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 Korn/Ferry International, Inc. (KFY)
* 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 28, 2004, I bought KFY, first for client accounts, then for my personal accounts. Korn/Ferry International, Inc. provides executive recruitment, middle-management recruitment, and consulting services. Executive search, the Company's core business, focuses on board level, chief executive and other senior executive positions for clients predominantly in the consumer, financial, industrial, life sciences and technology industries. Futurestep, Korn/Ferry's middle-management recruitment business, creates customized recruitment strategies based on clients' individual workforce needs. Here's why I bought this stock: + News: Back on Dec 8 before the open, the company announced results for the quarter ended Oct 31. Earnings came in at 21c per diluted share (vs 6c last year and First Call 19c). Revenue was up 39% to $113.5 million (First Call $104.4 million). + A "true surprise"*: For four weeks prior to the news, the stock was trading in a sideways. Then, on Dec 8, the stock soared on extremely heavy volume. Volume, at 1.6 million shares, set a 4-year record, and 5.6 times average 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 on Dec 8 represents a breakout from a 5-month trading range to a 3-year high. + Dramatic increase in average trading volume: Prior to Dec 8, average daily volume was about 293,000 shares. Even excluding that big spike on Dec 8, the average (Dec 9 to Dec 27) has jumped to 586,000. Most of this new volume is on the buy side. + The stock's 200-day moving average is rising, indicating a long-term uptrend. + Possible end-of-dip: Yesterday, the stock price fell 71c, or 3.3%, the biggest drop since the breakout. This morning, the stock price fell further before rebounding. When I bought, roughly two hours after the opening bell, the stock price was up slightly. I suspect the upward trend will resume shortly. + Tight stop-loss: The breakout pivot point is $20, and we bought at about $21. My hard stop-loss price will be at or very close to $20. + Excellent and accelerating recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +7%, +26%, +38%, and, most recently, as cited above, +39%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 03 vs Dec 02: 10c vs (7c) Mar 04 vs Mar 03: 21c vs (5c) Jun 04 vs Jun 03: 20c vs (2c) Sep 04 vs Sep 03: 21c vs 6c + Rising estimates: According to recent data from First Call, the consensus earnings estimate for FY 05 is 84c, up from 79c 90 days ago (and up from FY 04 actual earnings of 35c); and the consensus estimate for FY 06 is $1.97, up from $1.05 90 days ago. + Valuation: At 20 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 17.5%, the stock is moderately priced. + History of earnings surprises: This company has reported earnings at least 2c ahead of estimates in each of the past four quarters (including the recently reported quarter cited above). + The company's industry group ("Commercial Services - Staffing") is ranked #120 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. -KD, December 28, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||