Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since October 7, 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.
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Friday, October 21, 2005, I bought COHU, first for client accounts, then for my personal accounts. Cohu, Inc. designs, manufactures, and sells semiconductor test handling equipment to semiconductor manufacturers throughout the world. The Company also manufactures closed circuit television, metal detection, and microwave equipment. This stock is a component of the S&P 600 SmallCap Index. Here's why I bought this stock: + Blowout earnings surprise: Yesterday, after the close, the company announced results for the quarter ended Sep 24. Earnings came in at 42c per diluted share (vs 24c last year and First Call 27c). Revenue was up 25% to $68.6 million (First Call $59.6 million). + A "true surprise"*: Prior to the news, since late July, the stock has been sliding generally lower. In fact, yesterday's close was just 7c above the 3-month low set the day before. Then, today, the stock is soaring on very heavy volume, more than six times average. * "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). + Excellent recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -7%, +24%, +9%, and, most recently, as cited above, +25% to $68.6 million. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 04 vs Dec 03: 11c vs (10c) Mar 05 vs Mar 04: 16c vs 10c Jun 05 vs Jun 04: 25c vs 32c Sep 05 vs Sep 04: 42c vs 24c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2005 is $1.00, revised upward from 84c 90 days ago (and up from 2004 actual earnings of 76c); and the consensus estimate for 2006 is $1.41, revised upward from $1.22 90 days ago. + Valuation: Long-term earnings growth projections on this stock are not available (at least I couldn't find any), but, at 17 times next year's earnings, the stock appears attractively priced. + History of earnings surprises: This company has reported earnings at least 6c ahead of estimates in each of the past three quarters (including the just-reported quarter cited above, which was 18c ahead). + The company's industry group ("Elec - Semiconductor Equipment") is ranked #49 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. + The stock's 200-day moving average is rising, indicating a long-term uptrend. -KD, October 21, 2005
* Net buy prices shown are the total net purchase cost after commissions for all managed accounts divided by the total number of shares. 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||