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 Lam Research Corp. (LRCX)
* 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 29, 2004, I bought LRCX, first for client accounts, then for my personal accounts. Lam Research Corp. designs, manufactures, markets and services semiconductor processing equipment used in the fabrication of integrated circuits for the worldwide semiconductor industry. Here's why I bought this stock: + End of dip? The stock has been trading generally lower since peaking at $29.40 on Dec 6. Since Dec 6, the stock has twice found support within a couple of pennies of $27.73. The second time is now. (Yesterday's close was $27.73, and today the stock is up modestly.) It is my guess that the mild downtrend since Dec 6 has just ended. + The stock's 200-day moving average has just recently turned around. Prior to November, it was falling; now it is rising. The stock, then, is in a long-term uptrend. + Excellent and dramatically accelerating recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +4%, +24%, +77%, and, most recently, for the quarter ended Sep 30, +128% to $419.5 million. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 03 vs Dec 02: 7c vs 2c Mar 04 vs Mar 03: 14c vs 3c Jun 04 vs Jun 03: 37c vs 2c Sep 04 vs Sep 03: 64c vs 4c + Next year's earnings estimate is rising sharply: According to recent data from First Call, the consensus earnings estimate for FY 05 (Jun) is $2.03, down from $2.37 90 days ago (but up from FY 04 actual earnings of 62c); more importantly, in my view, the consensus estimate for next year, FY 06, has risen to $1.85 from $1.42 over the past 90 days ago. + Valuation: At 15 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 20%, the stock is very attractively priced. + History of earnings surprises: This company has reported earnings at least 2c ahead of estimates in each of the past four quarters, and 6c ahead in the most recently reported quarter, the one ended Sep 30. + The company's industry group ("Semiconductor Equipment") is ranked #157 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This is low, but it has been generally rising over recent weeks and months. I chose to buy the stock in spite of the following negative factor: - Next year's earnings estimate is slightly less than this year's earnings estimate. (On the other hand, as stated above, the 5-year earnings growth rate is projected to be a very healthy 20% per year.) -KD, December 29, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||