4/2007
Buy Price $6.98, Valuation $13.40
Up $.45 to $7.45 last week.
Penninsula Capital filed a 13D last week. Bought another 222,000 shares over the past few weeks at prices from $6.75 to $7.27. Now own 1.65 million shares or 20.4% of MEDW. They had previously filed 13G's and have now converted to a 13D--maybe they are going to get more active in trying to get the value up here? Not sure how they liguidate there stake profitably without a takeover.
Up 7%. HOLD

OB-abies (Bulletin Board Listed Stocks)

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.78 (was $2.06 before double up), Valuation $5.34 (was $5.03, $5.28, $5.28, $5.21)
Closed at $1.69, down $.05 last week.
Now down 5%. BUY. Still a Huge valuation gap here.

Lion Inc. (LINN.ob-Recommended 4/15/2006)
Buy price $.36, Valuation $.49 (was $.57, $.62, $.66 and before that $.79)
Closed at $.19, unchanged last week.
This one has cost us about 3% off our total 2007 performance so far.
One of the Lion co-founders and other shareholders started a proxy contest to get elected to the Board at the shareholders meeting last week (June 20). Obviously they are not happy with the company, or stock performance. With the cost cutting measures announced recently--maybe the proxy contest will liven the stock price up a bit. Would like to at least cut our losses on this one.
No news yet from the meeting or voting.
Down 47%. HOLD until we get some revenue growth and stop losing money (same story as last quarter(s)).

OPTIO Software Inc. (OPTO.ob-Recommended 3/22/2006)
Buy price $1.25, Valuation $2.28 (was $2.89, $2.89, $2.54 and 2.88)
Closed at $1.25, up $.10 last week.
Even with the lousy last quarter, there is still value here.
Has cash of $.44 per share--3%5 of the market cap.
Still hoping we will see north of $2.00 this year--but may not happen now unless next quarter rebounds with some decent numbers.
Dead even on this one so far. HOLD.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $1.19,Valuation $3.25 (was $3.29 $2.69, $3.36, $3.81)
Stock closed at $1.20, unchanged last week.
AVSO.ob, announced a $200,000 sale last week and the stock did nothing.
Trading at 37% of our valuation.
No news.
Now up 1%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask, Valuation $1.29 (Was $1.42, $1.28 $1.13, $1.05, $.82)
Ask price unchanged last week at $.37. Closed at $.35.
This is still trading at only 29% of our latest valuation, but until the VOIP business stops losing money, we are not buyers--yet.
Only 5,200 shares traded all of last week.
Up 37% based on the ASK price


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