The Microcap Speculator

Last month’s microcap insider buys all but bucked the market meltdown, losing an average of only 0.69% from the time the list was published through today, versus losses of 6.44% in the SPY (S&P 500 ETF) and 7.80% in the IWM (Russell 2000 ETF). So what microcap stocks were insiders and 10%+ owners buying in December?

1. Synalloy [[SYNL]]: Director Murray Wright bought 25,000 shares in December, an investment exceeding $400,000. These were Wright’s first purchases since selling 35,000 shares at over $40 last year. Like Wright, I am long Synalloy.
2. Torch Energy Royalty Trust [[TRU]]: Robert O’ Shea’s Trust Ventures just keeps buying TRU shares ahead of the liquidation vote. O’Shea, who has obviously crunched the numbers, must believe that a dissolution will yield substantially more than current prices.
3. Comsys IT Partners [[CITP]]: Texas investor Geoffrey Raynor increased his investment in Comsys, an IT staffing company, purchasing over 500,000 shares in December. Oops! CITP shares lost over 15% in the first week of 2008.
4. Georgia Gulf [[GGC]]: Do you think only retail investors are guilty of doubling down? Look no further than Georgia Gulf, where Rodger Krouse’s Sun Capital funds increased their underwater bet by over a million dollars in December.
5. Crescent Banking Co. [[CSNT]]: Director Michael Lowe bought over $2 million worth of this Georgia bank holding company in December. By my back-of-the-envelope calculations, he now owns over a quarter of outstanding shares.
6. XCorporeal [[XCR]]: A fund controlled by director Marc Cummins bought over 100,000 shares in December. XCorporeal is a medical device company developing a “wearable kidney.” Why can’t they just call it portable dialysis?

Track the performance of this portfolio on Stockpickr.

DISCLOSURE: Long SYNL as of Jan. 7. No position in other stocks mentioned.

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Its time for another edition of the microcap insider buying report. Here are a few microcap stocks with heavy insider buying in November and early December 2007:

1. Access Plans USA [[AUSA]]: Three directors bought at total of 31,247 shares, for about $30,000. These represent the first insider purchases of 2007. Access Plans USA describes itself as “a nationwide distributor of health insurance and non-insurance healthcare programs that provide access to affordable healthcare for the growing number of uninsured and/or underinsured in the United States.” While it took a large loss last quarter mainly on a writedown of goodwill, revenues are growing and operating earnings are positive.
2. Incentra Solutions (ICNS.OB): Insiders bought about 350,000 shares at $.70-$.80. Incentra, formerly Helio Solutions, is a provider of IT and storage management solutions to enterprises and managed service providers in North America and Europe. Incentra continues to lose money but has trimmed losses considerably. I especially like the increase in revenues — up 117 percent to $92.1 million for the first 9 months of the year. Sales dwarf the company’s tiny $17.48M market cap.. I think these insiders may be on to something, and I may join them.
3. Opko Health [[OPK]]: The Frost Gamma Trust, an investment vehicle managed by the company’s CEO, Miami billionaire Dr. Phillip Frost, bought $20M in shares, bringing its holdings up to 62%. Opko is developing Bevasiranib, a small interfering RNA (siRNA) drug designed to silence the genes that produce vascular endothelial growth factor (VEGF), believed to be largely responsible for the vision loss of wet AMD. If anyone has a bead on the value of this drug, send me an email.
4. Imergent [[IIG]]: Imergent insiders continue to buy even as IIG stock plummets. Motley Fool named it the “worst stock,” and given the company’s miserable earnings report and continued legal woes, I’ll sit this one out.
5. Private Media Group [[PRVT]]: Milton Berth, the CEO, President, and Chairman of this adult media porn distribution company, continues to make large open-market purchases. Private Media has returned to profitability, but still trades at a high price-to-sales ratio.
6. TLC Vision [[TLCV]]: Highland Capital continues to scoop up shares of TLC Vision, buying over a million shares last month. The laser vision correction chain lost a lot of money last quarter, mostly on impairment charges, but is cash flow positive.

I entered the portfolio into Stockpickr so you can track its performance here.
DISCLOSURE: No positions.

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Though its been a while since I covered insider buying here, the recent liquidity crisis has not stopped insiders at some microcap companies from calling their brokers. Here are a few notable recent buys:

Gray Television [[GTN]]: The family Robinson has made dozens of purchases over the past few months, totaling hundreds of thousands of dollars. I’m not crazy about the television business, but this one may be worth watching.

