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Institutional Analyst: Special Situation Research

Adding Vasco Data (VDSI) $4.67 to Special Situation Review.

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Institutional Analyst, Special Situation Review, Sunday 3/15/2009.

Chicago 38...54F Snow Flurries.
Los Angeles 50...63F Sunny. (187)
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1. Adding Vasco Data (VDSI) $4.67 to Special Situation Review
2. Let the Currency Wars Begin.
3. Let the St. Patrick's Month Begin.
4. Yes We Can.
5. The Value at Risk.
6. You at Risk.
7. Disclaimer.

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Contact us: roland@internetstockreview.com

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1.Adding Vasco Data (VDSI) $4.67 to SSR

This is our second "special situation" stock idea, since we've decided to
cover any and all types of stocks, now that (and because) the broader
market averages are down 50%. The first was Inventure (SNAK) at $1.07.
We'll have all sorts of interesting companies and try to keep the penny
stocks to a minimum and limited to the truly interesting. Consider all
ideas to be trading ideas and coverage to be light and to continue, only
while the stocks are going up. We have a site to host the write-ups and
additional information on the companies.

Visit it here: http://iaspecialsituationresearch.ning.com/

Oh and by the way, feed us your ideas. Everything will be considered, but
we need a short story -- not just a name and symbol.

And so...

A friend of ours (a stockboker) who live a few blocks away from us finally
sold his palatial estate about a year ago, after it had been on the market
for quite some time. It's not your everyday house. In fact it's something
of a famous house and for fans of Frank Lloyd Wright, a very "important"
and much sought after house (though how a house could ever be important,
is beyond our comprehension -- but that's what they say).

http://www.flickr.com/photos/alui0000/1982919564/in/photostream/

He mentioned to us that the buyer "ran" a publicly traded company called
Vasco Data (VDSI), which was based in a neighboring town. It's a name we
had never heard of, so we decided to start digging. We didn't catch the
name of the buyer, so we looked into the insider holding roster and
decided to make the assumption that it would be the executive who held the
most shares, which turned out to be the CEO (this is of course all public
information).

When he bought the home a year back or so -- the shares of his company are
trading at $14 (roughly). A quick check with the insider holdings roster
shows he controls 8 million shares. So while he may not be Silicon Valley
rich, $112 million is nothing to sneeze it. This made us decide to take a
look at what made him so much money, noting that the company traded as
high as $45 in late 2007, making his stake worth $360 million and the
company worth $1.6 billion.

While we have never heard of it and while we would venture to guess 99.9%
of all asset gathering stockbrokers wouldn't have a clue about who they
are, it was an institutional darling. What created the billion dollar plus
valuation was rapid, rapid growth with sales growing from $52 million
(05), $76 million (06), $119 million (07) and then $133 million (08).

What initially cratered the shares in our opinion, is knowledge by its
current "fast-money" shareholders that most of Vasco's customers, are in
the banking industry (82%). What knocked it to its recent low was a down
4th quarter and the simple statement from management that it would
"...temporarily stop providing an annual outlook due to the uncertainty
created by the continued turmoil in the economy, but that it expected 2009
to be a profitable year." (Well that's reassuring !)

While revenues were only down 7%, fast money doesn't pay near 100 times
earnings for "okay" results, as they did in 2007. Earnings were $0.55 in
2007 and $0.64 in 2008, meaning the pendulum has swung from overvalued to
undervalued and Vasco Data now trades at 7X last years earnings ! They
also have $57 million in the bank and a market value of $63 million. This
is fun.

