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 Innovative Solutions (ISSC)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Thursday, November 18, 2004, I bought ISSC, first for client accounts, then for my personal accounts. Innovative Solutions & Support, Inc. designs, develops, manufactures and markets flight information computers, large flat-panel displays and advanced monitoring systems that measure and display critical flight information. Here's why I bought this stock: + News: Yesterday, Wed Nov 17, after the close, the company announced results for the quarter ended Sep 30. Earnings came in at 37c per diluted share (vs 23c last year and First Call 29c). Revenue was up 43% to $14.4 million (First Call $13.7 million). For fiscal 2004, which also ended Sep 30, released backlog increased 47% to a record $35.4 million, and cash flow from operations increased 188% to a record $7.0 million. + Breakout: In response to the news, this morning the stock is up sharply on extremely heavy volume. Volume today may end up being the heaviest since the company's IPO day in August 2000. Today's price move is a breakout from a 12-week trading range into new all-time high territory. (The stock must close above $28.46 in order for this statement to be true on a closing basis. My guess is that it will.) + The stock is on track to meet my stringent technical buy criteria, as outlined in my Research Update of June 26, 2004: http://www.deencapital.com/newslett/2004/040626.129.html#3 . + Excellent recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +93%, +53%, +88%, and, most recently, as cited above, +43%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 03 vs Dec 02: 14c vs 2c Mar 04 vs Mar 03: 22c vs 10c Jun 04 vs Jun 03: 27c vs 10c Sep 04 vs Sep 03: 37c vs 23c + Rising estimates: According to recent data from First Call, the consensus earnings estimate for the current fiscal year FY 05 (Sep) is $1.13, up from $1.10 90 days ago. No data is available for next year, FY 06. + Valuation: At 26 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 15%, the stock may be a bit pricey. (On the other hand, the substantial earnings surprise just announced hints that maybe, just maybe, that 15% estimate may be low.) + History of earnings surprises: This company has reported earnings at least 2c ahead of estimates in four of the past five quarters (including the just-reported quarter cited above, which was 8c ahead). + The company's industry group ("Aerospace/Defense Equipment") is currently ranked #43 for relative strength out of 197 groups tracked by Investor's Business Daily. This is down from #36 one month ago, #12 two months, and #25 three months ago, but it's up from #48 one week ago, #77 four months ago, #122 five months ago, and #113 six months ago. + The stock's 200-day moving average is rising, indicating a long-term uptrend. -KD, November 18, 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||