ImmuCell Corporation (ICCC) is a 12 million market cap animal health biotechnology company. It’s focused on developing, manufacturing and selling products that improve animal heath in the dairy and beef industries worldwide. ICCC has been in business for over 20 years.

Some of their products are First Defense, Wipe Out dairy wipes and other proprietary commercially effective products used to prevent and promote health and prevent disease with cows. Their current product line can be found here.

Dry Clean USA (DCU) is completely neglected, ignored, unloved and illiquid but is still one of the deepest of deep value micro cap stocks, in my opinion. Dry Clean USA closed at $1.00 this past Friday 09/23/09 and qualifies as a candidate to discuss on Seeking Alpha. I thought it may interest some Seeking Alpha nano cap investors. My first mention of DCU was on my blog September 2008 at 0.75.

Not quite a jaw dropping returns or suited for almost all institutional investors but in comparison to the returns generated by DFSCX (DFA US Micro Cap I) which was down 21% over the same period, its fundamental performance as a company and to a much lesser extent its stock performance makes the idea interesting to some investors.

Every day there are thousands of insider trades, but most of this data is noise. The topic of insider trading has been studied and written about for many years in academia and for profit firms. Insider trading activity is not a magic potion. Many newsletters have failed to justify their existence and have folded by over relying or simply misinterpreting the information. But having said this, studies have shown correctly using insider trading activity does have forecasting value and can help in outperforming the market.

A summary of key points for using insider trading

Current market conditions have enhanced Clarus Corp.’s (CLRS.PK) assets for a future combination. Clarus Corp. is a shell company with no current operating business but instead has about 86 million in cash or $4.95 per share and 223 million in NOLs. 90% of the NOLs expire 2020 or latter. The current stock price is only $4.06!

CLRS.PK is seeking to acquire a business in any industry and is being managed by the highly successful CEO Warren Kanders. Kanders has a successful track record most notably with AH (NYSE) Armor Holdings. Armor Holdings (AH) posted a ~30% compounded growth rate after he took over.

I was interested in searching for companies that could be exploiting this bear market in the hopes that they will increase future shareholder value. A potential overlooked financial measure not immediately obvious is actual large share buybacks at depressed prices over the past 6 months. For some companies these purchases could turn out to be the most prudent allocation of shareholder capital. Many companies will issue press about share buybacks and never buy those shares. Other companies will never make a public announcement and actually buy large amounts of shares. I began the search using the cash flow statement to get a tangible measure of how much money was expended on share repurchases by quarter.

Using the “Financing Activities” section of the cash flow statement I reviewed the line item “sale or purchase of stock”. A negative indicates the expenditure of cash on share buybacks and positives would be the receipt of cash from the exercise price of options or the issuance of new shares. This may be obvious, but I believe it’s an area that can provide new ideas as part of a more complete analysis.

The liquidation of Technology Solutions (TSCC) was a strong reminder of the profit potential for stocks trading for less than net cash (cash – total liabilities). TSCC was relatively illiquid and trading between a low of $1 and a high of $1.11 this year. Some days no shares were traded. But in my article on 02/09/09 "Exploiting Market Anomalies with Neglected Illiquid Stocks" I did speak on the topic of illiquid value stocks and believe it should not deter value investors.

On Tuesday, February 10, TSCC announced they would liquidate. TSCC closed at $2.18 this past Friday (02/13/09), up from the liquidation announcement date on Tuesday 02/11/09 at $1.06 for a +105% gain. This event got me thinking I should carefully search for other net cash bargains. I screened on many quantitative and qualitative factors coupled with net cash greater than current share price. These ideas were the most appealing net cash bargains.

Most investors know GAAP requires real estate to be recorded at its historical cost. Given real estate purchased many years ago is likely to have a fair market value materially higher than the historical cost, I decided to search companies for this hidden asset. Furthermore, my initial search was to buy these inefficiently priced real estate assets with companies that have an optimistic future evident by a sound balance sheet, cash flow and desirable products and services. The real estate market has been in what some would say a depression and for some properties liquidity can be near nonexistent at this time. But some of these outsized real estate holdings can provide an overlooked margin of safety.

The approach is relatively straight forward, but can often be overlooked especially on companies lacking Wall Street or financial press coverage. For this article I focus on just one idea as the material became too long. But I will try to introduce the other ideas in a follow up piece.

The market continues to indiscriminately sell stocks. But in 2008, micro cap value took one of the biggest hits compared to other investment categories.

I occasionally like to remind myself of something Benjamin Graham said:

Ark Restaurants Corp (ARKR) has evolved over its 25 years toward being one of the best, if not the best, shareholder-friendly restaurants. CEO Mike Weinstein was an investment banker before creating the publicly traded Ark Restaurants. The CEO’s leadership can be credited for its successful management team and outstanding capital allocation.

The company has a wide range of restaurant styles without a single identifiable concept. CEO Mike Weinstein has stated "I don't know how to build brand equity and don't want to". ARKR currently has 20 full scale restaurants with chefs and executive chefs, 30 fast food themes, catering operations and wholesale / retail bakeries. Its upscale restaurants are stylishly designed at landmark locations, including Bryant Park Grill located behind the New York Public Library, the Grill Room with majestic views of the Hudson, 1000 seat Sequoia along the banks of Washington D.C.'s Potomac River, Gallagher’s Steakhouse located at Resort Hotel and Casino in Atlantic City, and others.

Okay, it's not recession proof, but U.S. Physical Therapy (USPH) is a recession resistant health care service provider. USPH has an outstanding financial position with $35 million of an unused credit line, consistent stable free cash flow, and a proven management team that will enable it to continue expanding market share by exploiting the current lower multiples on overlooked smaller accretive competitors. U.S. Physical Therapy, Inc operates 349 outpatient physical and/or occupational therapy clinics in 42 states representing about 7% of this highly fragmented industry. From a macro point of view the long term economics of physical/occupational therapy can only improve with aging baby boomers and a country in less than perfect physical health.

The consistently high ROE currently at 14.10% screams out well managed company and the high earnings yield of 17.50% (EBITDA/EV) is proof of a bargain stock price. A sound capital structure is also contributing to the high and consistent ROE. Shares outstanding are basically flat over the past 4 years at 11.96 million shares and proof of a shareholder friendly management. The recent quarter reported significant top and bottom line improvements. Comparative third quarter 2008 results versus Q3 2007 improved with revenues +26% to 47.20 million, net income +19%, same store revenues + 3.40%, same store visits +2.80% offset with a .01 EPS negative impact from Hurricane Ike.

Datawatch (DWCH) is a microcap stock ($7.10 million market cap) that provides business intelligence software solutions for the desktop and enterprise. More than 20,000 companies and government agencies worldwide, including most of the Fortune 100, benefit from their various software solutions.

The firm is best recognized for Monarch software, which has sold in excess of 400,000 registered copies. Their software is available in multiple languages including German, French, and Spanish. At this time, approximately 38% of the company’s revenues are derived overseas.