We have exited our position in Facet Biotech (FACT) for a net gain of 58% since our posting on the company last April.

Biogen Idec Inc. (BIIB) said Friday it offered to buy its partner Facet Biotech Corp. for $356 million, and at the same time criticized Facet for entering a partnership with Trubion Pharmaceuticals Inc. (TRBN) last week.

Life Sciences Research, Inc. (LSR) announced Thursday that it has entered into a definitive merger agreement to be acquired by Lion Holdings, Inc., an entity controlled by LSR’s Chairman and Chief Executive Officer, Andrew Baker, for $8.50 per share in cash. Mr. Baker currently beneficially owns approximately 17.5% of the outstanding shares of LSR.

On our March 16, 2009 post, we specified that LSR was a special situations play with a high probability of realization. We also pointed out that this was not a long-term play, as its mediocre earnings power did not make it a long-term value candidate. We are now closing our position on LSR, for an absolute return of 20%.

Soapstone Networks (SOAP) announced Monday that its Board of Directors has unanimously approved a plan of dissolution and liquidation of the Company.

We added SOAP to the Valuehuntr Portfolio on March 9, 2009, after the company announced it was seeking strategic alternatives to enhance shareholder value. At the time, the company had nearly $6.0/share in cash, but trading at a market cap of $2.8/share.

Shares of Vanda Pharmaceuticals Inc. (VNDA) skyrocketed today after the company said the FDA approved its schizophrenia drug Fanapt. Vanda plans to begin shipping the drug to pharmacies later this year. The news sent Vanda shares surging nearly tenfold to $10.00 from $1.08. We purchased the stock at $0.80/share, which translates into a whopping 1150% gain, the best individual gain we have had so far.

VNDA was the very first addition to the ValueHuntr Portfolio. As we discussed in our March 6, 2009 article, our investment in VNDA was a rare win-win scenario because the company, trading below net-cash at the time of our purchase, would have likely been liquidated had the FDA not approved its Fanapt product, which would have resulted in a 100% gain at liquidation.

We are adding Facet Biotech Corporation to our ValueHuntr Portfolio. FACT is a company with a market cap of $239M ($9.72/share) with $295M ($12.00/share) of net-cash as of December 31, 2008. On December 18, 2008, Facet Biotech completed its spin-off from PDL BioPharma, Inc. (PDL). PDL capitalized Facet with $405 million in cash and cash equivalents and contributed to Facet its biotechnology operations and related assets, including four clinical-stage programs, research and development capabilities and protein engineering technology assets. We estimate FACT’s worth at a minimum $14/share, which is the rough value its assets would be worth at liquidation.

Dear Facet Team Members,

As you may have seen, a press release was issued by one of our stockholders yesterday. The stockholder proposed an alternate slate of directors for the Facet board, in advance of our annual stockholder’s meeting in May, and called for the company to issue a substantial cash dividend followed by a sale of the company.

Late last week, we also received a letter from this stockholder that included his alternate director slate. We issued a press release earlier this morning indicating we had received the nomination notice. It is our policy to listen to all of our stockholders and our Board is in the process of evaluating the notice. Although we thoughtfully evaluate stockholder input, we believe we are headed in the right direction strategically and do not believe these proposals are currently in the best interests of the company and our stockholders.

Given all that you have endured over the last couple of years, I realize that this information may be unsettling to many of you. But let me assure that we have a solid strategy in place — our goal for Facet is to build an oncology-focused biotech company that is committed to developing drugs to improve patient lives — and we have the support of our board of directors. The most important thing we can do is to continue to focus on our day-to-day responsibilities while working to achieve our goals.

Dear Dr. Wong,

We are in receipt of your letter dated March 26, 2009 and the accompanying notice of your intent to nominate directors at our 2009 Annual Meeting of Stockholders. We welcome the input of our stockholders, and our Board has considered the suggestions articulated in your letter and March 30, 2009 press release.

Our Board and management remain firmly committed to increasing the value of the Company to our stockholders. To this end, our Board has regularly evaluated the Company’s business plan as well as strategic alternatives to create value for our stockholders since the Company’s spin-off less than four months ago. In this regard, we note the following:

- Facet has undergone a rigorous analysis of its strategy, both in connection with our recent spin-off and subsequently.

