The Deen's List(TM) A service of Deen Capital Management, Inc. (www.deencapital.com) Vol.1 #92 Tuesday, December 23, 2003 9:50am ET Please read carefully our disclaimers at the end of this newsletter. Market stance: BULLISH (since Dec 12 2003) **************** Bought Research In Motion Ltd. (RIMM) ***************** Net buy price in managed accounts(*)... $59.15 Yesterday's close (Dec 22)............. $46.10 Net change (based on net buy price).... +$13.05 Today's volume as of 4:00pm ET ........ 1.9 million ($114.6 million) Average daily volume................... 2.2 million ($130.8 million) This year's earnings-per-share......... $0.49 (est) Next year's earnings-per-share......... $1.04 (est) P/E using next year's earnings......... 57.8 (est) Earnings growth rate, next 5 years..... 30.0% 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 Dec 23, I bought RIMM. Research In Motion (www.rim.net) is a Canadian company which sells wireless solutions for the mobile communications market. They are known for their very popular Blackberry hand-held e-mail device. Here's why I bought this stock: + News: This is certainly one of the most spectacular earnings surprises I've ever seen. On Mon Dec 22 after the close, the company announced results for the quarter ended Nov 29. Operating earnings came in at 31c per diluted share (vs last year's loss of $1.21 and First Call 17c). Revenue was up 107% to $153.9 million (First Call estimate $146.3 million). The company also substantially raised their projections for the next two quarters. + A "true surprise"(*): Since early October, the stock has been trading in the mid-40's. Then, in response to the news, the stock opened Tue Dec 22 at $58.50, up $12.40 from Monday's close. Within the first five minutes of the regular trading session, average daily volume had already been exceeded. We bought in the first four minutes. (*) "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 Tue Dec 23 represents a breakout from a six-week trading range. + Excellent and accelerating recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +32%, +46%, +71, and, most recently, as cited above, +107%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Feb 01 vs Feb 02: (7c) vs (11c) May 03 vs May 02: (1c) vs (14c) Aug 03 vs Aug 02: 10c vs (13c) Nov 03 vs Nov 02: 31c vs ($1.02) + Rising estimates: According to recent data from First Call, the consensus earnings estimate for FY 04 (Feb) is 49c, up from 29c 90 days ago; and the consensus estimate for FY 05 is $1.04, up from 58c 90 days ago. + Valuation: At 57 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 30%, the stock at first blush appears over-valued. I would argue that it is not, however, for three reasons: 1) high P/E's are normal during a company's unprofitable-to-profitable transition phase; and 2) the projections for both next year's earnings and the 5-year earnings growth rate are very likely too conservative, in view of the blowout news cited above. + History of earnings surprises: This company has reported earnings at least 2c ahead of estimates in each of the past four quarters (including the just-reported quarter cited above). + The company's industry group ("Telecom - Wireless Equipment") has risen in relative strength over the past six months, according to Investor's Business Daily. It now ranks 4th out of 197 groups. *********************** 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. ***************************** 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.