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Hello Readers,

Since the last Newsletter, we closed one position, for a gain.

REAL GOODS SOLAR (12/5/09). Closed position 5/18/10 at $4.75 for a 58% GAIN.

A good-looking quarterly report helped push Real Goods Solar higher as it more than pierced our 50%-plus target; we also think that the BP oil spill gave it, and other solar stocks, a nice lift.

The last few weeks, like most of May, have been ugly for the markets. We have heard all of the reasons as to why, and many of those, we suspect, may be swept under the rug for the simple reason that market pros usually think short term. However, there is a growing sense, even among those optimists, that the government machinations are not working, and the question is not if there will be another major market sell-off, but when. So, will we have the typical summer rally? We may know more in a few weeks. And yes, our Current Portfolio continued to get slammed during the recent market nosedive.

Here are the headlines since the last Newsletter about companies in the Current Portfolio; dates in parentheses are when we first recommended them. We are not giving updates about companies on the “Endangered List” unless we feel the news to be very significant.

CombinatorX (CRXX)(5/5/10). To present at the Noble Financial equity conference on June 7.

American Caresource (ANCI)(4/20/10). Will also present at the Noble confab on June 7.

Novabay Pharmaceuticals (NBY)(4/20/10). Completes enrollment in Phase 2 Impetigo clinical trial.

Novavax (NVAX)(4/5/10). Names former FDA officer as medical chief.

Cerus (CERS)(3/20/10). Company and Whittemore Peterson Institute confirm inactivation of XMRV by the INTERCEPT Blood System.

Microtune (TUNE)(2/5/10). Coship selects Microtune TV Tuner for cable HD set-top boxes and modems in China.

Cytokinetics (CYTK)(2/5/10). Announces opening of a Phase 2a “Evidence of Effect” clinical trial of CK-2017357 in patients with peripheral artery disease and claudication. Presents non-clinical data from its Smooth Muscle Contractility Program.

CytRx (CYTR)(1/5/10). Initiates Phase 2 clinical trial with Bafetinib in B-cell chronic Lymphocytic Leukemia. Bafetinib demonstrated statistically significant inhibition of glioblastoma multiforme cell lines.

OXiGENE (OXGN)(11/20/09). Announces publication of preclinical data on OXi4503 demonstrating potent anti-leukemia effects.

Helicos Biosciences (HLCS)(10/20/09). Cuts half of workforce. We have placed this on the “Endangered List”.

BioSante Pharmaceuticals (BPAX)(9/20/09). Announces Novartis’ successful use of 2A/Furin technology in their antibody development platform. Receives two new patents for manufacture of proteins, including antibodies.

Anadys Pharmaceuticals (ANDS)(8/20/09). Exploring strategic options, including sale of company as it files a $12.5 million registered direct offering with certain institutional investors. Says its Hepatitis C drug shows promise in mid-stage trial.

BioClinica (BIOC)(8/5/09). To participate in four different healthcare conferences during June and July.

Salary.com (SLRY)(7/5/09). Recent quarterly numbers not great and miss Street estimates; balance sheet could use improvement.

Ligand Pharmaceuticals (LGND)(2/20/09). Buys rights to AstraZeneca asthma drug.

Market Leader (LEDR)(12/20/08). To present at the Needham Internet and Digital Media Conference on June 8.

The Orchard (ORCD)(11/20/08). Reaches 1.2 billion mobile customers across Asia.

Oilsands Quest (BQI)(10/20/08). Files for environmental approval of Axe Lake SAGD project.

Akeena Solar (AKNS)(10/20/08). Clinches deal with Westinghouse on solar panels.

U.S. Geothermal (HTM)(8/5/08). Idaho PUC approves Neal Hot Springs Power purchase agreement.

Applied Energetics (AERG)(7/5/08). We have removed this from the “Endangered List”, since the stock has risen from the dead over the last few months. Recent numbers are so-so, but balance sheet looks pretty good.

Bridgeline Digital (BLIN)(6/5/08). Releases iAPPS Marketier. SBLI selects iAPPS Content Manager and iAPPS Analytics.

Microvision (MVIS)(5/20/08). Unveils increased brightness, 720p HD-ready laser Pico projector demonstrator.

Biolase Technology (BLTI)(4/5/08). Secures $5 million debt facility with several financial institutions.

ActivIdentity (ACTI)(3/5/08). Launches authentication appliance for the banking system.

Hollywood Media (HOLL)(1/5/08). Latest numbers show more losses than were probably expected; balance sheet still looks okay.

Move, Inc (MOVE)(1/5/08). Move Network now features Lat49 location-based digital advertising. BDX and HomeFinder.com bring largest collection of new home listings to national site and online network of 130+ newspapers. To present at the Needham Internet confab on June 8.

Linktone (LTON)(11/5/07). Latest results (unaudited) look pretty decent; balance sheet still looks strong.

XATA (XATA)(9/20/07). Brokerage firm upgrades stock to a “buy”.

Alliance Fiber Optic (AFOP)(7/20/07). Raises 2ndQT guidance.

TTI Team Telecom (TTIL)(3/5/07). Stock gets a little lift due to takeover rumors, which the company won’t confirm or deny. Recent quarterly numbers so-so; balance sheet still looks pretty good.

