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 Lennar Corp. Cl A (LEN)
* 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, December 22, 2004, I bought LEN, first for client accounts, then for my personal accounts. Lennar Corp. is a homebuilder and provider of financial services in 13 states. Its homebuilding operations include the sale and construction of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through unconsolidated partnerships. Here's why I bought this stock: + News: On the morning of Wed Dec 15, the company announced results for the quarter ended Nov 30. Earnings came in at $2.29 per diluted share (vs $1.69 last year and First Call $2.21). Revenue was up 21% to $3.55 billion (First Call $3.73 billion). The stock soared 10% that day on the heaviest volume in 11 months. + Possible end of post-spike dip: Rather than buy on the day of that price/volume spike, I waited for a price dip. We got one, albeit a very small one, and my guess is that the dip bottomed out yesterday. + Tight stop-loss: I see this stock as attempting to breakout into new all-time high territory. It's near the bottom end of what I would call the "pivot zone". A very small downward move from here and I would consider this a failed breakout attempt and sell. In other words, our downside risk, barring a huge gap down as recently happened with DITC and PLMO, is small, smaller than I usually accept. + 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: +16%, +11%, +21%, and, most recently, as cited above, +21%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Feb 04 vs Feb 03: $0.84 vs $0.68 May 04 vs May 03: $1.22 vs $1.02 Aug 04 vs Aug 03: $1.36 vs $1.21 Nov 04 vs Nov 03: $2.29 vs $1.69 + Rising estimates: According to recent data from First Call, the consensus earnings estimate for FY 05 (Nov) is $6.76, up from $6.28 90 days ago (and up from FY 04 earnings of $5.70); and the consensus estimate for FY 06 is $7.61, up from $6.90 90 days ago. + Valuation: At 7 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 a penny ahead of estimates in each of the past four quarters (including the just-reported quarter cited above, which was 8c ahead). + The company's industry group ("Building - Residential / Commercial") is ranked #17 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily. It has slipped just recently, but is still above its 20-, 40-, and 60-day moving average. I therefore view the trend as up. Also, this group is one of the top-performing groups this morning, based just on the first half-hour of trading. -KD, December 22, 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||