- Our goal has been to focus on therapeutic areas that we believe hold the greatest opportunity for us to create meaningful value for our stockholders. As a result of our continued review and analysis, we are focusing our efforts on oncology.

- We believe our development programs and technology capabilities represent substantial potential value for our stockholders. Indeed, our collaborations with Bristol-Myers Squibb and Biogen Idec on certain of our development programs validate the value of these programs. We firmly believe that by continuing to advance these and other programs, as well as our proprietary protein engineering technology platform, we can enhance value for our stockholders.

- Furthermore, in an effort to maintain strict financial discipline, we have aggressively lowered our cost structure. In particular, as we recently announced, we have reduced our headcount and our overall anticipated cash utilization in 2009, thereby extending the time period for which we have funding.

We believe that our current Board, comprised of four independent directors and Faheem Hasnain, our President and Chief Executive Officer, and the management of the Company have a record of working to advance the interests of all stockholders, consistent with their fiduciary duty.

Based on our strategic review and ongoing analyses, the Board believes that our current strategic plan is the right plan to build value for our stockholders. Since we are committed to considering all alternatives to creating value, we have reviewed your proposal for the liquidation of the Company. We have, however, unanimously concluded that the interests of our stockholders are best served by continuing to focus on executing our current strategy.

Moreover, the Board believes that the assumptions stated in your March 30 press release with regard to the Company’s ability to distribute a significant cash dividend do not properly take into account, among other things, the Company’s significant lease and other obligations, which are detailed in the Company’s 2008 Annual Report on Form 10-K. Further, we believe that in this current economic environment, your proposals would significantly impair the Company’s ability to realize appropriate value for its existing assets.

Accordingly, we do not believe that your suggestions are in the best interests of our stockholders. We intend to maintain an open and active dialogue with our stockholders as we continue to work to enhance stockholder value.

Sincerely,

Brad Goodwin

Chairperson of the Board

Trident Microsystems (TRID) is a company whose stock is trading substantially below its net-cash value. According to its latest SEC filing the company held nearly $212M in cash with $56M in total liabilities, for a net-cash value of $156M as of December 31, 2008. However, TRID’s market price is only $95M, nearly a 60% discount to its net cash.

TRID is a leader in integrated circuits for Digital Television. While its products are used in all kinds of displays, LCD television is its most important growth market as LCD televisions take share from plasma in the market for larger screens as well as traditional CRT television sets of all sizes. Additionally, TRID designs, develops, and markets integrated circuits (ICs) and associated software for digital media applications, such as digital television (digital TV) and digital set-top boxes (STB). The company also designs cross-platform software that allows multimedia applications to run on devices in the digital living room, including digital STBs and digital TV sets.

A common belief in Wall Street is that risk avoidance is incompatible with investment success. This view holds that high return is attainable only by incurring high risk and that investment success is attainable only by seeking out, rather than avoiding, risk.

It wasn't uncommon for Ben Graham, the creator of value investing, to invest in stocks in which the liquid assets on the balance sheet (net of all debt) were worth more than the total market capitalization of the company (also known as "net nets" to Graham followers). This means that Graham was effectively buying businesses for nothing, and in some cases, for less than what the businesses would sell at auction.

For this article, we focus on what Ben Graham called “secondary stocks”. We define a secondary stock as one having no claim to fame, prominence, or general popularity. Hence, it is likely to be ignored by the stock market generally and left for dead when the disparity between price and intrinsic value may in fact be the greatest. There is no guarantee or law of market action by which the price can be counted upon to adjust itself eventually to its intrinsic value. Therefore, our focus is on companies with a catalyst in place. These are our picks:

A critical misconception behind GE’s latest stock plunge is that the industrial giant faces the same financial woes as Citigroup (C), Bank of America (BAC), and other major banks. Though the similarities are many, there are some startling differences.

A common misconception about GE Capital is that as other major banks, it may have as much as $45 billion in commercial mortgage backed securities (CMBS) that will need to be marked down, sharply decreasing the value of GE’s assets. However, our analysis shows that this is completely wrong. The latest 10-K shows that as of December 31, 2009, GE held as much as $50 billion in a commercial real estate loan book, a senior secured position where GE underwrites each individual property. This means that the $34 billion of equity is the actual value of the properties, with over 80% of that with no third party debt.