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 Ultralife Batteries Inc. (ULBI)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Thursday, December 30, 2004, I bought ULBI, first for client accounts, then for my personal accounts. Ultralife Batteries, Inc. develops, manufactures and markets a range of standard and customized lithium primary (non-rechargeable), lithium ion and lithium polymer rechargeable batteries for use in an array of applications. Here's why I bought this stock: + News: On Thursday morning, Dec 23, the company announced that it has been awarded a 5-year U.S. Defense Department contract worth up to $286 million to supply non-rechargeable batteries to the military. + A "true surprise"*: For three weeks prior to the news, the stock was trading in a sideways to down pattern, and well below its 52-week high. Then, on Dec 23, the stock shot up $4.92, or 33%, to $19.62, on volume of 3.6 million shares. That's huge volume for this stock -- it's daily average was around 200,000 shares. Volume, in fact, set an all-time record. Subsequent profit-taking has been light, and today, the stock price is starting to advance, following through for the first time on Thursday's rise. * "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). + On Dec 23, the stock met my stringent technical buy criteria, as outlined in my Research Update of June 26, 2004: http://www.deencapital.com/newslett/2004/040626.129.html#3 . + The price is still well below its 52-week high of $24.64, set in April. + Excellent recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +175%, +75%, +41%, and, most recently, for the quarter ended Sep 30, +23% to $24.4 million. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 03 vs Dec 02: 15c vs (14c) Mar 04 vs Mar 03: 22c vs 2c Jun 04 vs Jun 03: 25c vs 16c Sep 04 vs Sep 03: 9c vs 7c + Strong estimates for next year: According to recent data from First Call, the consensus earnings estimate for 2004 is 25c, down from 2003 actual earnings of 41c; but the consensus estimate for 2005 is 78c, a 212% jump. + Valuation: At 26 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 50%, the stock is very attractively priced. + The company's industry group ("Consumer Products - Misc") is ranked #159 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been pretty stable over recent weeks and months. However, looking at the industry group chart, I see that it is this week breaking out of a 9-month trading range. I chose to buy the stock in spite of the following negative factors: - The consensus estimates for 2004 and 2005 have dropped over the past 90 days. For 2004, the estimate has fallen from 40c to 25c; for 2005, from $1.00 to 78c. - The company has missed the Street's earnings estimates in both of the past two quarters -- by 25c in the Jun 30 quarter, and by 4c in the Sep 30 quarter. - The stock's 200-day moving average is falling, indicating a long-term downtrend. That's a lot of negative factors. But this news is very big. Also, the the valuation, and a number of technical factors are all compelling. -KD, December 30, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||