The Deen's List(TM)
A service of Deen Capital Management, Inc. (www.deencapital.com)
Vol.1 #88           Thursday December 18 2003           3:53pm ET

Please read carefully our disclaimers at the end of this newsletter.

Market stance: BULLISH (since Dec 12 2003)

**************** Bought Applied Signal Tech Inc. (APSG) ****************

Net buy price in managed accounts(*)... $23.52
Yesterday's close (Dec 17)............. $23.90
Net change (based on net buy price).... -$0.38
Today's volume as of 3:08pm ET ........ 138,681 ($3.3 million)
Average daily volume................... 66,100 ($1.6 million)
This year's earnings-per-share......... $0.81 (est)
Next year's earnings-per-share......... $0.98 (est)
P/E using next year's earnings......... 24.1 (est)
Earnings growth rate, next 5 years..... 22.5% 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 Thu Dec 18, I bought APSG.  Applied Signal Tech (www.appsig.com)
makes signal processing equipment to collect and process
telecommunications signals for government agencies.

Here's why I bought this stock:

+ News:  On Tue Dec 16 after the close, the company announced results
for the quarter ended Oct 31.  Earnings came in at 26c per diluted
share (vs last year 8c and First Call 20c).  Revenue was up 26% to
$29.1 million (First Call estimate $26 million).

+ A "true surprise"(*):  Prior to the news, the stock was trading near
the low end of a 3-month trading range.  Then, on Wed Dec 17, the stock
soared +$2.35 to $23.90 on 760,200 shares.  That's huge volume for
this small stock which, on average, trades about 66,000 shares a day.

(*) "True surprise" is my term to describe a company news item that
ignites heavy buying and that was not preceded by a short-term runup
in the stock price (i.e. not preceded by rumor).

+ Breakout:  The price movement on Dec 17 represents a breakout from
a 3-month trading range.

+ Excellent recent sales growth:  Here are the quarterly year-to-year
sales growth rates from the last four quarters, in chronological order:
+12%, +19%, +43%, and, just announced, as cited above, +26%.

+ Excellent recent earnings-per-share growth:  Here are the quarterly
EPS figures for the last eight quarters:

Dec 02 vs Dec 01: 17c vs 17c
Mar 03 vs Mar 02: 21c vs 13c
Jun 03 vs Jun 02: 16c vs 1c
Sep 03 vs Sep 02: 26c vs 8c

+ Rising earnings estimates for next year:  According to recent data
from First Call, the consensus earnings estimate for next year (FY 05
[Oct]) is 98c, up from 92c 90 days ago; and the consensus estimate
for this year (FY 04) is 81c, down from 83c 90 days ago.

+ Valuation:  At 24 times next year's estimated earnings and a
projected 5-year annualized earnings growth rate of 22.5%, the stock
is attractively priced.

+ History of earnings surprises:  This company has reported earnings
at least 6c ahead of estimates in four of the past five quarters
(including the just-reported quarter cited above).

+ The company's industry group ("Elec - Military Systems") has risen
in relative strength over the past six months, according to Investor's
Business Daily.

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************************ 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.