Some Microcap Quick Hits

A few notes from the trading turret:

• Some of you want to know if I trade any of the stocks coming up on the Century Club scan based on MarketClub’s smart scanner. Sure I do. Last week, for example, I bought Ada-Es (ADES) and Vical (VICL). Both bucked the dismal market and barely stayed green.
  
• Highway Holdings (HIHO) is off about thirty cents since the last post, down very close to my entry point. I still like it, especially after HIHO declared a three cent dividend. If that becomes a quarterly event, the yield would be about 9%.
• One of my all-time best shorts was Zix Corp. (ZIXI) formerly known as Zixit. Lucky or right, I took this one down in the 80s in 2000, and rode it all the way to mid single-digits. I hadn’t given Zix a second thought since I covered in 2002, but was surprised to learn that Zix is almost profitable. Turns out that HIPAA and other regulations that all the Ziximaniacs thought would send Zix to the stratosphere are actually beginning to pay off. Put this one on the watch list.
• As right as I was on ZIXI, I was just as wrong on Star Scientific (STSI). After a court entered summary judgment against it, I thought Star Scientific was kaput. Oops. The court of appeals reversed and breathed new life into Star Scientific, allowing Star to take its patent infringement claims against Reynolds American (RAI) to trial. But Star couldn’t convince a jury that Reynolds actually infringed its tobacco curing patents. If Star doesn’t get a new trial, I don’t see how it can survive.
• Remember Escala, the stamp-trading and collectible company that fell to the pink sheets after the Spanish corporation that owned most of its shares was exposed in an international fraud? Escala is now Spectrum Group Int’l (SPGZ.PK), with operations in coin dealing, bullion trading and auctions. Spectrum Group seems to have put the past troubles behind it, but can’t seem to turn a profit. Guess those inflated stamp revenues are sorely missed.

DISCLOSURE: Long ADES, VICL, HIHO. No position in STSI, ZIXI, or SPGZ.

Comments

[Hal Briggs:]

Star Scientific just might receive that Motion for Judgment as matter of Law from Judge Garbis. Star has already proven that they are the ones that invested years of research and many millions of dollars into their process. Star acted in good faith that their legal counsel would dot every single "I" and cross every single "T". That process belongs to Star as a matter of principle and good faith, it is not their fault that their counsel failed to do the job right to the exacting point of dotting that very last "I". The facts are that Reynolds jumped on a tiny loop hole and are pressing the exact letter of the law. The atmosphere of the court system is changing and Obama is seeking "empathy". Sotomayor will probably get the Supreme court nomination. By the time this case were were to hit the Supreme court, the most likely result will be Reynolds will be out completely. Greed to the point of getting everything no mater what is what causes these cases to go on for many many years. If Judge Garbis does grant that motion, Reynolds would be wise to feel the new judicial wind that is blowing and seek out an out of court settlement with Star about the many millions Star has sued for. My guess is that Star might take dimes on the dollar for their patent infringement losses up to that point just to end it, then they could pick up and move on with lucrative license agreements. Star's counsel failed a bit and Reynolds jumped right into that... What I have learned running my little shop is to compromise on a murky area just to end a bigger problem that may/may not get me in a worse spot. If a customer is does not pay and I offer to remove all my labor just to get my part/sales tax/shipping costs... Well that is sometimes the best thing. I can get new work and not go back to that slow pay person.

Jul 13 12:37 PM

[microman:]

I also like HIHO, as a value play with growth potential. There are some striking similarities with BNSO as well, including being housed in Hong Kong, trading at deep discounts to cash and book value, and running a lean operation that will ultimately lead to EPS growth.

Jul 13 04:20 PM