A Contrarian Setup With Penson PNSN

Last week Penson Worldwide (PNSN) a major international clearing firm and the second largest clearing firm in the U.S. came out about $42 million that might bring a write-down. A board member who had a relationship to the $42 million resigned. Immediately following this news the stock crashed from $5.00 to $2.73 a share in two days.

Although the $42 million seems significant it is only a measly 0.49 percent of their $8.7 billion in average daily customer balances. Penson also has more than $5.8 billion in cash and equivalents. They even had a pretty good recent quarter. In their last quarter revenue was up. I don't see this development seriously damaging their long-term business. In-fact with a market cap now of around $100 million I see this as an attractive valuation.

Although this is an opportunity there are things to keep in mind. Over recent years their revenue growth has declined slightly and they aren't consistently profitable. Overall, I think this is a more speculative play but I think there is a good setup for a small position here off what appears to be some capitulation and technical strength.

The price action looks like the beginning of a bullish engulf. Buy volume needs to stay steady for this to continue. I like an entry point on price strength above Fridays close. If the stock doesn't follow through here, however, I only want to watch and see how the technicals develop.


full disclosure: no position currently

Stock Below NCAV

Thomas Group (TGIS) has a market cap of $4.14 million and from the November 12th quarterly report there is $4.18 million in net current asset value. The stock had an unusual volume spike on 12-01 and printed $2.99. The price is currently at $1.90. It is pretty speculative to me as a long term hold but I think it is worth looking at over the next couple days for a trade.


full disclosure: no position

Cheap Stock Parlux Fragrances (PARL)

PARL has net current asset value of around $89 million and a market cap right now with the stock at $2.47 of about $50 million. A big bulk of NCAV is in inventory.

There was some significant volume in the stock on Friday and it is testing up against this long standing range it has been in since last year. The stock has been stuck between about $1.50 and $2.40s a share. Price action wise I think it is more likely to pull back the next couple days than start running higher. I may buy it a lower price. We'll see. I've just got it on a watchlist now.

full disclosure: no position

Silver Leaf Resorts Looks Cheap Again

Silverleaf Resorts (SVLF) has gone back down below net current asset value. It's brother in the industry Bluegreen (BXG) is down a lot too and below NCAV but I didn't like BXG's last quarterly.

SVLF has $127.8 million in net current asset value and is trading at a market cap of only $39.4 million at the moment with the stock at $1.04.

full disclosure: long SVLF @ 1.04

Health Care Bill Stocks Breakout Play

Near Net Current Asset Stock & health care stock Forward Industries FORD products include soft-sided carrying cases, bags, clips, hand straps, protective face plates, and other accessories for medical monitoring and diagnostic kits, cellular telephones, and bar code scanners. I read in the annual report that diabetic products were 75% of sales in 2009. With more people now being covered by the government all these people who are or are about to get type II diabetes should add to that segment.

I believe the market cap was just over NCAV. Net current asset value is $22.2 million and current market cap is around $22.5 million. The stock is volatile though and was up 19% Friday so it could actually dip below. They have a great balance sheet. The bulk of quick assets are in cash. I am sure there are a lot of other health care reform stocks out there as well that will benefit from the government subsidies if you will. This is just one that caught my eye because of the huge volume last week. MDF is an interesting chart too.




The stock is in a clear uptrend and seems to be possibly a failed double top on this wide ranging day spike. The only concerning thing is how much of an appetite is left after this run but being around NCAV seems positive in this regard. Hard for me to pick a spot technically to enter because the stocks momentum looks strong here. I might play it of continuation or a pull-back to new support at around 2.60. It's actually a better investment and hold type of play probably on health-care. Luckily one of the few long-term investments I still have is a healthcare mutual fund that I've held for some years. I sold my Stryker SYK about a couple years ago.

full disclosure: no position at time of writing

Former NCAV Stock Blonder Tongue

This former NCAV cheap stock Blonder Tongue Laboratories BDR popped 70% today off of earnings.

Operating EPS was positive vs a loss prior. Sales were up driven by digital video encoders. It looks like there is about 14.7 million in current assets and about 7 million in debt. So, this big pop pushed it over NCAV. But it still might be in play. I guess we will see.

disclosure: no position

Baby Boomer Resort Stock

Silver Leaf Resorts is in the business of getaway and destination timeshare resorts in the United States. They cater to short vacations and tourists. This is one of those stocks that bottomed in December 2009 and not in March 2010. I really wish I had payed it more attention early this year. It's one of those deep value land plays.

