Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since December 7, 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, Tuesday, December 14, 2004, I bought KONG, first for client accounts, then for my personal accounts. KongZhong Corp. provides second-generation (2.5G) wireless interactive entertainment, media and community services in China. Here's why I bought this stock: + It's becoming increasingly likely that I may override my NASDAQ Timing Model and return to a bullish stance, perhaps as soon as today or tomorrow. Also, those buys from yesterday appear to be working out OK right out of the starting gate. Accordingly, I feel comfortable putting another toe or two in the water. + I bought this stock, and sold at a loss, recently. I still very much like the explosive growth, the very low valuation relative to next year's earnings, and the recent heavy-volume buying. But the stock has experienced a significant correction since peaking on Dec 6. As a result, we can now buy at a price that is lower than both our earlier buy price and our earlier sell price. I suspect that that correction completed this morning when the stock hit an intraday low of $9.32. The stock is currently rebounding from that level. + Breakout holding: On Nov 29, this stock broke out into new high territory for the first time since it came public in early July. The breakout was accompanied by extremely heavy volume. The bottom of the recent price correction, just below $10 on a closing basis, corresponds to the top of the prior trading range. This means that the breakout is holding. The stock appears to be finding support at that level. This is a good sign from a technical point-of-view. + Explosion in trading volume: Prior to the breakout, average daily volume was about 270,000 shares per day. From Nov 29 to yesterday Dec 13, daily volume has ranged from 679,000 to 2.9 million shares (average 1.3 million). Most of this volume has been on the buy side. + Dramatic recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +999%, +921%, +873%, and, most recently, for the quarter ended Sep 30, +509% to $12.4 million. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 03 vs Dec 02: 6c vs (3c) Mar 04 vs Mar 03: 11c vs 1c Jun 04 vs Jun 03: 19c vs 1c Sep 04 vs Sep 03: 15c vs 2c + Strong estimates: According to recent data from First Call, the consensus earnings estimate for 2004 is 53c, and, for 2005, 58c. In 2003, the company reported earnings-per-share of 10c. + Valuation: At 17 times next year's estimated earnings, the stock is very attractively priced. (The 5-year annualized earnings growth rate is not available.) (Regarding earnings surprise history: No earnings surprise history data is available.) + The company's industry group ("Telecommunications - Wireless Services") is ranked #27 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been mostly rising over recent weeks and months. I chose to buy the stock in spite of the following negative factor: - Earnings estimates have fallen over the past 90 days. For 2004, the consensus has dropped from 55c to 53c, and, for 2005, the consensus has dropped from 65c to 58c. -KD, December 14, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||