Bad week last week as we were down 4.4%, and are up 2.7%
for 2014. The DOW was up .1% and NASDAQ was down 2.8%. For the year, the DOW is
down 1.5% and NASDAQ is down .5%
No earnings last week.
Some of our stocks are just stupid cheap—compared to their net
cash on hand per share divided by their stock price.
Check this list:
GRVY
|
169%
|
CCUR
|
31%
|
SIGM
|
56%
|
MRVC
|
22%
|
SYNC
|
52%
|
BLIN, DAEG, GRVY and CBEY can still be bought.
Last week we went 0 stocks up, 13 down and 1 unchanged.
Since inception we are now 66 stocks up and 18 down for a 78.6% winning
percentage (80% is our target win %).
Since our beginning,
we have closed out the following positions:
2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW
+21% (Buyout
offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR
+19%
2007-LINN.ob -57% (mortgage business bust didn't help here)
2007-TISA -39% (take some tax loss for 2007 due to
disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or
"take-under")
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%
2009-MBRK +67%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33% (fourth trip on this)
2009-NED +46%
2009-CUTR +13%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL
+78%
2010-CCEL +49%
2010-HPOL +27% (third trip)
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%
2012-BVSN +30%
2012-TISA +137%
2012-PTIX -44%
2012-MTSL +157%
2012-LTUS -98% No more Chinese stocks for us
2012-AEZS -63%
a bad
speculation.
2012-RIMG -46% (including dividends)
2012-HPOL +34% (4
th trip)
2012-MEDW +133% (Buyout 1 week AFTER we sold this)
2012-SPNC +118%
2012-RWWI +1%
2012-MOTR -29% (lost biggest customer contract)
2013-INUV -83% Held this since 2007. Failed business model.
2013-ASTX-+40%
2013-MGCD-+79%
2013-LXK +2%
2013-AGYS +41%
2013-DRIV+31%
2013-EXTR +63%
2013-MITL +183%
2013-QADA +51%
2014-AVNW-28%
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 68 stocks that we closed out since 2006 (57 were
winners) the average net gain was 34%
United Online Inc.
(NASDAQ-UNTD)-Recommended 3/12/2014)
Buy Price $10.28
Valuation $27.86
Closed down $.06 at $11.62
UP 13%
Synacor Inc.
(NASDAQ-SYNC)-Recommended 12/17/2013)
Buy Price $2.56
Valuation $6.67 (Was $6.39)
Closed down $.12 at $2.44
Earnings announced on March 5, 2014. They did what they said
they were going to do-revenue of $29.4 million, which was still down from $32.2
million last year. They made $.01 per share versus $.03 last year (GAAP basis).
Gross margin held steady at 46% and cash per share was $1.32—50% of the current
market price. Our valuation rose to $6.67.
All in all, a good quarter. But—their guidance
for next quarter and year was not so great. Next quarter they are projecting
revenue of $24-$25 million and an adjusted EBITDA loss of $.7 to $1.2 million
and for 2014, revenue of $100-$105 million and positive adjusted
EBITDA of $2 to $5 million. Based on their
2014 year guidance, our valuation would fall to about $5.94 a share—still more
than double the current price. Offsetting this, is that they are booting our
their CEO and looking for a new one, and they instituted a $5 million share
repurchase plan. We will change this one to a HOLD for now. No panic, just a
wait and see attitude for a while.
Down 5%. HOLD
Dex Media Inc.
(NASDAQ-DXM)-Recommended 5/10/2013)
Buy Price $15.14
Valuation $34.36 ( Was $31.50, $24.25)
Closed down $1.03 at $8.68
Earnings announced on March 13, 2014. Things seem to be
moving on track. Pro-forma revenues were $513 million for the quarter and
$2.184 billion for the year. Adjusted EBITDA was $207 million for the quarter
and $866 million for the year. Using our 3.5X EBITDA less net debt gives us a
valuation of $34.36. Net debt was $2.519 billion. As far as we can see they are
still on track with their 12/6/2012 pre-merger projections, other than digital
sales did not grow as predicted.