Asset Valuation
I was fairly surprised at how cheap it appears on an asset level. There is $176.319 million in net tangible assets and as of March 8, 2010 38,140,043 shares outstanding. This gives us a $51.87 million market cap against that $176.31 million in net tangible assets or a 29% discount to NTAV.

I crunched net tangible asset value per share at $4.62 per share and the stock is only at $1.36 as of the close today.




It has technically just broken out of a trading range but has a lot of resistance around the 1.50 area. I think this cheap stock goes higher over the next few days and tests that 1.50 at the least and probably will continue higher from there.


full disclosure:no position at time of writing however I may go long (buy) the stock this week.

Deep Value NCAV Penny Stocks

I found a few interesting stocks below net current asset value the other day. A couple of these I know from the past as being volatile. In other words they just didn't trade super thin for months and years, rather, they have been scooped up by institutions before.

Qiao Xing Mobile Communication Co.(QXM) does handsets in China and is really beaten down here. I found it off a screen and when trying to double check to make sure it is sub NCAV if that's a major criteria for you. I didn't see a recent filing on the SEC website and don't want to put a whole lot of time into DD so do your own DD in this regard.




Infosonics Corp. is an old favorite because I made 20% on it last year over a few days and got out near the top. They distribute wireless handsets in Central and South America and distributes high-end products under the Verykool brand name. Off the balance sheet there is $25 mil in NCAV and a $16 mil market cap.

I just got filled finally today on this one at $1.13 and am long.




Seanergy Maritime Holdings SHIP

This is a dry bulk shipper and is beaten down but the technicals indicate it might be bottoming short term.

EF Johnson Technologies EFJI

I really nailed this one awhile back and called the top later on it too.

Unfortunately I don't think I bought it. But, anyway it is back below NCAV of $38 million. It might be bottoming out here. If I play it I might pick it up at mid $.90s so I have a clear stop loss on the breakdown signal.



clean technical bottom so far



full disclosure: long IFON for a trade

Former Net-Net Stock MSON Soaring

I just noticed former ncav MSON in a technical scan that I initially noticed at the beginning of 2009 is in play on new distribution news. Right now it is a little over net current asset value and I don't know their story here other than there was huge volume recently on this news. As the stock showed in April it can run straight up a ton fast.

I think it might consolidate right around $3.00 around this black resistance at 3.00. This news might give it the potential for a richer valuation of course and more follow through. It's pretty thin and usually doesn't trade that many shares a day.


click for larger image















full disclosure:no position

Net-Net Update

I was looking at Boss Holdings BSHI.ob a couple different times over the past year and a half or so. The stock continued to trade very thin and decline. I just found out that back in late August they announced they were going to go private and cash out holders of less than 100 shares at $7.65. I think this may already be finished. I don't know.

All my posts on BSHI

full disclosure:no position

Nyer Liquidating

Nyer Medical NYER is planning to liquidate after they sell their pharmacies for around $19 million. NYER was a chronic net-net for a long time I looked at a couple years ago. They've only got $5 million in cash on their last balance sheet. Let's say they get the full $19 million that's about $24 mil in cash less a whopping $10 million in total debt. This is assuming nothing changed from the filing date.

The $7.5 mil market cap doesn't seem like much of a spread. They do have $6 mil in receivables. I think a conservative crunch would put liquidation value around $10-12 million but this is just a really quick back of envelope. I don't think the stock even traded that high. It only got to 2.45 or about $9 mil. I don't think I'll be playing this right now but some of you all might want to do some more research and number crunching. It seems like there could be a 15% or so spread there.

The price action is sort of weird for a liquidation news. It opened up the day trading over $2 a share and hit a high of $2.40's per share then steadily sold off all day and closed at 1.86. I imagine the selling pressure was from bitter bag-holders who bought in over the past few years and were happy to dump their shares with the stock up over 100% on the day. That is just market forces based on past price action aka technical analysis.

full disclosure:no position

Stock ADPT

I put CHCI up as a watch the other day and this thing ran huge today and topped out at $.98. I didn't trade today but I hope some of you maybe saw these like VG to that I put on Twitter that ran today. LPTH was my top watch today and it ran 16% today off a easy set-up. The breakout was at $2.30 and it ran to $2.74. Net-Net MSN is holding up better than I expected. To many possible swing trades out there.

ADPT is testing around this new possible support around $3.00. It is congesting well so far which makes it seem that it might continue running. If I'm going to play it tomorrow is the day to go long. I think a good stop loss is right below $2.85. If you look on the 11th,12th and 18th $2.85 was the low of those days and important support. The likelyhood of it getting more downside when it cracks this is pretty good. So $2.83-84 is a good stop point with a profit target of $3.50-.60.














full disclosure: no position

Ben Graham Net-Net EFJI

EF Johnson Technologies EFJIMost of their business is from wireless radios. They sell wireless communications equipment with a large base of their customers being the government.

