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Theoretically, shareholders would also be able to use insider trades as a way to screen for Russell rejects that are likely to outperform. But there was only one company that had insiders buying stock in recent months: Newport Beach, Calif.-based Acacia Technologies Group (ACTG: news, chart, profile).
Acacia is known for holding patents on the V-chip, which is used in TV sets to selectively block out programming that's not suitable for children. The company also holds patents for sending digital media content.
Paul Ryan, Acacia's chief executive, bought 81,800 shares of his company's stock from the end of February through mid-March at prices ranging from $1.04 to $1.33 a share. The stock now trades at about $1.20 a share.
Ryan acknowledges that the V-chip market has flopped -- partly due to competition in the V-chip market. The company reported $222,000 in sales, and a loss of about $7 million in its March quarter. But he says the company will turn around once licenses start rolling in for its digital media technology, which it just started selling this year.
Acacia has a book value of more than $2 a share, and more than $1.60 in cash per share. According to Ryan, the company has already entered 24 licensing deals for its digital media technology; he hopes the company will be cash-flow positive next year.
But the company burned through more than $3 million in its most recent quarter. Future growth will depend on Acacia's ability to enforce technology patents that are 13 years old. Ryan claims that the "vast majority" of companies that are streaming media on the Internet and through cable lines are violating his patents.
Ryan hopes to enforce his patents with lawsuits, if necessary. He's filed claims against 39 adult-entertainment companies to try to force them to license his company's technology. About 10 have settled with Acacia so far, he says.
The long-term risk to the company, Ryan acknowledges, is if the lawsuit strategy fails, and one of the companies Ryan sues can invalidate a group of Acadia's patents. So far, the validity of Acacia's patents hasn't been challenged in court, Ryan said.
A separate screen on stocks that trade at the ultra-low multiple of one-times their sales or less didn't turn up much of anything interesting, either. Unlike last year, few of the companies stood out as having a better-than-average chance of turning things around.
With Acadia as one of the only stock that turns up after screening a list of potential Russell throw-aways, it seems pretty clear that this year is different: No longer is it easy to pick a prize stock from the rubbish heap.
Mike Tarsala is a San Francisco-based reporter for CBS.MarketWatch.com. |
