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 Insteel Industries Inc. (IIIN)
* 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 IIIN, first for client accounts, then for my personal accounts. Insteel Industries, Inc., through its wholly owned operating subsidiary, Insteel Wire Products Company, manufactures and markets concrete reinforcing products and industrial wire products. Here's why I bought this stock: + Breakout: Back on Nov 29, the stock broke out of a 6-week trading range on extremely heavy volume. Volume on Nov 29, in fact, easily set an all-time record for this stock. We bought today at a price slightly under the Nov 29 close (which was $19.65). + 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: +20%, +61%, +63%, and, most recently, for the quarter ended Sep 30, +76% to $105.8 million. + Stunning recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 03 vs Dec 02: $0.08 vs ($0.09) Mar 04 vs Mar 03: $0.70 vs ($0.14) Jun 04 vs Jun 03: $1.98 vs $0.08 Sep 04 vs Sep 03: $1.27 vs $0.21 Note: There is no analyst estimate data on this small little-known company. Also no earnings surprise data. + Valuation: At 5 times trailing earnings, the stock is very attractively priced. + The company's industry group ("Metal Processing & Fabrication") is ranked #14 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. Note that we already own two stocks in this industry group. This one makes three. The other two are sporting 10%-plus gains in less than a week. The tsunami of buying interest in this industry group is, as near as I can tell, not over. I chose to buy the stock in spite of the following negative factor: - This stock has already had an enormous run, rising from 66 cents per share a year ago to $19 and change now. And yet, it possesses in spades two of my favorite characteristics -- very high growth and very low P/E. -KD, December 22, 2004 Bought Intervoice-Brite Inc. (INTV)
* 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 INTV, first for client accounts, then for my personal accounts. Intervoice, Inc. provides converged voice and data solutions for network and enterprise operators. See their website for further details. Here's why I bought this stock: + News: Yesterday after the close, the company announced results for the quarter ended Nov 30. Earnings came in at 18c per diluted share (vs 10c last year and First Call 12c). Revenue was up 16% to $48.4 million (First Call $45.8 million). + A "true surprise"*: For seven weeks prior to the news, the stock was in a sideways trading pattern. Then, this morning, the stock is up sharply 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 stock, based on early morning trading today, is attempting to break out of a 7-month trading range. + The stock's 200-day moving average is rising, indicating a long-term uptrend. + Accelerating recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +14%, +9%, +6%, and, most recently, as cited above, +16%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Feb 04 vs Feb 03: 9c vs (52c) May 04 vs May 03: 8c vs (3c) Aug 04 vs Aug 03: 13c vs 10c Nov 04 vs Nov 03: 18c vs 10c + Rising estimates: According to recent data from First Call, the consensus earnings estimate for FY 05 (Feb) is 48c, up from 42c 90 days ago (and up from FY 04 actual earnings of 32c); and the consensus estimate for FY 06 is 58c, up from 55c 90 days ago. + Valuation: At 24 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 27.5%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings at least 3c ahead of estimates in each of the past two quarters (including the just-reported quarter cited above). I chose to buy the stock in spite of the following negative factor: - The company's industry group ("Telecommunications Equipment") is ranked #68 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally falling over recent weeks and months. -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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||