Major Customers
The U.S. Department of Defense was approximately 15%, 62% and 16% of consolidated revenues in 2008, 2007 and 2006. DRS Technologies, Sprint/Nextel, and the State of California are significant customers, representing 13%, 12% and 12%, respectively, of consolidated revenues in 2008.

Valuation
At $1.24 a share market cap is $32.74 mil and net current asset value is $39.41 mil. Net current asset valuation is a quick rough liquidation value. However, in this particular case almost 50% of NCAV (net current asset value) is comprised of inventory sitting in storage. In the event of an actual hypothetical liquidation it would very likely yield much less than the amount on the companies books.

2009 earnings per share have been boosted it appears to $.06 and a sole analyst expects $.10 for 2010. At 1.24 a share this is only about 12 times earnings and they could continue to grow over 50%. This asset valuation and trailing 2009 PE multiple of 20 seem nuts to me. Nuts meaning it might still be undervalued.

On the 15th of September volume soared and the stock flew on the back of a press release for their new Hybrid IP25 first responder radio system and 2 new military contracts for the radios on the 15th. I would have loved this stock at $1.00 because of the larger asset valuation cushion and also because of the price action. I believe the stock could have a pull-back soon which I explain in the following charts and I am going to wait a day or two to see what develops.



In the above chart we can see that there could be strong support right around $1.00.



The green line on ADX contracting worries me a little right now



It's running on heavy momo(momentum) right now being that it is hugging the upper band. Some people could take some profits soon.



The arrow on the right shows how buying volume is trending downward day to day which worries me that buyers might be getting exhausted in this round up for now atleast. Plus the doji candle two days ago and a shooting star candle Friday. The momo could very well continue for awhile but I feel more comfortable waiting just a day or two for either a pull-back or some other sign buyers are committed right now.


full disclosure: no position at time of writing

Net-Net LDIS Is Liquidating

I just wanted to do an update on LDIS. In this press release they say they want to get a liquidation from between $.93 to 1.20 per share. This is right on the back of a Nasdaq deficiency notice for a low share price and it requires that the share price must now trade at $1.00 in the next 180 days or it could be delisted. I first noticed LDIS when it was at $.73 back in July. I can't seem to find a net-net I like that doesn't do well lately. Even net cash stock ACTS from awhile back has performed well. As of right now I'm not going to buy LDIS.


I sold INHX at $1.21 today from a $1.20 buy because I got a bad feeling about this action the past several days. They got some media? coverage I guess on a Seeking alpha article and a $2 target by Zacks. The thing I didn't like about that was it did boost the price into that breakout I was looking for but it looked like a bull trap and nasty shooting star to me plus I've got some back to back winners and taking a commission scratch on this one will probably be some good risk management that I need. It is still looking strong but I'd just rather buy the next big break if it comes.
















full disclosure: no positions

ZRBA Net Cash Stock

ZRBA is no longer going to do the liquidation and put out a press release yesterday they are exploring strategic alternatives. I'm holding from about $3.90 and the stock popped up to $4.97 and I just sold at $4.66. The way this thing has traded on news in the past is it runs big first day then because know one trades this stock it falls off the next day. Whoever comes in with size will probably do this again and I can't afford to wait however many months, years for a bid on this company to possibly come in right now when I have a big profit margin in my face and the information I mentioned above.


full disclosure:no position ZRBA

Net-Net FSII Soaring

I first found this net-net at around $.60 and it was at a big discount to net current asset value. I put it on the stock watchlist Monday because it broke out of a triangular consolidation. It's slightly over NCAV of $28 million now at over $1 a share. Huge volume today.

full disclosure:no position at time of writing

Net-Net Emerson Radio MSN In Play

(MSN) Emerson Radio popped 87% on top line growth of 26% year over year. Net income grew 300% year over year.

MSN is a perennial net-net. Pretty unexpected results and price action I'd imagine for a lot of people. There was some profit taking as the stock didn't hold the days highs very well. The amazing thing to me is home appliance sales were behind the boost for revenue growth. Home appliance sales? Isn't there a housing recession? Isn't the consumer almost dead? Huh.