IMAX Corp. [[IMAX]]: Not deterred by the recent restatement, investor James Douglas keeps buying shares. I’m more concerned with the profits. I’ll wait until the company puts in a good quarter or two before considering following in Douglas’s footsteps.

MGT Capital Investments [[MGT]]: Chairman & CEO Tim Paterson Brown bought 1.25M shares recently in two private transactions. Though the size is significant, non-market purchases need to be viewed with a degree of skepticism. Just as it means an insider was purchasing, it also means a private investor thought it was time to dump a huge amount of shares.

Nano Proprietary (NNPP.OB): This nanotech IP company was once a darling of daytraders but has since seen nothing but scorn from investors. Two insider buys, though smallish, may signal a pending turnaround.

Plug Power [[PLUG]]: Mining giant Norilsk Nickel continues to build its position in this microcap fuel cell company. Is a buyout brewing?

Prospect Capital [[PSEC]]: Insiders are scooping up shares of this company, which used to be called Prospect Energy. The financial services it offers — mezzanine finance, bridge loans, and private equity — have caused many companies distress in past months. However, Prospect finances energy companies, which have been red hot. Investors are betting that Prospect will escape the liquidity crunch unscathed.

Unify Corp. (UFYC.OB): Turnaround investors Austin Marxe and David Greenhouse added almost 100,000 shares in two separate buys in September and October, bringing their ownership to 1,379,577 shares, or nearly a quarter of all outstanding. From the look of the chart, Marxe & Greenhouse may be on to something.

Yukon Gold Corp. (YDFG.OB): Director Jose Guerra just bought 447,500 shares for $134,000 of this gold company, which I had not heard of before today. He has bought more in the past at higher prices, so Guerra’s buy may not hold a lot of predictive value. Still, its his largest buy thus far so it is at least a significant vote of confidence.

DISCLOSURE: No positions.

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Its time for another installment of the Microcap Insider Buying Report. I began with J3SG’s 3-month microcap insider & 10% holder buying summary, and used Yahoo! Finance and EDGAR to investigate the leads. Want to follow the insiders? Take a look at these companies:

• JL Halsey Corp. (JLHY.OB): Chairman William Comfort and director Andrew Blair bought over 12 million shares (mostly in a limited partnership) in non-market transactions from entities controlled by David Burt. I take this as a vote of confidence in the owner of Lyris and other email and ecommerce businesses, which just reported solid earnings.
• Telik, Inc. (TELK): Black Bear Offshore Master Fund continues to buy shares in this fallen pharmaceutical development company. Do they know something we don’t, or are they just doubling down on a bet gone bad? Stay tuned.
• GTC Biotherapeutics (GTCB): CEO, President and Chairman Geoffrey Cox continues to make small purchases of this microcap biotech company, which recently expanded the license for its anti-nerve agent therapy.
• Zhone Technologies (ZHNE): New Enterprise Associates continues to be a substantial buyer of this communications equipment provider. Although Zhone has come a long way since 2002, it is still not profitable. I’ll pass.
• Ardea Biosciences (ARDC.PK): Baker Brothers Life Science Fund and Tang Capital are recent buyers in this Pink Sheets biotech company, which appears to be a spinout from Valeant Pharmaceuticals.
• World Heart Corp. (WHRT): Microcap investing duo Austin Marxe and David Greenhouse have taken a substantial stake in World Heart, which develops the Levacor magnetic levitation heart pump. Take a look at their other holdings.
• Great Plains Renewable Energy (GPRE): After watching shares of his ethanol manufacturing company drop over 50% from its 52-week highs around $50 per share, CEO Wayne Hoovestal apparently had enough. In early March, he bought 182,000 shares at $22, coincidentally last Friday’s closing price.
• Metromedia Int’l (MTRM.PK): Black Horse Capital Management upped its stake by 1,000,000 shares in this GSM wireless company operating in the Georgian Republic.
• EAU Technologies (EAUI.OB): EAU claims to have an electrolyzed water technology for non-toxic, safe disinfecting applications. Peter Ullrich must think it works — his Water Science LLC fund just bought another $3M worth of shares.
• TRX, Inc. (TRXI): After this developer of software for travel agents and corporate travel departments tumbled on a lousy earnings report and outlook, major shareholder BCD Holdings (which has two directors on the board) picked up another 175,000 shares. Given the outlook for this industry and the company’s own guidance, its hard to get excited about TRXI even at these levels.

DISCLOSURE: I have no position in any of the above companies. Not a recommendation to buy or sell any securities. For informational and educational purposes only.

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