The Deen's List(TM) A service of Deen Capital Management, Inc. (www.deencapital.com) Vol.1 #31 Tuesday October 21 2003 1:57pm ET Please read carefully our disclaimers at the end of this newsletter. Market stance: BULLISH (since Oct 3 2003) ******************************* Summary ******************************** Bought EENC Bought MNC Bought RE ***************************** Bought EENC ****************************** Enterra Energy Corp (EENC) Net buy price in managed accounts(*)... $19.09 Yesterday's close (Oct 20)............. $18.41 Net change (based on net buy price).... +$0.68 Today's volume as of 1:12pm ET ........ 1.4 million ($25.9 million) Average daily volume................... 124,700 ($2.4 million) This year's earnings-per-share......... N/A Next year's earnings-per-share......... N/A P/E using next year's earnings......... N/A Earnings growth rate, next 5 years..... N/A (*) The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. On Tue Oct 21, I bought EENC. Enterra Energy (www.enterraenergy.com) is a small Canadian oil and gas company. They explore, develop, and produce oil and gas, mostly from fields in western Canada. Here's why I bought this stock: + News: On Thu Oct 9, the company said it expects revenue and cash flow in the third quarter to increase by about 300% from a year earlier. They also said they expect earnings of $1.5 to $2 million, compared with $461,000 a year ago. NOTE: The company expects to announce third quarter results on Nov 14. + Breakout: On Mon Oct 20, the stock broke out of a three-and-a-half month trading range on extremely heavy volume (952,000 shares vs the average of about 120,000. Today, Tue Oct 21, the stock is up again on substantially heavier volume still. + Explosive recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -20%, +102%, +293%, and, most recently, for the quarter ended Jun 30, +266% to $18.5 million. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 02 vs Dec 01: 8c vs 9c Mar 03 vs Mar 02: 8c vs (5c) Jun 03 vs Jun 02: 46c vs 34c Sep 03 vs Sep 02: 54c vs 4c + Valuation: At 16 times trailing 12-month earnings, the stock is attractively priced. NOTE: I have no earnings estimate or 5-year growth projection data for this very small and little-known company. The above items were so compelling that I chose to buy the stock in spite of the following negative factor: - The company's industry group ("Oil&Gas - Canadian Exploration & Production") has fallen dramatically in relative strength over the past six months, according to Investor's Business Daily. ****************************** Bought MNC ****************************** Monaco Coach Corp (MNC) Net buy price in managed accounts(*)... $22.69 Yesterday's close (Oct 20)............. $19.29 Net change (based on net buy price).... +$3.40 Today's volume as of 1:06pm ET ........ 802,600 ($18.2 million) Average daily volume................... 173,600 ($3.9 million) This year's earnings-per-share......... $0.40 (est) Next year's earnings-per-share......... $1.23 (est) P/E using next year's earnings......... 18.5 (est) Earnings growth rate, next 5 years..... 15.0% per year (est) (*) The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. On Tue Oct 21, I bought Monaco Coach Corp. Monaco Coach (www.monaco-online.com) is a manufacturer of premium motor coaches and recreational vehicles. Here's why I bought this stock: + News: Tuesday morning, the company announced results for the quarter ended Sep 30. Earnings came in at 21c per diluted share (vs last year 40c and First Call 9c). Revenue was down 3% to $303.2 million (First Call estimate $269 million). + Breakout: The stock is breaking out today, Tue Oct 21, on extremely heavy volume, from a 7-week trading range. + Valuation: At 18 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 15%, the stock is attractively priced. + The company's industry group ("Bldg - Mobile/Mfg & RV") has risen dramatically in relative strength over the past six months, according to Investor's Business Daily. The above items were so compelling that I chose to buy the stock in spite of the following negative factors: - Sales and earnings were down from year-ago levels for the third quarter. - Weak recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +15%, -7%, -14%, and, most recently, for the quarter ended Sep 30, -3%. - Weak recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 02 vs Dec 01: 41c vs 26c Mar 03 vs Mar 02: 15c vs 33c Jun 03 vs Jun 02: 2c vs 37c Sep 03 vs Sep 02: 21c vs 40c - Falling estimates: