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.

Thursday, November 30, 2006

Parlux Fragrances (PARL-NASDAQ) $6.65-BUY

Parlux is in the frangrance business as the name says. It has brand rights to names like Perry Ellis and Paris Hilton among others. I owned this stock twice before several years ago very profitably. The current situation is involved and interesting. Please read all the recent press releases.

Our valuation is $13.77 a share. So the stock is trading at less than 50% of our valuation which makes it a buy in its own right. On top of that they recently had an offer to buy their Perry Ellis brands for $120 million (equal to today's market cap alone). Perry Ellis nixxed the deal though. So now Glenn Nussdorf who owns 37% of E-Com Ventures (which is one of Parlux's major customers) has recently bought 12.2% of PARL and is making nioses about buying PARL entirely. Lots if inter-relationships here which mkes it complicated and a bit risky. There are rumors of an offer any day, any minute--which means nothing will probably happen for a while, or at all. The stock was up as high as $19 in the last 52 weeks. We owned is previously at the $1.50 level and we hate to buy stocks back at higher levels but PARL's business has exploded since we owned it beofre and it has a number of catalysts that could drive this much higher. The "take-over" rumors talk about $13.50 a share, which are amazing close to our valuation. BUY.


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