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, Monday, October 31, 2005, I bought LCAV, first for client accounts, then for my personal accounts. LCA-Vision Inc. develops and operates stand-alone laser vision correction centers throughout the United States, as well as in Canada and Europe. The Company's centers are supported by its network of credentialed ophthalmologists and optometrists who perform laser vision correction procedures, pre-procedure evaluations, and post-procedure follow-ups. This stock is a component of the S&P 600 SmallCap Index. Here's why I bought this stock: + News: Last Tuesday, Oct 25, before the open, the company announced results for the quarter ended Sep 30. Earnings came in at 37c per diluted share (vs 17c last year and First Call 28c). Revenue was up 51% to $47.0 million (First Call $44.9 million). + The stock had been trending down from early July through early October, but then ... + Enthusiastic market reaction: That day, Oct 25, the stock soared 12% on very heavy volume, more than 5x average. The price has given back some of that gain in the days since, on lighter volume. I suspect Friday marked the end of that post-spike profit-taking dip. + Excellent recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +58%, +59%, +53%, and, most recently, as cited above, +51%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 04 vs Dec 03: 23c vs 12c Mar 05 vs Mar 04: 44c vs 20c Jun 05 vs Jun 04: 36c vs 18c Sep 05 vs Sep 04: 37c vs 17c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2005 is $1.43, revised upward from $1.36 90 days ago (and up from 2004 actual earnings of 78c); and the consensus estimate for 2006 is $1.87, revised upward from $1.83 90 days ago. + Valuation: At 23 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 37%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings at least 6c ahead of estimates in each of the past four 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 negative factor: - The company's industry group ("Medical - Outpatient / Home Care") is ranked #119 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, October 31, 2005 Bought United Therapeutics Corp. (UTHR)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Monday, October 31, 2005, I bought UTHR, first for client accounts, then for my personal accounts. United Therapeutics Corp. develops pharmaceuticals to treat vascular diseases such as pulmonary hypertension and peripheral vascular disease. The Company's lead products are stable synthetic forms of prostacyclin and are delivered orally or subcutaneously. United's products are currently in Phase III clinical trials. Here's why I bought this stock: + News: This morning, before the open, the company announced results for the quarter ended Sep 30. Earnings came in at 61c per diluted share (vs 27c last year and First Call 49c). Revenue was up 65% to $33.0 million (First Call $32.4 million). + Enthusiastic market reaction: In the first 50 minutes of today's trading session, the stock is already up $4.90 to $72.00, with volume already more than twice the daily average. + Near-Breakout: The stock is close to breaking out of a 2-month trading range. + Excellent recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +59%, +70%, +64%, and, most recently, as cited above, +65%. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 04 vs Dec 03: 28c vs (15c) Mar 05 vs Mar 04: 31c vs (9c) Jun 05 vs Jun 04: 49c vs 18c Sep 05 vs Sep 04: 61c vs 27c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2005 is $1.79, revised upward from $1.38 90 days ago (and up from 2004 actual earnings of 66c); and the consensus estimate for 2006 is $2.22, revised upward from $2.03 90 days ago. I would expect further upward revisions in the wake of this morning's earnings surprise. + Valuation: At 32.5 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 32.5%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings at least 3c ahead of estimates in each of the past five quarters (including the just-reported quarter cited above, which was 12c ahead). + The company's industry group ("Medical - Biomed/Biotech") is ranked #11 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally fairly stable over recent weeks and months. + The stock's 200-day moving average is rising, indicating a long-term uptrend. -KD, October 31, 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||