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Friday, December 25, 2009

Opportunity Costs Hard to Predict in Short-Term, Watch Over Full Market Cycle; Mediasite Holiday Wishes

Sonic Foundry's (SOFO, $4.90) share price didn't deliver for us in 2009 and, unfortunately, represented a significant opportunity cost as our other stock purchases (e.g. especially certain REITs), as well as foregone ideas (capital constraints), performed impressively from irrational entry points offered by the Market.

So it is in the short term as price changes are impossible to forecast and, often, are decoupled from expected fair values supported by underlying fundamentals. Some stocks may languish, while others surge for any number of reasons, rational or irrational. j2 Global Communications (JCOM, $19.74) is another idea that went nowhere despite slight top-line growth (through recession) and consistent Q/Q increases in shareholders' equity (book value) through growing retained earnings. Excess cash continues to build on j2's balance sheet and should keep accumulating in 2010. Shareholder friendly management can use the large net cash position (~25% of market capitalization) to reinvest in the business, make acquisitions, repurchase shares, and/or pay a dividend.

But, back to Sonic Foundry. The good news is that we remain confident that the Mediasite franchise continues to grow around the world (e.g. see fiscal 2009 revenue growth, increases in deferred revenue, more customers, etc.) and that true economic value is not reflected in the company's market value. Moreover, customer adoration for Mediasite is tangible everywhere and numerous companies/organizations would benefit from adopting the technology. As such, we're happy to share the Mediasite Holiday Presentation Catalog (2006-2008) for some lighthearted holiday fun. We know Sonic Foundry has a 2009 catalog out there, but for some reason, we couldn't access the link at the time of this writing. Plenty of entertaining skits/takes in the 2006-08 catalog.

Happy Holidays,

Jeffrey Walkenhorst

Disclosure: long SOFO.
© 2009 Jeffrey Walkenhorst
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