Seeking Alpha is so generous to provide a transcript from 4Q conferrnce
call: http://tinyurl.com/djblnj

(No guidance for 2009: For the full year 2008, Vasco won 1,827 new
customers -- 249 banks and 1,578 enterprise security customers. The
company, competes with EMC (EMC) unit RSA Security and ActivIdentity
(ACTI) )

VASCO Data Security International Inc.
1901 South Meyers Road
Suite 210
Oakbrook Terrace, IL 60181
Phone: 630-932-8844

Web Site: http://www.vasco.com/

Shares Out: 37 million
Float: 27 million
Market Value: $173 million
Insiders: 24%
Institutions: 43%
Sales $133 million
(Public since 1998)

So what do they do ? In all honesty, it's not very exciting (or
interesting for that matter). They're one of the leaders in strong
authentication and e-signature solutions and services specializing in
Internet Security applications and transactions. Their prime markets are
the financial sector, enterprise security, e-commerce and e-government. We
spent all of 17 seconds on their website.

So here's the investment thesis. The stock has traded down almost every
single day until March 9th. Second it's in the banking sector, which has
traded down almost every single day until March 9th. So there you go. No
need to over complicate these things. It could be a dead bank bounce, or
the bargain of the century.

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2. Let the Currency Wars Begin.

Just when every other country appears to be racing to devalue its
currency, the poor Japanese yen just can’t stop strengthening. Its rise
against the euro Monday was accompanied by a splurge of bad news,
including Sony’s likely first operating loss in 14 years and Toshiba’s
first in seven years. Furthermore, Japanese bankruptcies were up 24 per
cent in the year to the December. The Nikkei resoponded by declining more
than 4 per cent.

All in all, the yen’s recent major ascent will undoubtedly be troubling
the authorities. So the big question is, just how will they respond? Many
are expecting only one thing, that Japan too will be forced to join the
devaluation bandwagon. The strong yen is already having a very nasty
effect on the economy- exporters like Sony and Toshiba being hit a case in
point.

http://ftalphaville.ft.com/blog/2009/01/13/51087/on-your-marks-get-...


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3. Let the St. Patrick's Month Begin.

In Chicago, we are already two weeks into St. Patrick's month, which
started the 7th of March with the first parade in Forest Park.

Yesterday was the Chicago parade and the South Side Irish parade -- and
bring it on. We're not only participating, we're picking up steam. Sunday
and Monday are the Official days-O'-rest.

http://chicago.metromix.com/home/photogallery/south-side-irish-para...


Most of these 25 bars opened at 8AM yesterday, so people could have
breakfast (yeah right) and then take a bus to the parade:

http://chicago.metromix.com/bars-and-clubs/article/get-on-the-bus/9...


Even more buses:

http://chicago.metromix.com/bars-and-clubs/roundup/more-parade-bus-...


50 More Parties (so literally, you can't go to them all).

http://chicago.metromix.com/bars-and-clubs/roundup/st-patricks-day-...


Tuesday's Parties:

So many parties, you not only can't go to all of them, you can't even read
about all of them. One we'll avoid for sure is Trump Hotel & Tower which
brilliantly shows its out-of-towner status, offering up $36 "Eire
platters" which is black cod tempura rolls and salmon and tuna rolls. WTF.

Keep in mind many parties start at 8AM and end at 1:30. Most professionals
are home before sun-down and with the weather predicted to reach into the
70's, it could get very ugly out there.

Example: www.StatePatricksDay.com

Chicago Patty Wagon: http://www.flickr.com/photos/36293705@N00/111699983

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4. Yes We Can.

Making St Patrick's Day a national holiday.

http://www.proposition317.com/Home.aspx

It's looking more and more like they can't. This is really maddening.

They only got 435,000 signatures out of 1 million needed. They being
Guinness. They being Diageo (DEO) with $12 billion in sales and additional
brands like Smirnoff, Bailey's, Bushmills, Cuervo, Ketel One, J&B, Captain
Morgan's, Johnnie Walker and Tanqueray...

How much money do they spend on advertising every year...and the can't
muster a million signatures ?

What is this country (the UK actually) coming to.

Which is a great stock, by the way:
http://www.diageo.com/en-row/homepage.htm

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5. The Value at Risk.

We came across a new market related blog which is short, very well written
and easy to understand... and free of big words like "reparation" or
concepts like "...statistically significant positive alpha."

