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. Bought Thomas & Betts Corp. (TNB)
* 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, October 26, 2005, I bought TNB, first for client accounts, then for my personal accounts. Thomas & Betts Corp. designs, manufactures, and markets electrical and electronic connectors and components for use in assembling, maintaining, and repairing electrical, electronic, and communication systems. The Company's products are sold worldwide through distributors, mass merchandisers, catalogs, and home centers. This stock is a component of the S&P 400 MidCap Index. Here's why I bought this stock: + News: On Monday, Oct 24, after the close, the company announced results for the quarter ended Sep 30. Earnings came in at 57c per diluted share (vs 42c last year and First Call 48c). Revenue was up 12% to $442.1 million (First Call $428.8 million). + A "true surprise"*: Prior to the news, for about 11 weeks, the stock has been stuck in a trading range between 32 and 36. Then, yesterday, the stock soared +8% to $37.40 on extremely heavy volume, about nine 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). + Breakout: The price movement yesterday represents a breakout from an 11-week trading range. + Excellent recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +14%, +11%, +13%, and, most recently, as cited above, +12%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 04 vs Dec 03: 40c vs 33c Mar 05 vs Mar 04: 40c vs 27c Jun 05 vs Jun 04: 47c vs 34c Sep 05 vs Sep 04: 57c vs 42c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2005 is $1.82, revised upward from $1.79 90 days ago (and up from 2004 actual earnings of $1.43); and the consensus estimate for 2006 is $2.09, revised upward from $2.07 90 days ago. This does not factor in the newly raised guidance from the company. They now project $1.95 to $2.00 for 2005. + Valuation: At 18 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 15%, the stock is moderately priced. + History of earnings surprises: This company has reported earnings at least 4c ahead of estimates in each of the past five quarters (including the just-reported quarter cited above, which was 9c ahead). + 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 mildly negative factor: - The company's industry group ("Elec - Components / Connectors") is ranked #107 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has remained fairly close to that ranking over recent weeks and months. -KD, October 26, 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||