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. Bought PortalPlayer Inc. (PLAY)
* 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 11, 2005, I bought PLAY, first for client accounts, then for my personal accounts. PortalPlayer Inc. is a fabless semiconductor company that designs, develops and markets comprehensive platform solutions, including a system-on-chip, firmware and software for hard disk drive-based personal media players. The Company's platform solutions are designed to enable personal media players to manage thousands of digital media files and allow for customizable user interfaces. Here's why I bought this stock: + News: Yesterday, after the close, the company raised guidance for the fourth quarter and also withdrew its plans for a secondary stock offering. The company now expects to report 40c to 50c per share, excluding items. The First Call consensus is 43c. + Reversal of bad news: It was the company's announcement of a stock offering back that triggered a 28% selloff in the stock price back on October 25. Volume that day, October 25, was huge, 12.4 million shares, or about 11x average. Today's announcement has also triggered a huge-volume move, this time to the upside. Volume this morning is on track to equal or exceed that of October 25. + A "true surprise"*: Prior to the news, the stock was trading near a 4-month low. Then, this morning, as cited above, the stock is soaring on extremely 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). + Today, the stock is on track to meet the stringent technical buy criteria outlined in my Research Update of June 26, 2004: http://www.deencapital.com/newslett/2004/040626.129.html#3 . + Explosive triple-digit recent sales growth: Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +453%, +336%, +270%, and, most recently, for the quarter ended Sep 30, +126% to $57.9 million. + Excellent recent earnings-per-share growth: Here are the quarterly EPS figures for the last eight quarters: Dec 04 vs Dec 03: 53c vs (3c) Mar 05 vs Mar 04: 33c vs (2c) Jun 05 vs Jun 04: 27c vs 4c Sep 05 vs Sep 04: 43c vs 21c + Earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2005 is $1.43, revised upward from $1.31 90 days ago (and up from 2004 actual earnings of 73c); and the consensus estimate for 2006 is $1.37, revised downward from $1.38 90 days ago. + Valuation: At 18 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 22.5%, 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 four quarters. (The most recent quarter ended Sep 30 was 5c 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 factors: - The company's industry group ("Elec - Semiconductor Mfg") is ranked #26 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. - The earnings estimate for next year, at $1.37, is less than the $1.43 estimate for this year. -KD, November 11, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||