Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since October 31, 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, November 4, 2005, I bought BBOX, first for client accounts, then for my personal accounts. Black Box Corp. provides technical network services and related products to businesses. The Company offers standard networking products through its catalog and its Web site. Black Box designs and builds custom products and operates subsidiaries throughout the world. This stock is a component of the S&P 600 SmallCap Index. Here's why I bought this stock: + News: Two days ago, on Tue Nov 1, the company announced results for the quarter ended Oct 1. Operating earnings came in at 78c per diluted share (vs 62c last year and First Call 72c). Revenue was up 46% to $185.1 million (First Call $180.3 million). + A "true surprise"*: Prior to the news, since peaking in late July, the stock has been in a clear downtrend. Then, on Tuesday, the stock soared 12% on extremely heavy volume, about 10x 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 on Tuesday represents a breakout from a 3-month trading range to a 9-month high. + Excellent and accelerating recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -5%, +21%, +44%, and, most recently, as cited above, +46%. + Turnaround in recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 04 vs Dec 03: 52c vs 66c Mar 05 vs Mar 04: 39c vs 65c Jun 05 vs Jun 04: 75c vs 54c Sep 05 vs Sep 04: 78c vs 62c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 06 (Mar) is $2.86 revised upward from $2.85 90 days ago (and up from FY 05 actual earnings of $2.07); and the consensus estimate for FY 07 is $3.24, revised upward from $2.90 90 days ago. + Valuation: At 14 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 11%, the stock is moderately priced. + Two quarters of earnings surprises: The June quarter was 14c ahead of estimates, and, as cited above, the September was 6c ahead. (For two quarters prior to that, earnings came in below consensus.) + The company's industry group ("Computer Networking") is ranked #72 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. I chose to buy the stock in spite of the following negative factor: - The stock's 200-day moving average is rising, indicating a long-term uptrend. -KD, November 4, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||