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, August 19, 2006

Dog days of Summer

Sorry we missed our update last week (don't ask). We will update performance from 2 weeks ago, today.

We broke even over the last 2 weeks, 5 up, 5 down and 1 even. However, our model portfolio year-to-date gain dropped 3% to a 15% gain, mostly due to MIVA and OPTO.ob. MIVA is still our biggest dog, followed by DWCH, LINN.ob, PDLI and then OPTO.ob. Since the start of the year we are 9 up and 5 down. No buys or sells this past 2 weeks.

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

CAW-(Buy price $9.45, Valuation $18.40). Closed up $.27 for the week at $10.00. Yield about 3%. A group called Costa Brava Partnership is offering to buy the Class A stock at a "substantial premium". The company has rejected this offer. The company is "in-play". CB owns 7.9% of the stock. No news last week on anything. Up 6% so far. HOLD.

QADI-(Buy price $6.93, Valuation $13.73 (was $11.86). Closed at $7.61, up $.01. QADI released earning last week--not bad. The valuation has moved up to $13.73, so at the current price it is trading at only 55% of valuation. Has $1.30 in cash also. Up 10% so far. BUY.

PDLI-(Buy price $19.31, Valuation > $30)--Closed at $18.39, up $.95 from last week. Now down only 5%. Volatile stock. BUY.

MIVA-(Buy price $3.80, Valuation $7.38 (was $9.10)). MIVA closed at $2.35, down $.48. Now down 38% on this one. MIVA released Q2 results week before last. They reported a whopping $73 million loss ($2.29 a share), but after deducting a BS goodwill write-off of $64 million and another $5.8 million of stock expense, severance and restucturing charges, they only lost about $3.5 million. This still stinks. The valuation sank to $7.38 from the previous $9.10, but the stock is still selling at only 32% of its valuation--and it has $1.16 a share in cash (49% of its market value). The risk here of course that the Googles and other search engines continue to eat MIVA's lunch (like Walmart did to regional retailers). But at this price, I will be in there buying on Monday. BUY.

Datawatch-(Buy price $3.66, Valuation $7.63 (was $9.31)). Closed at $2.85, down $.11 from last week, still a loser--down 22%. HOLD.

Inforte-(Buy price $4.11, Valuation $6.86 (was $7.32)). Up $.22 to $4.22 last week. Still has $2.52 per share in cash and valuation only fell a little, but lowering our price objective to $5.50. Now up 3%. BUY.


Linn.ob-(Buy price $.36, Valuation $.66 (was $.79)). Closed at $.31, up $.02. Still trading at less than 50% of our current valuation. Down 14% YTD. HOLD until we get some revenue growth and stop losing money.

OPTO.ob-(Buy price $1.25, Valuation $2.88). Closed at $1.20, down $.10. They just keep announcing new customers and the market yawns and bids up Yahoo and Amazon. I'll continue to skip those and stay with OPTO. Now down 4% to date. BUY.

AVSO.ob-(Buy price $1.19, Valuation $3.81). Stock closed at $1.8), down $.09 from $1.89. Now only up 51%. Wainting on year-end results for AVSO. Could be burdened with some acquisition and capital raising charges, but we expect to see some good operating results. Still only trading at 50% of our valuation. BUY.

CTIG.ob-(Buy price $.27 ask, Valuation $1.05 (Was $.82)). Ask price fell to $.37 (down $.05). Closed at $.34. Cash is $.28 per share. CTIG realeased earning also. Not great but (sales down a bit and had a book loss of $.01 per share) the valuation increased to $1.05 and net cash was $.26 per share. Up 37% (based on asked price). If you own this HOLD. If you don't-BUY.

IYXI.ob-(Buy price $1.91, Valuation--over $3.00). Closed at same price as 2 weeks ago-- $2.60, still up 36% so far. HOLD


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