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.

Friday, April 27, 2007

4/28/2007 Update

Last week we went 7 up and 9 down again. LINN.ob holds first place on our "biggest dog" list (by far) followed by PARL, INFT, ILOG, BDR and ARIS.ob. For the week, 2007 year-to-date, and since we started this Blog in January 2006, our model portfolio is +2%,+12.7% and +30.0% respectively. Since inception we are now 15 stocks up and 6 down (3 of which is down less than 10%).

We actually went in the same direction as the market last week. We were up 2% this past week and are now up 12.7% so far in 2007. The DOW, NASDAQ and the S+P 500 all gained from .7% to 1.2% last week, and are all now up from 5.3% to 5.9% for the year. We are still are up more than double the averages.

Since inception we have closed out the following positions:

NTCT +44%
ONXS +11% (Buyout offer)
DTLK +41%
CAW +21% (Buyout offer)
IYXI.ob +44% (Buyout offer)
MOBI +47% (Buyout offer)

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

ILOG announced earnings last week. Our OB-abies continued to drift down--except for CTIG.ob which is now up 85%.

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $10.65, Valuation $18-$20
Down $.43 to $10.66 last week.
Short interest as of April 13th, rose again to 4.1 million shares from 3.36 million in March. Short interest was 1.8 million in December. We don't get it at all, but the shorts are controlling the "vertical" as far as we can see--for now. Everything is going fine here. SPNC expects to file the CELLO (above-the-knee) 501k application with the FDA in less than 30 days. If approved (no reason to expect it will not be), this should be huge.
Now up .1% so far. BUY.

QAD Inc. (QADI-Recommended 6/14/2006)
Buy price $6.93, Valuation $15.92 (was $13.69 $13.73 and $11.86)
Closed at $9.60, down $.57.
No news. QAD finally paused in its upward climb.
Earnings due Thursday, May 17th after the close.
Trading at 60% of our valuation.
Up 39% so far. HOLD.

PDL BioPharma Inc. (PDLI-Recommended 5/21/2006)
Buy price $19.31, Valuation > $30
Closed at $25.76, up $1.63.
Earnings due out on May 2nd, after the close.
PDL also announced that they are moving forward on Nuvion trails based on results so far.
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.
Now up 33%. HOLD.

MIVA Inc. (MIVA-Recommended 3/18/2006)
Buy price $3.80, Valuation $7.37 (was $7.52, $7.38 and $9.10)
MIVA closed at $4.37, up $.03.
Earnings due out May 7th, after the close.
No news.
Now up 15%. HOLD.

DataWatch Corp. (DWCH-Recommended 2/12/2006)
Buy price $3.21 (averaged down from $3.66), Valuation $8.32 (was $7.50, $7.63, $9.31)
Closed at $3.55, up $.32 for the week.
Earnings scheduled for April 30th, before the close.
No other news.
Now up 11%. HOLD.

Inforte Corp. (INFT-Bought January 13, 2006)
Buy price $3.74 (averaged down from $4.11), Valuation $6.13 (was $6.95, $6.86)
UP! A big $.02 at $3.18 last week.
This IS ridiculous. Cash is 83% of the market cap.
Earnings are out on May 14th, after the close.
Has $2.64 per share in cash. Price objective $5.50.
Now down 15%. BUY.

RiT Technologies (RITT-Recommended 11/12/2006)
Buy price $1.00, Valuation $3.36 (Was $2.69)
Closed down another $.03 at $1.33 last week.
No news. Bought a little more of this last week at $1.35.
Earnings due out on May 3rd, before the open.
Up 33%. BUY.

Parlux Fragrances (PARL-Recommended 11/30/2006)
Buy price $6.12 (was $6.65 before double up), NEW Valuation $8.63 (Was $13.77)
PARL closed at $4.72, down $.19 last week.
No news last week and the stock continued to drift down. The new management has 2.2 million reasons to make this stock go up. Glenn Nussdorf paid $6 for his shares.
Down 23%. HOLD.

Blonder Tongue Laboratories (BDR-Recommended 3/4/2007)
Buy price $1.83, Valuation $5.12 (was $5.88).
Closed at $1.74 down $.17 for the week.
No news. Trading at 34% of our valuation.
Down 5%. BUY

ILOG SA (ILOG-recommended 3/26/2007)
Buy price $13.60, NEW Valuation $20.99 (was $20.52)
Closed at $12.77 last week, down $.96.
Earnings last week. Sales were up 7%, but profit was down from $.15 to $.04. So the stock tanked on 800 shares traded. Guidance was unchanged for revenues (up 17%+) but the outlook for profit was cut to flat vs. last year (note-their year ends 6/30). Our valuation went UP to $20.99.
Down 6%. BUY

Celebrate Express (BDAY-recommended 4/17/2007
Buy Price $8.82, Valuation $18.18
Up $.49 to $8.95 last week
BDAY announced some lay-offs last week to get more efficient. Good.
Up 6%. BUY

OB-abies (Bulletin Board Listed Stocks)

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $2.06, Valuation $5.03 (was $5.28, $5.28, $5.21)
Closed at $2.02, up $.07 last week.
No news.
This stock is still illiquid, so price moves are fairly meaningless at this point.
Now down 2%. BUY. Still a Huge valuation gap here.

Lion Inc. (LINN.ob-Recommended 4/15/2006)
Buy price $.36, Valuation $.57 (was $.62, $.66 and before that-$.79)
Closed at $.18, down $.03 last week.
Now trading at only 32% of our current valuation.
We will give LION another quarter or two to see if they can turn things around.
Down 50%. HOLD until we get some revenue growth and stop losing money (same story as last quarter). I bought a little more on Friday at $.18.

OPTIO Software Inc. (OPTO.ob-Recommended 3/22/2006)
Buy price $1.25, Valuation $2.89 (was $2.89, $2.54 and 2.88)
Closed at $1.35, down $.11 last week.
Has cash of $.47 per share--35% of the market cap.
Still hoping we will see north of $2.00 this year.
8% gain so far. BUY.

Avatech Solutions Inc. (AVSO.ob-Bought November 28, 2005)
Buy price $1.19, Valuation $3.29 (was $2.69, $3.36, $3.81)
Stock closed at $1.37, down $.11.
No news. Bought a little more on Friday myself at $1.40.
Now up 15%. BUY.

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask, Valuation $1.42 (Was $1.28 $1.13, $1.05, $.82)
Ask price moved up $.14 to $.50. Closed at $.45.
This is still trading at only 35% of our latest valuation.
No news.
Up 85% based on the ASK price. HOLD.


Blogger tchannon said...

Regarding INFT, what is your hypothesis on how the end will unfold?

11:40 AM  
Blogger Cheap Stock Investor said...

I think the same thing will happen with INFT that has happened with MOBI and or DWCH. A buy-out, or some decent performance that will move the stock to our valuation.

3:18 PM  

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