Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since December 15, 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 Armor Holdings Inc. (AH)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Friday, December 17, 2004, I bought AH, first for client accounts, then for my personal accounts. Armor Holdings, Inc. is a manufacturer and provider of specialized security products, training and support services related to these products, vehicle armor systems, military helicopter seating systems, aircraft and land vehicle armor systems, protective equipment for military personnel and other technologies used to protect humans in a variety of life-threatening or catastrophic situations. Their products and systems are used domestically and internationally by military, law enforcement, security and corrections personnel, as well as governmental agencies, multinational corporations and individuals. Here's why I bought this stock: + News: Late last Friday, Dec 10, the company confirmed that the U.S. Army has requested that it increase production of fully armored Humvee vehicles. + A "true surprise"*: After putting in a 1-month low on Wed Dec 8, the stock rose on heavy volume on Thu Dec 9, Fri Dec 10, and Mon Dec 13. * "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). + End of dip? I decided to wait for a dip. After the stock slipped $1.53 yesterday, the first down day after five straight up days, the stock was trading slightly higher late today when I decided to buy. That was a brief and shallow dip, but it may be all we get. + Breakout: Last Fri, Dec 10, the stock broke out of a 10-week trading range on heavy volume. + The stock's 200-day moving average is rising, indicating a long-term uptrend. + Excellent and accelerating recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +35%, +101%, +174%, and, most recently, for the quarter ended Sep 30, +183% to $256.8 million. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 03 vs Dec 02: 34c vs 25c Mar 04 vs Mar 03: 43c vs 19c Jun 04 vs Jun 03: 81c vs 21c Sep 04 vs Sep 03: 81c vs 22c + Rising estimates: According to recent data from First Call, the consensus earnings estimate for 2004 is $2.41, up from $2.25 90 days ago; and the consensus estimate for 2005 is $2.78, up from $2.36 90 days ago. + Valuation: At 17 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 13.5%, the stock is moderately priced. + The company's industry group ("Commercial Services - Security / Safety") is ranked #7 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally rising over recent weeks and months. I chose to buy the stock in spite of the following negative factor: - History of earnings surprises: This company has missed estimates for both of the last two quarters -- by 13c in the Jun 30 quarter, and by 6c in the Sep 13 quarter. -KD, December 17, 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. The company announced quarterly earnings yesterday after the close. Non-GAAP earnings came in at 53c, up 279% from 14c a year ago. This was in line with estimates. Revenue came in at $376.2 million, up 39% from $271.2 million during the comparable quarter a year ago. This was better than the First Call consensus of $372.1 million. So earnings were good, but the stock was punished swiftly and severely, and on very heavy volume. The stock traded all day, from the opening bell on, far below my stop loss price of $40.87. That is why I sold. -KD, December 17, 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||