YM BioSciences (YMI)(11/5/06). Enrolls first U.S. patient in Phase II randomized, double-blind brain metastases trial for nimotuzumab.

Inventure Group (SNAK)(3/5/06). Changing name to Inventure Foods. Says there is strong retail sell-in for its Jamba all natural smoothies.

8×8 (EGHT)(1/20/06). This one has driven us crazy for over five years as, once again, the company posts some decent FY numbers, namely profits, and the stock just sits in limbo; balance sheet still looks good.

Our selections for this Newsletter are another small drug maker and an equipment maker, both NASDAQ-listed.

DUSA PHARMACEUTICALS, INC. (NASDAQ: DUSA) – $2.17. Twelve-month hi-low has been $2.75 – 88 cents. Based in Wilmington, MA, with about 80 employees, this drug maker has 24.1 million shares outstanding, $22.75 million in total current assets, $24.58 million in total assets, and $9.02 million in total liabilities, of which $2.91 million is deferred revenue. Institutional ownership is around 37%. One analyst rates the stock a “strong buy”. www.dusapharma.com

Sometimes we stumble over a small drug manufacturer whose stock has been in limbo for the last few years and may be ready for a breakout, if the markets don’t tumble. DUSA Pharmaceuticals, Inc. sort of plays to vanity, has a decent balance sheet, and modest revenue growth.

Founded in 1991, and public since 1992, DUSA is a dermatology company that develops and markets Levulan photodynamic therapy (PDT) and other products for common skin conditions. Its products include Levulan Kerastick 20% Topical Solution with PDT and the BLU-U brand light source for treating non-hyperkeratotic actininc keratoses (AKs) of the face and scalp. AKs are pre-cancerous skin lesions caused by chronic sun exposure that can develop over time into a form of skin cancer called squamous cell carcinoma. The company also markets the BLU-U without Levulan for treating moderate inflammatory acne vulgaris and general dermatological conditions. It is also developing non-PDT drug products, including Nicomide, Nicomide-T, AVAR products, ClindaReach, Meted, and Psoriacap.

In early May, DUSA announced that the U.S. Patent office has issued a notice of allowance for a key patent related to its PDT light source, the BLU-U. Also, at around that time, the company initiated a clinical trial of Levulan PDT on high-risk solid organ transplant recipients. The study will examine the multiple courses of Levulan plus BLU-U on treating AKs, as well as the reduction of the incidence of new non-melanoma skin cancers on the scalp or forearms.

For FY2009, ending 12/31/09, revenue was $29.8 million with $2.51 million in losses compared to 2008 revenues of $29.54 million and $6.25 million in losses. During the 1stQT of FY2010, ending 3/31/10, revenue was $8.71 million with $424,483 in losses.

So far, DUSA seems off to a good start for this year.

Our 24-month target for the stock is $3.75 to $4.00.

For more information, contact DUSA at 978-657-7500.

CLEARFIELD, INC. (NASDAQ: CLFD) – $2.58. Twelve-month hi-low has been $6.09 – $1.07. Based in Plymouth, MN, with about 110 employees, this equipment maker has 12 million shares outstanding, $8.87 million in total current assets, $19.34 million in total assets, little debt, and $1.66 million in total liabilities. Institutional ownership is around 9%. www.clearfieldconnection.com

Clearfield, Inc. recently stumbled because of its quarterly numbers, but, if you believe the new housing market is due for an upturn over the next year or two, then this company could get its mojo back. The one good aspect here is that the balance sheet should help the company get back to its onetime self.

Founded in 1979, and public for nearly 25 years, Clearfield manufactures and sells telecommunications equipment. It provides a suite of standard and custom connectivity products, such as fiber distribution systems, optical components, outside plant cabinets, and fiber and copper cable assemblies. The company’s products include Clearview cassettes; Fieldsmart fiber crossover distribution systems (FxDS) that provide fiber management modularity and scalability across the fiber network from inside plant to outside plant environments; FieldSmart fiber scalability center (FSC), a modular and scalable outside plant cabinet that allow users to align their capital equipment expense with subscriber revenue; and FieldSmart fiber delivery point (FDP) product line for the access network that incorporates the delivery of fiber connectivity to the neighborhood or business district.

Clearfield packages optical components for signal coupling, splitting, termination, multiplexing, demultiplexing, and attenuation to seamlessly integrate with the Field Smart FxDS, FieldSmart FSC, and FieldSmart FDP. The company serves the communication service providers, including fiber-to-the-premises, large enterprise, and OEM markets.

At the end of April, Clearfield announced two new product development and marketing initiatives in which broadband infrastructure providers can enhance their product offerings by easily integrating the Clearview Cassette and the Clearview xPAK Cassette into their own product lines.

For the FY ending 9/30/09, revenue was $24.94 million with $3.78 million in net income versus the previous year revenue of $23.49 million and $1.51 million in net income. During the first six months of the current FY, ending 3/31/10, revenue was $9.66 million with $268,051 in losses.

This is a company that’s been around for a long time and has had up and down cycles. It could be due for another up-cycle, soon.

Our 24-month target for the stock is $4.50 to $4.75.

For more information, contact CLFD at 763-476-6866.

Look for the June 20, 2010 Newsletter to be posted on 6/16 or 6/17.

Thank you,

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