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 Accredited Home Lenders (LEND)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Tuesday, November 30, 2004, I bought LEND, first for client accounts, then for my personal accounts. Accredited Home Lenders Holdings Co. is a nationwide mortgage banking company that originates, finances, sells, securitizes and services non-prime mortgage loans secured by residential real estate. Accredited focuses on borrowers who may not meet conforming underwriting guidelines, because of higher loan-to-value ratios, the nature or absence of income documentation, limited credit histories, high levels of consumer debt or past credit difficulties. Here's why I bought this stock: + News: Today, Tue Nov 30, before the open, the company announced that it now expects to show a profit of $6.90 per share in calendar 2005. The First Call consensus was $6.56. Chairman and CEO James Konrath added that "we believe we can increase our earnings per share at an average rate of 15% per year for the next three to five years". + A "true surprise"*: For two weeks prior to the news, the stock price was falling. Then, today, the stock price soared on extremely heavy volume. * "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). + Breakout: The price movement today represents a breakout from a 10-month trading range. + Also today, the stock met 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 . + The stock's 200-day moving average is rising, indicating a long-term uptrend. + Excellent recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +116%, +50%, +51%, and, most recently, for the quarter ended Sep 30, +53% to $178.1 million. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 03 vs Dec 02: $1.41 vs $0.39 Mar 04 vs Mar 03: $1.05 vs $0.85 Jun 04 vs Jun 03: $1.60 vs $1.25 Sep 04 vs Sep 03: $1.66 vs $1.40 + Rising estimates: According to recent data from First Call, the consensus earnings estimate for 2004 is $6.00, up from $5.80 90 days ago; and the consensus estimate for 2005 is $6.56, up from $6.27 90 days ago. (And now -- see "News" above -- the company is forecasting $6.90 for 2005.) + Valuation: At 6.5 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 15%, 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, and 6c ahead in each of the two most recent quarters. + The company's industry group ("Finance - Mortgage & Related Services") is ranked #140 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been falling over recent weeks and months. This is a negative; however, I also see that this industry group, consisting of 140 stocks, is itself breaking out of a 10-month trading range today, just like the stock. -KD, November 30, 2004
* The net buy (sell) price is the total net cost (proceeds) after commissions for all managed accounts divided by the total number of shares. I sold LFUS today primarily in order to raise cash in order to buy LEND. Also, I notice that the relative-strength ranking of the company's industry group ("Electronics - Components/Connectors") has continued to fall since I bought the stock. Also, this stock has not performed as well as its peers in our portfolio. -KD, November 30, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||