Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since August 18, 2004) Contents
Year-To-Date Performance
* An average of managed accounts, net after commissions and fees. Individual account results may vary. See also www.deencapital.com/perform.htm. For information on managed accounts, see www.deencapital.com/mgdaccts.htm. Bought MicroStrategy Inc. (MSTR)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Wednesday, October 27, 2004, I bought MSTR, first for client accounts, then for my personal accounts. MicroStrategy Inc. provides business intelligence software that enables companies to analyze raw data stored across their enterprise to reveal trends and insights needed to develop solutions to manage their business effectively. Here's why I bought this stock: + News: Yesterday, Tue Oct 26, the company announced results for the quarter ended Sep 30. I had to get out my calculator to compute diluted earnings-per-share from operations. I came up with $1.11. Their reported number is $7.22, which is mostly due to an income tax benefit. Anyway you slice it, this was a blowout quarter. In the same quarter last year, the company reported a loss, and the First Call consensus was 51c. Revenue, at $60.6 million, was up 42% from a year ago and well above the First Call consensus of $48.45 million. The company also said it expects 2005 revenue of $211.1 to $251.6 million (First Call $227.42 million) and GAAP diluted earnings per share of $1.87 to $2.74 (First Call $1.99). + A "true surprise"* -- sort of: In the weeks leading up to the news, the stock was trending gently higher, though still well down from its 2004 high. Today, the stock is making a huge jump on extremely heavy volume, challenging that 2004 high set in February. * "True surprise" is my term to describe a company news item that ignites heavy buying and that was not preceded by a short-term run-up in the stock price (i.e. not preceded by rumor). + Near-Breakout: A close above $64.78 would be a breakout from an 8-month trading range, and would be a new multi-year high. + Today, the stock is on track to meet my very stringent technical buy criteria, as outlined in my Research Update of June 25, 2004: http://www.deencapital.com/newslett/2004/040626.129.html#3 . + The stock's 200-day moving average was falling, until today. Now it is rising. + Excellent and accelerating recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +23%, +31%, +14%, and, most recently, as cited above, +42%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 03 vs Dec 02: $0.68 vs $0.40 Mar 04 vs Mar 03: $0.60 vs $0.12 Jun 04 vs Jun 03: $0.67 vs $0.39 Sep 04 vs Sep 03: $1.11 vs ($1.59) + Rising estimates: According to recent data from First Call, the consensus earnings estimate for 2004 is $2.52, up from $2.34 90 days ago; and the consensus estimate for 2005 is $1.99, up from $1.89 90 days ago. + History of earnings surprises: This company has reported earnings at least 17c ahead of estimates in each of the past five quarters (including the just-reported quarter cited above). + The company's industry group ("Computer Software - Enterprise") has risen dramatically in relative strength over the past three months, according to Investor's Business Daily. I chose to buy the stock in spite of the following negative factor: - Valuation: At 32 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 19%, the stock may be pricey. On the other hand, in view of the company's track record of far exceeding analysts' estimates, it is not unreasonable to think that next year's estimated earnings may be low. -KD, October 27, 2004 Sold Petroleum Development Corp. (PETD)
* The net buy (sell) price is the total net cost (proceeds) after commissions for all managed accounts divided by the total number of shares. My StockSell Program (Ver.13r) is likely to give a sell signal on PETD at the close today. I am selling in anticipation of this. This signal is based purely on technical considerations. -KD, October 27, 2004
* Net buy prices shown are the total net purchase cost after commissions for all managed accounts divided by the total number of shares. ** Current prices are at least 20 minutes old. Welcome to The Deen's ListTM, an 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. Your personal information, including your e-mail address, will be held in strict confidence by Deen Capital Management, Inc. We will not share it with or sell it to others. All stocks discussed in The Deen's ListTM involve a high degree of risk. It should not be assumed that any stock discussed in The Deen's ListTM 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 Copyright © 2004 Deen Capital Management, Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||