They put up some pretty decent free cash flow the past couple quarters which is good. They have a good balance sheet with $23.6 mil in cash and quick liquidation value or net current asset value is $44 mil. I'd imagine at best the stock trades sideways for weeks or sells off big time here. That's without listening to what management had to say and a scenario where no analysts upgrade. I doubt there are even that many analysts if any though on the stock right now. Maybe something to keep an eye on and possibly, possibly enter on a pullback. Right now I think it is going to have a hard time holding above that gap.

Net Current Asset Stock ADPT

ADPT has $370.2 mil in net current asset value and a market cap of around $350 mil. The stock just traded higher today amidst today's market beating.
















There has been some heavier buying recently as the volume spikes tell. If and only if it trades and closes over $3.00 per share for a couple days I feel like it has a good shot at $3.60















full disclosure: no position

My 2009 Net-Net Stocks Performance & Going Forward

I went back through the blog starting with the first day of 2009 and crunched some numbers on my net current asset stocks pick performance. This assumes one bought them the next day after finding them on the blog this year. If it was on the blog in 2009 and less than net current assets I used it. Looking through the 2009 list there are some that I posted on earlier than 2009 like HHGP which is a -20% loser since the initial post pre 2009,TUES +58% gainer and HKN -35% since its December post when it was less than tangible assets however. I think PARL was on the blog in 2007 or 2008 to but I didn't go back that far and a search didn't turn it up. It would be a looser from then. The rest were fresh for 2009.

This might sound a little weird but I think I've said this before. I really had no idea what I was doing with net-nets before around mid-2008. In 2007 when I started following them and most of 2008 I was just feeling them out. From mid 2008 on there are a lot of winners to though of course.

These returns below were calculated with the potential buy-in starting the day after it was on the blog in 2009 because I didn't always post during market hours. These returns assume one bought that next day and sold at the stocks high afterward. The likeliness of selling at the high is not highly likely but had one decided to protect the potential profits and sell on the way up it would have been very possible to have come out with a good chunk of the bulk of those profits. About all of these I calculated about 3 weeks ago so some of them are probably up a lot more since then. SMRT hit 10.50 for example. The ones with technicals next to them were ones that technical analysis had a major role in.

25 winners
4 losers

Winners
PIR 1,600% technicals

SMRT 670%

SWIR 285%

TUES 236%

PXG 293% technicals

MSON 178% technicals

VVTV 194%

HHGP 156%

CACH 150%

AERG 100% in 1 day technicals

ANAD 96% technicals

GSIG 77% technicals

NLS 58% technicals

MLR 48%

CALL 45%

PARL 42%

HURC 40%

FSII 40% technicals

LDIS 28% technicals

JOB 26%

AEY 17%

SPAR 20% technicals

IFON 19% technicals

HKN 18%

IVA good run .50 to .70 but I think was to illiquid

NSTR .05%

Losers
CDCO -5%

ADGF -19%

RFIL -25%

QLTI -53%

SKX -46% stock crashed after post. Maybe a little to hard on this one because if doubled down off March lows it went to 14 as of now.


I'm going to start tracking the performance of my net current asset stock aka net-net picks better from here out. For it to be a pick I'll do a post on it and say it is a buy at such and such price. I'll also add it to this portfolio here. I'm pretty sure this can be viewed by anyone. I may also add none net-nets from time to time. I'm not liking Tickerspy so far because I haven't figured out how to even sell a position with it. I started a Marketocracy portfolio to which I think I like better but the $1 mil it gives me to manage is a bit much to just show how I can trade these net's.

If you've been paying attention to my net-net posts, for months now I have only been putting a net-net up if it is worthy of an actual buy very soon me. Since 2007 I have put up a lot of net-net's as potentials with my thesis on them but didn't always pound the table on them as a buy that day. I'd usually run through the good I saw and the bad. I was good then but I am even better now.

From here out my skill with stock picking will be a little more on display be it turn out good or bad. Some time in the future I may switch it over to Covestor.com. Covestor actually taps into your broker so with them there is the most complete transparency possible. For now though I feel like posting on them around the same day I trade them will do. I put up FSII ahead of time because that set-up was so good I wanted put out a heads up. I think the bulk of you that read my blog are here for net-net's and value plays. It's not always easy for me to post up an entry for a net-net trade in real-time on the same day so I might just do these watches. I don't keep as close an eye on net-net's and deep value day to day as I do my other watchlists. I trade a lot of different strategies.

I brought up earlier that I want to start charging a yearly or monthly subscription for my net-net picks. If I go that route it will still be months off. You will also have the opportunity to track my progress better before deciding if $5-$8 a month is worth it. As you can see since 2008 it has been going well and I've actually even stepped up my proficiency lately.

