Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since August 10, 2005)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 Psychiatric Solutions Inc. (PSYS)
* 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, September 6, 2005, I bought PSYS, first for client accounts, then for my personal accounts. Psychiatric Solutions, Inc. offers behavioral health programs to critically ill children, adolescents, and adults. The Company owns and operates freestanding psychiatric inpatient hospitals and manages psychiatric units within general acute care hospitals owned by others. This stock is a component of the IBD 100. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + I'll wait till after the close to make it official, but there's a very good possibility that I'll be turning bullish later today, on the strength of my three primary technical indicators. I'll have more to say about this if and when I do turn bullish. + News: This morning, before the open, the company raised its earnings guidance for fiscal 2006 (ends December 31). The now expect $2.10 to $2.15 per share, up from prior guidance of $1.97 to $2.05, and above the First Call consensus $2.09. This guidance includes the anticipated impact of a planned public offering of 3.5 million shares of common stock. + A "true surprise"*: Prior to the news, the stock was trading within a tight range for more than 2 months. Friday's close was a 3-week low. Then, this morning, the stock is soaring on 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). + Near-Breakout: I call today's move a "near-breakout" because if you ignore just two days of this stock's trading history (July 12 and August 2), then today's move would be a breakout from a nine-week trading range. In my opinion, a true breakout, which would mean a close above $50.11, is likely just around the corner. + Excellent recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +40%, +40%, +34%, and, most recently, for the quarter ended June 30, +23% to $143.9 million. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Sep 04 vs Sep 03: 21c vs 18c Dec 04 vs Dec 03: 35c vs 19c Mar 05 vs Mar 04: 36c vs 23c Jun 05 vs Jun 04: 41c vs 29c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2005 is $1.63, revised upward from $1.60 90 days ago (and up from 2004 actual earnings of $1.15); and the consensus estimate for 2006 is $2.09, revised upward from $1.98 90 days ago. + Valuation: At 24 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 21%, 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 three quarters. + The stock's 200-day moving average is rising, indicating a long-term uptrend. I chose to buy the stock in spite of the following negative factor: - The company's industry group ("Medical Outpatient / Home Care") is ranked #88 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, September 6, 2005
* 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 © 2005 Deen Capital Management, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||