They
forecast $2.33 billion in revenue, $2.681 billion in net debt and $865 million
of adjusted EBITDA for 2013. We will continue to hold as we have seen other
value plays like Pitney Bowes ($11 to $24) and Lexmark ($21 to $35) come back
from panic situations.
Paulson & Co, filed a Form 13D on 5/10/2013 disclosing a
10.9% stake. They have held this stake since before the bankruptcy and merger.
Then on May 14
th, they filed a 13D/A disclosing another 350,000
share buy at prices up to $17.07 bringing their stake to 13%.
Down 43% HOLD
XRS Inc.
(NASDAQ-XRSC)-Recommended 2/26/2013)
Buy Price $1.50
Valuation $5.57 (Was $6.71, $6.16, $6.79, $6.50)
Closed down $.02 at $2.78
Earnings announced on February 6, 2014. So-so. Revenue fell
to $13.3 million from $14.2 last year, gross margin fell a bit to 59% from 63%
and Non-GAAP net income fell from $2.2 million to $1.9 million. Mobile revenues
were up 14%. Our valuation fell on the sales decline to $5.57—still more than
3X the current selling price. This is a company in transition and we are will
to wait to see if they can turn it around.
From their last press release:
"Fiscal 2014 will be a year of significant transition
for the Company as we begin the migration of our legacy customers to the XRS
mobile solution. As we transition from our legacy hardware-based solutions to
our no upfront cost mobile solutions, we expect soft overall revenue. We expect
accelerating mobile revenue growth with consistent margins and will continue to
invest in the further development of the XRS mobile solution with key
integrations to strategic third-party providers thereby creating a whole
product that will position us to capitalize on this expanding market."
UP 85%, HOLD
Daegis Inc.
(NASDAQ-DAEG)-Recommended 11/30/2012)
Buy Price $1.09 (Was $1.20 before we doubled up)
Valuation $3.25 (Was $3.25, $3.42, $4.64, $4.86, $4.00)
Closed down $.13 at $1.28
Earnings were reported on 2/25/2014. YOY comparisons were
not good. Sales fell to $7.9 million from $10.4 million and adjusted EBITDA
fell to $1 million from $1.8 million last year. Net debt decreased a bit to
$11.3 million from $11.6 million last quarter, and is down about $2.4 million
from last year. This is the first quarter in a while where sales did not
decline from the previous quarter.. Our valuation stabilized and rose a bit to
$3.25 per share-still a lot higher than the current trading price.
Norm Pessin filed a 13D on November 27, 2013 disclosing a
6.2% stake and upped it to 12.2% in December 2013. Good news that someone else
sees the value here.
Kurt Jensen a 10% owner continues to sell stock at almost
any price, putting a lid on DAEG. He still has 1.6 million shares, so this
could take a while. .
Up 18%, BUY
Bridgeline Digital
Inc. (NASDAQ-BLIN)-Recommended 8/24/2012)
Buy Price $1.17 ($1.24 before 2/14/2014 $10,000 adder)
Valuation $1.83 (Was $1.61, $2.19, $2.35, $2.56, $2.24)
Closed down $.08 at $.99
BLIN reported the long awaited “big sale” which was a $7
million contract. The stock soared from about $.90 to $1.30 on Friday, only to
give it almost all back by the end of the day on $3.9 million shares. We think
this was day traders playing with the stock and still like BLIN long term.
Earnings announced February 14, 2014. Revenues were $6.5
million up from $6.2 million last year. This is the first time in a long time
that the YOY comparison was positive. Revenue from their legacy business was
only $387,000. Recurring revenue doubled from last year to $1.6 million. They
reported a $777,000 loss for the quarter. Adjusted EBITDA was $20,000.
For FY 2014 they are projecting revenue of $28 million and
positive adjusted EBITDA (compared to a loss of $700,000 in 2013). Our
valuation fell a tad
to $1.74 a share.
We really like BLIN and think that just their recurring
revenue stream of $6.4 million is worth the current $20 million market cap.