I've only been following net-net's since 2007 and have made really big progress since just 2008 in them. I have kind of gotten in a groove on which ones to drill down on with the fundamental analysis and focus on. Incorporating technical analysis as a tool in my various strategies has also been very significant. I am a very different investor and trader with net-net's and approach them differently than most investors who work in them. I believe that has really helped me identify some of the best performers better.

full disclosure: no positions

My 2009 Net-Net Stocks Performance & Going Forward

I went back through the blog starting with the first day of 2009 and crunched some numbers on my net current asset stocks pick performance. This assumes one bought them the next day after finding them on the blog this year. If it was on the blog in 2009 and less than net current assets I used it. Looking through the 2009 list there are some that I posted on earlier than 2009 like HHGP which is a -20% loser since the initial post pre 2009,TUES +58% gainer and HKN -35% since its December post when it was less than tangible assets however. I think PARL was on the blog in 2007 or 2008 to but I didn't go back that far and a search didn't turn it up. It would be a looser from then. The rest were fresh for 2009.

This might sound a little weird but I think I've said this before. I really had no idea what I was doing with net-nets before around mid-2008. In 2007 when I started following them and most of 2008 I was just feeling them out. From mid 2008 on there are a lot of winners to though of course.

These returns below were calculated with the potential buy-in starting the day after it was on the blog in 2009 because I didn't always post during market hours. These returns assume one bought that next day and sold at the stocks high afterward. The likeliness of selling at the high is not highly likely but had one decided to protect the potential profits and sell on the way up it would have been very possible to have come out with a good chunk of the bulk of those profits. About all of these I calculated about 3 weeks ago so some of them are probably up a lot more since then. SMRT hit 10.50 for example. The ones with technicals next to them were ones that technical analysis had a major role in.

25 winners
4 losers

Winners
PIR 1,600% technicals

SMRT 670%

SWIR 285%

TUES 236%

PXG 293% technicals

MSON 178% technicals

VVTV 194%

HHGP 156%

CACH 150%

AERG 100% in 1 day technicals

ANAD 96% technicals

GSIG 77% technicals

NLS 58% technicals

MLR 48%

CALL 45%

PARL 42%

HURC 40%

FSII 40% technicals

LDIS 28% technicals

JOB 26%

AEY 17%

SPAR 20% technicals

IFON 19% technicals

HKN 18%

IVA good run .50 to .70 but I think was to illiquid

NSTR .05%

Losers
CDCO -5%

ADGF -19%

RFIL -25%

QLTI -53%

SKX -46% stock crashed after post. Maybe a little to hard on this one because if doubled down off March lows it went to 14 as of now.


I'm going to start tracking the performance of my net current asset stock aka net-net picks better from here out. For it to be a pick I'll do a post on it and say it is a buy at such and such price. I'll also add it to this portfolio here. I'm pretty sure this can be viewed by anyone. I may also add none net-nets from time to time. I'm not liking Tickerspy so far because I haven't figured out how to even sell a position with it. I started a Marketocracy portfolio to which I think I like better but the $1 mil it gives me to manage is a bit much to just show how I can trade these net's.

If you've been paying attention to my net-net posts, for months now I have only been putting a net-net up if it is worthy of an actual buy very soon me. Since 2007 I have put up a lot of net-net's as potentials with my thesis on them but didn't always pound the table on them as a buy that day. I'd usually run through the good I saw and the bad. I was good then but I am even better now.

From here out my skill with stock picking will be a little more on display be it turn out good or bad. Some time in the future I may switch it over to Covestor.com. Covestor actually taps into your broker so with them there is the most complete transparency possible. For now though I feel like posting on them around the same day I trade them will do. I put up FSII ahead of time because that set-up was so good I wanted put out a heads up. I think the bulk of you that read my blog are here for net-net's and value plays. It's not always easy for me to post up an entry for a net-net trade in real-time on the same day so I might just do these watches. I don't keep as close an eye on net-net's and deep value day to day as I do my other watchlists. I trade a lot of different strategies.

I brought up earlier that I want to start charging a yearly or monthly subscription for my net-net picks. If I go that route it will still be months off. You will also have the opportunity to track my progress better before deciding if $5-$8 a month is worth it. As you can see since 2008 it has been going well and I've actually even stepped up my proficiency lately.

I've only been following net-net's since 2007 and have made really big progress since just 2008 in them. I have kind of gotten in a groove on which ones to drill down on with the fundamental analysis and focus on. Incorporating technical analysis as a tool in my various strategies has also been very significant. I am a very different investor and trader with net-net's and approach them differently than most investors who work in them. I believe that has really helped me identify some of the best performers better.

full disclosure: no positions