Don't visit the site if you prefer reading bullish commentary, which may
aid in the implementation of your current investment strategy. We often
read only that, which we know in advance agrees with our current opinion
and we are mostly in agreement with the blog.

As an example he suggests investors not to expect a V-shaped rebound in
the market, because:

"...there are several Countries that face a legitimate, imminent risk of
collapse. We have seen this scenario unfold in Iceland, a relatively
insignificant country that in this situation merely serves as a precursor
for what is to come. The next leg down in the global economy will occur in
conjunction with the collapse of one of the Countries that is currently at
risk of collapse.We refer specifically to Hungary, Latvia, Ireland, Greece
and Spain. We fully expect that two of the listed Countries will default
on its sovereign debt and descend into a period of relative chaos. We are
quite sure that the aforementioned issues are inevitable in nature, and
will serve as a catalyst for a renewed sense of panic with respect to the
state of the global economy."

(We think we'll have a near-V rebound and then head lower -- which is
almost getting to be a "too popular" theory these days.)

About Chinese Premier Wen Jiabo who publicly stated he may cut back on our
allowance:

"...we suspect that the Premier's comments are the first stage of a
thoroughly calculated plan with regards to the unfolding global Situation.
Secondly, the United States Government will continue to spend money as
quickly as possible...and the capital levels of Major Institutions, and in
our best estimation can say that the US Banking Industry requires a
minimum of an additional One Trillion Dollars to bring back some degree of
solvency. In other words "We ain't seen nothin ye.t. We assume that
history (of human civilization) will repeat itself, and the Debtor nation
will ultimately choose to debase its currency as a means of managing its
obligations. "

(We're in the US dollar getting debased camp, we're just not too sure
"when" and "what" to do about it to about it. Though we are nonetheless
sure we "will" figure it out in time and it will make us more money than
any other wave we've ever ridden.)

About Greenspan trying to preserve his legacy:

What Mr. Greenspan doesn't seem to understand, however, is that no amount
of editorial writing and speech making will ever be able to restore his
reputation. First of all, the Proles tend to seek a simplified set of
causes for every major event such as the Crisis of today. Greenspan's
explanation involves events in far away lands that will be difficult for
the workingman to fathom. Secondly, every Crisis must have a scapegoat,
and once that scapegoat is identified, it is impossible to reverse course.
Mr. Greenspan, being a retired and elderly man, was an easy target for
that scapegoat."

(We're in the camp that the only way you can really solve problems (aka
spending like drunk sailors) that were decades in the making, is to stop
trying to prolong the agony and instead allow enough time for the excesses
and imbalances to work themselves out.)

http://www.thevalueatrisk.blogspot.com/

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6. You at Risk.

Are you at risk ?

Very cool website showing crime in your area, just pop in your zip code.
http://www.crimereports.com/

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7. Disclaimer. Statements made in this news release that relate to future
plans, events or performances are forward-looking statements. Any
statement containing words such as "believes," "anticipates," "plans,"
"expects," "intend," "mean," and similar words, is forward-looking, and
these statements involve risks and uncertainties and are based on current
expectations. Consequently, actual results could differ materially from
the expectations expressed in these forward-looking statements. Reference
is made to the Company's public filings with the US Securities and
Exchange. Not a client.
Going Concern Statements.
We would like to point out that the majority of companies listed on the
OTC Bulletin Board have factors which create an
uncertainty about the their ability to continue as a going concern. These
concerns are typically related to financing (or lack of), competitive
environments, lack of operating history and operating at loss levels which
is typical of most start-ups.
These statement can usually be found in their most recent 10Q filings and
typically you don't have to dig to far down past the financial tables. We
like to use http://www.pinksheets.com for quick and easy access to SEC
filings. We think it would be wise for most investors to assume that all
companies listed on the OTC Bulletin Board (and many on NASDAQ) have going
concern issues.
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