According to recent data from First Call, the consensus earnings estimate for 2003 is 40c, down from 57c 90 days ago; and the consensus estimate for 2004 is $1.23, down from $1.51 90 days ago. I accept all of these considerations because this is a turnaround story, and the sales and earnings growth show up in next year's projections. Next year's earnings, at $1.23, are expected to be up 207% from this year's projected 40c. Also, the earnings news, down though it was, nonetheless far exceeded expectations. ****************************** Bought RE ******************************* Everest Re Group Ltd. (RE) Net buy price in managed accounts(*)... $83.94 Yesterday's close (Oct 20)............. $76.51 Net change (based on net buy price).... +$7.43 Today's volume as of 1:08pm ET ........ 2.0 million ($167.9 million) Average daily volume................... 315,500 ($26.5 million) This year's earnings-per-share......... $8.14 (est) Next year's earnings-per-share......... $10.20 (est) P/E using next year's earnings......... 8.2 (est) Earnings growth rate, next 5 years..... 17.0% per year (est) (*) The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. On Tue Oct 21, I bought Everest Re (www.everestregroup.com). Everest Re is a holding company providing treaty and facultative reinsurance to property and casualty insurance companies. Here's why I bought this stock: + News: On Mon Oct 20 after the close, the company announced results for the quarter ended Sep 30. Operating earnings came in at $2.23 per share (vs last year $1.29 and First Call $2.05). Revenue was up 80% to $1.12 billion (First Call estimate $1.10 billion). + Breakout: Today, Tue Oct 21, the stock is making a second breakout attempt from a 7-month trading range. (The first attempt, in early October, failed.) + Excellent recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +67%, +43%, +72%, and, as cited above, +80%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 02 vs Dec 01: $1.17 vs 96c Mar 03 vs Mar 02: $2.02 vs $1.35 Jun 03 vs Jun 02: $1.94 vs $1.34 Sep 03 vs Sep 02: $2.23 vs $1.29 + Rising estimates: According to recent data from First Call, the consensus earnings estimate for 2003 is $8.14, up from $8.02 90 days ago; and the consensus estimate for 2004 is $10.20, up from $9.81 90 days ago. + Valuation: At 8 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 17%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings at least a penny ahead of estimates in each of the past three quarters (including the just-reported quarter cited above). The above items were so compelling that I chose to buy the stock in spite of the following negative factor: - The company's industry group ("Insurance - Property/Casualty/Title") has fallen dramatically in relative strength over the past six months, according to Investor's Business Daily. *********************** Subscription Information *********************** Welcome to The Deen's List(TM), a new e-mail stock newsletter from Deen Capital Management, Inc. My intention is to inform you as quickly as is practical regarding my stock market moves. When I buy or sell a stock, first I take care of client accounts, then I buy/sell for my personal account(s), and then, third, I send out this newsletter. Your feedback is welcome. Send e-mail to deenslist@deencapital.com. To subscribe or unsubscribe, include the word "subscribe" or "unsubscribe" in the Subject line. This newsletter is free to managed account clients. For a limited time, it is also free to all interested parties. **************************** Privacy Policy **************************** Your personal information, including your e-mail address, will be held in confidence by Deen Capital Management, Inc. We will not share it with or sell it to others. ************************ IMPORTANT DISCLAIMERS ************************* * All stocks discussed in The Deen's List(TM) involve a high degree of risk. It should not be assumed that any stock discussed in The Deen's List(TM) or purchased by Deen Capital Management, Inc. will be profitable. * Past performance is not necessarily indicative of future results. * The information contained herein has been compiled from sources deemed to be reliable; however, we are not responsible for its accuracy or completeness. ************************************************************************ Ken Deen Deen Capital Management, Inc. PO Box 30925 Santa Barbara, CA 93130 (805) 682-1870 deenslist@deencapital.com Copyright (C) 2003 Deen Capital Management, Inc.