The Microcap Speculator

Worth reading:

• Patriot Scientific Reports Q3 FY’08 Results - market really hated this one, sending shares down over 20%. I was a very early fan of PTSC but have been skeptical since it peaked. With the big settlements behind it, how can PTSC justify its valuation?
• Candente: Copper Worth Looking At - Otto Rock via Seeking Alpha, on why Cadente is a likely takeout at a much higher price
• China 3C Group Enters into Supply Agreement with Wal-Mart Stores in Zhejiang Province - CHCG needed a little good news after the latest dour outlook.
• YTB International Reports Total Revenue of $141 Million and $3.2 Million Net Income for 2007 - YTBLA is en fuego, rising from below 1 to around 4 in just a few weeks (chart). The funny thing is I never even heard of this company.
• The Short Case for Origin Agritech - Interesting read but imo this stock was rides up and down on the fancy of momo traders.
• BAB, Inc. Reports Profit for 1st Quarter FY 2008 - Earnings hold steady at my favorite publicly-traded bagel company. As long as they do, I’ll keep collecting that huge dividend.

DISCLOSURE: Long CHCG.OB, BABB.OB. No position in other stocks mentioned.

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A few items:

• BAB Holdings (BABB.OB) announced another $.02 quarterly dividend. Shares have recently traded in a price range of $.85-$.95. Though the trading is thin, the yield is fat. Just counting the regular dividends — not last quarter’s special dividend — BAB Holdings gives shareholders $.08 per year. At the bottom end of BAB’s price range, that amounts to a 9.4% yield, and at the top end, an 8.4% yield. Not too shabby!
• I’m still long the junior/mid-tier gold miner field bet posted Feb. 20. So far, the results are mixed: Gold Fields [[GFI]] is up about 10.6% since then, and Gammon Resources [[GRS]] is up a solid 26.4%. On the flip side, Golden Star Resources [[GSS]] is down 3.2% and U.S. Gold [[UXG]] is down 2.6%. My takeaway? The disparate results show the need to play this one as a field bet. That’s why when I decided to increase the bet yesterday, I added another stock, Tan Range Exploration [[TRE]], instead of adding to existing positions. Next add will probably be Western Goldfields [[WGW]]. The stocks still don’t reflect the recent rally in the underlying metal, or potential earnings power. As long as gold holds $900 over the next three months, I expect a slingshot move in the juniors and mid-miners.
• Microcap nursing-home stock Advocat, Inc. [[AVCA]] reports earnings next Wednesday. Though the stock is under pressure on light volume this week, I like it at these levels and may boost my holdings in advance of the quarterly report.
• Littlefield (LTFD.OB), the bingo hall operator frequently mentioned here as a play on aging baby boomers, was a little light on earnings. I’m out of the stock and have no plans to reenter until financial results improve.
• China 3C Group (CHCG.OB) continues to hit new lows, though it reaffirmed fiscal 2007 earnings projections of $.43 to $.47. At today’s price of $2.23, I think that the Chinese electronics retailer offers a pretty good risk/reward in front of the 2008 Olympics. I’m a buyer.

DISCLOSURE: Long BABB.OB, GRS, UXG, GFI, TRE, AVCA, CHCG.OB. No position in WGW (yet) or LTFD.OB.

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A few news items worth mentioning:

• Advocat, Inc. [[AVCA]] received a letter from activist shareholder Paul Kessler of Bristol Investment Fund pressuring it, among other things, to let shareholders vote on whether to de-stagger the board of directors and to hire an advisor to weigh strategic alternatives.  Similar demands from Kessler, who controls about 5% of shares, have been disregarded by the company.  I expect no action here even though Kessler’s demands would probably increase shareholder value.
• China OTC Player has an interesting post on three companies that could benefit from China’s devastating snowstorms [via Seeking Alpha].  He names China Solar (CSOL.OB) (formerly Deli Solar), China Pharma Holdings (CPHI.OB), and Sino Gas (SGAS.OB)
• Air Industries (AIRI.OB) announced that its Welding Metallurgy subsidiary has won $1.07 million of new contracts during the month of January 2008. The company says that this is the largest aggregate amount of new contract awards in a single month for Welding Metallurgy since its inception in 1979.
• Bagel-maker BAB Holdings (BABB.OB) announced $.10 earnings for 2007, virtually identical to 2006 results.  That’s fine with me as long as they keep paying $.08 or more in annual dividends.

DISCLOSURE:  Long AVCA, AIRI.OB, BABB.OB.  No position in other stocks mentioned.

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BAB, Inc. (BABB.OB), the tiny comany that operates, franchises, and licenses the Big Apple Bagel, Brewster’s Coffee, Jacobs Bros. Bagels, and My Favorite Muffins brand restaurants, recently announced a special dividend of $.02 in addition to its regular quarterly cash dividend of $0.02 per share, for a total of $0.04. The dividend is payable on January 4, 2008 to shareholders of record as of December 20, 2007.

Sounds like small change, right? Not when you consider the resulting dividend yield. Assuming the company maintains its regularly quarterly dividend, buyers today will receive $.10 for the coming four quarters. At yesterday’s close of $.95, that is a yield of 10.52%!

Of course, that calculation is dependent on the company’s ability to sustain its regular quarterly dividend. I think it can. BAB is profitable, and in the first 9 months of 2007 already earned the eight cents necessary to cover a year’s worth of regular dividends.

One word of caution — the stock is quite thin, which means it is difficult to accumulate and will also likely be difficult to unload if the situation changes for the worse. I have been a buyer at $.94-$.95, and will probably continue to build this position in the coming days.

DISCLOSURE: Long BABB.OB

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