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.
* 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, November 3, 2004, I bought NTGR, first for client accounts, then for my personal accounts. NETGEAR, Inc. designs, develops and markets networking products for small business and home users. Its suite of approximately 100 products enables users to share Internet access, peripherals, files, digital multimedia content and applications among multiple computers and other Internet-enabled devices. Here's why I bought this stock: + News: On Thu Oct 28 after the close, the company announced results for the quarter ended Oct 3. Excluding stock-based compensation, earnings per diluted share came in at 20c (vs 8c last year and First Call 18c). Revenue was up 34% to $101.2 million (First Call $98.8 million). + Technical: The next day, the stock was briefly up on the news, but turned around and closed lower. The stock was again down on Friday. Yesterday, however, there was a dramatic intraday reversal on extremely heavy volume. The stock was down early in the day, but closed higher, on volume which set a post-IPO record. (The company's IPO was July 31, 2003.) The stock is gaining slightly again today, in a follow-through move, again on very heavy volume. I suspect that yesterday was a key reversal day. + Excellent recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +21%, +31%, +28%, and, most recently, as cited above, +34%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 03 vs Dec 02: 14c vs 10c Mar 04 vs Mar 03: 14c vs 8c Jun 04 vs Jun 03: 17c vs 9c Sep 04 vs Sep 03: 20c vs 8c + Rising estimates: According to recent data from First Call, the consensus earnings estimate for 2004 is 72c, up from 69c 90 days ago; and the consensus estimate for 2005 is 90c, up from 83c 90 days ago. + Valuation: At 15 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 18.5%, the stock is very attractively priced. + 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 ("Computer Networking") has risen dramatically in relative strength in recent months, according to data from Investor's Business Daily. I chose to buy the stock in spite of the following negative factor: - The stock's 200-day moving average is falling, indicating a long-term downtrend. However, since closing at an all-time low of $8.94 on July 26, the stock has been in a clear short- to intermediate-term uptrend. -KD, November 3, 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||