Down 20%, BUY
Telecommunications
Systems Inc. (NASDAQ-TSYS)-Recommended 6/14/2012)
Buy Price- $1.37
Valuation $5.32 (Was $6.81, $6.28, $4.89, $6.02, $6.72, $5.49)
Closed down $.02 at $2.31
Earnings announced on January 30, 2014. Hmmm. Revenues were
down to $79 million from $133 million last year. “Adjusted net income” was $.02
a share compared to $.20 last year. Gross margin was up to 40% from 37% last
quarter and 31% last year. Our valuation fell to $5.32, still more than double
the current price. Lower margin government revenues were down over 50%.
Still not a good quarter.
UP 70%, HOLD
CBeyond Inc.
(NASDAQ-CBEY)-Recommended 2/28/2012)
Buy Price $7.17 ( Was $7.94 before another $10,000 added at
$6.53)
Valuation $26.21 (Was $26.12, $27.58, $28.24, $28.33,
$29.04, $29.59, $29.58, $29.21)
Closed down $.23 at $7.02
AVI Partners filed a Form 13D on March 26th disclosing a
5.1% stake in CBEY. They say they are unhappy with the company performance.
Maybe this will help speed up the “strategic alternative” process that CBEY said
might take an “extended period”.
Earnings announced 3/13/2014. Sales fell to $111.5 from
$118.9 last year, and they lost $4.9 million. Our valuation rose a bit to
$26.21. No news on the “strategic alternatives” review, just that it might take
a long time. For 2014 they guided lower again. They expect revenue of $410 to
$430 million and adjusted EBITDA of $50 to $65 million and free cash flow of
$5-$15 million. Based on this tepid guidance, our valuation for 2014 would be
$24.68-still more than 3 times the current price.
Just waiting for something to happen here.
Down 2%, BUY
MRV Communications (Pink Sheets-MRVC.pk)-Recommended
10//10/2011
Valuation $25.50 (Was $28.98, $24.01 $23.06, $27.15, $31.80,
$34.60, $28.60, $41.20, $43.20 (after $9.50, $6.00 and $1.40 special dividends),
$52.40, $55.80)
Buy Price October 7, 2011- $8.50 ($25.40 before special
dividends)
Closed at $14.53 down $.37
Earnings announced on 3/17/2014.
Revenues were up 19% to $50.7 million and their pre-tax loss
declined to $174,000 from $3,104,000 last year. Net cash per share was $3.16
and our valuation jumped to $30.43 a share. Since their business is seasonal as
they say in their press release, We will call their valuation $25.50 based on
their 12 month results. They say they are continuing to invest in the business
and that these should become apparent in 2014. Patience.
Lloyd Miller disclosed a 6.9% stake in February 2012.
Raging Capital bought another 1.6 million shares in the
first week of December 2012 at $10.80 bringing their holdings to 20.1% of the
company.
Still trading at less than ½ our valuation.
UP 69%
HOLD
Sigma Designs Inc.
(NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $12.30 (Was $11.86, $8.24, $13.05, $10.67, $8.41
$12.10, $13.40, $16.02)
Closed down $.66 at $4.54
Ariel Investments filed a 13G on January 10, 2014 disclosing
a 10.1% stake in Sigma.
The CEO bought 343,000 shares back from Potomac Capital in
December 2013 leaving Potomac with only 465,000 shares of SIGM. The interesting
part was that the CEO paid $5.50 a share or about $1 over its trading price.
Either a great expression of confidence in SIGM or a small price to pay to get
rid of an activist investor. Since we don’t know which it is, or both we will
stay a hold on this, even though our gut says to buy.
Earnings announced on December 11th. They continue to do
what they say they are going to do. Revenues were $54.4 million, net cash was
$88.1 million or $2.55 per share and our valuation rose a bit to $12.39. They
reported Non-GAAP income of $3.3 million or $.10 a share.
But, they surprised Wall Street with Q4 guidance of revenues
of $40-44 million and essentially breakeven results. They also announced a $20
million share repurchase program—which didn’t impress anyone. With the stock
off 16% last week and near its 5 years lows now would be time to buy some I
guess. This will only help if they can be profitable going forward.
Our valuation will fall to about $11 based on their
guidance, which compared to $8.24 in their year ago fourth quarter. At this
price and valuation we are still at a hold on SIGM.
Down 47%, HOLD
Concurrent Computer
(NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$4.58 (Was $5.08 before $.50 special dividend)
Valuation $15.10 (was $14.55, $14.77, $16.26, $16.20,
$15.37, $13.53, $15.85, $14.13, $11.38, $14.04, $18.54, $15.99)
Closed down $.30 at $8.93 (including dividends)
Pays $.48 annual dividend.
Earnings announced on January 28, 2014. Good again. Revenues
increased 7.5% to $17.8 million and they made $.12 a share compared to $.08 last
year. Cash was $25.1 million or about $2.78 a share and our valuation rose to
$15.10 a share up from $14.33 a share last year.
We have collected $.60 in dividends so far (excluding the
$.50 special dividend which reduced our basis).
UP 95%, HOLD
Gravity Company Ltd.
(GRVY-Recommended 1/18/2010)
Buy Price- $1.45 per ADS (Was $1.68 before double up)
Valuation $3.18-(Was $3.06, $3.02, $4.14, $3.65, $3.41,
$5.52, $5.00, $5.39, $5.33, $5.61, $5.73, $4.38, $4.44, $5.15)
Closed at $1.00 down $.06.
Earnings announced on November 29
th for the quarter
ended September 30, 2013.
Revenues were
$12.1 million versus $14 million last year and $11.4 million last quarter and
they lost $1.7 million. Net cash rose to $46.7 from $45.2 million or $1.69 per
share. Our valuation rose a tad to $3.18 per share.
Lots of product introduction updates in their press release,
but not much has been translating to the financials. Looks like they lost their
licensee in China and are looking for a new one and they canceled the Korean
version of Ragnarok 2, although the English version is still available.
Revenues were up a bit as was cash, but unless the company decides to
distribute some of that excess cash (like $1.00 a share) this is going to be a
long wait.
Down 31%, BUY
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 $5.57 (was $5.70, $6.71, $6.41, $6.14, $5.97,
$6.21, $6.13, $5.82, $5.81, $5.72, $5.65, $5.39, $4.86, $5.60, $5.73, $5.54,
$5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03,
$5.28, $5.28, $5.21)
Closed at $3.20, down $.12
Q2 earnings announced 3/6/2013. Revenues were up 9% to $8.1
million from $7.5 million last year, gross margin was 79% and they lost $461,000
compared to income of $4,000 last year. This quarter included a $234,000
restructuring charge that should cut annual costs by $2.5 million Recurring
revenues were 95% of total revenues. They say in the press release that they
are investing more in sales and marketing this year, but still expect to
achieve higher EBITDA than last year. Q2 revenues were essentially flat with
Q1. If they don’t get some revenue traction soon, we don’t expect to see much
share price appreciation. Our valuation fell however to $5.57. Still trading at
only 59% of our valuation.
ARI announced another acquisition in November 2013. No
details, but a good sign that they are really trying to accelerate their growth.
Wynnefield partners bought another 100,000 shares at $2.90
in the first week of July 2013 raising their stake to over 10%..
UP 99%, HOLD, Still a Huge valuation gap here.
CTI Holdings
(CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.02 (Was $1.05,
$1.07, $1.14, $1.17, $1.34, $1.34, $1.37,
$1.36, $1.23,
$.91, $1.21, $.71, $.83,
$.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29,
$1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.33 closed at $.28
CTIG settled a litigation with QWEST in February 2014 and
got paid $1.3 million.
Some news—finally. Fairford/Birbeck upped their non-binding
offer to $.40 a share. No indication as to whether the Board will accept it or
any other details. Still a low-ball offer but one which we would take after holding
this for almost 8 years.
10Q filed on 11/14/2013. Not even a press release. Still
trying to steal this under the cover of darkness. Revenues were $3.6 million,
down from $3.9 million last year. They lost $394,000 compared to net income of
$34,000 last year. Our valuation fell to $1.02 a share still more than triple
the management buyout price. Cash per share fell to a measly $.02.
Birbeck and Fairford Holdings made a non-binding offer to
buy CTIG in March 2013 for $.29 a share. The company formed a special committee
to evaluate the offer. Hopefully they will find somebody else who will pay fair
value—or at least close to it.
UP 22%. HOLD
