Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since July 28, 2006)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 Shire Pharmaceuticals Group plc (SHPGY)
* 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 9, 2006, I bought SHPGY, first for client accounts, then for my personal accounts. Shire PLC specializes in the marketing, licensing and development of prescription medicines. The Group focuses its operations towards four therapeutic areas: central nervous system disorders, oncology/hematology, antivirals and biologics. Shire sells and markets its products in the United States, Canada, Ireland, France, Germany, Italy, Spain, and the United Kingdom. Here's why I bought this stock: + News: Last Friday, Oct 6, after the close, Shire and New River Pharmaceuticals (NRPH) jointly announced that the FDA issued an approvable letter for NRP104, a new drug for the treatment of ADHD. Contingent on final approval, the two companies plan to launch the drug in the second quarter of 2007. One analyst estimates that sales of NRP104 could reach $1.3 billion by 2012. + A "true surprise"*: For eight weeks prior to the news, the stock was trending flat to slightly down. Then, today, the stock is up sharply today 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). + Breakout: The price movement today represents a breakout from a six-week trading range. + 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 . + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2006 is $1.68, revised upward from $1.49 90 days ago (but down from 2005 actual earnings of $1.95); and the consensus estimate for 2007 is $2.39, revised upward from $1.94 90 days ago. + Valuation: At 24 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 16%, the stock is moderately priced. + History of earnings surprises: This company has reported earnings at least 2c above estimates in each of the past four quarters. The most recently reported quarter, ended June 30, was 6c above. + 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: - Good but choppy recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +9%, +24%, +23%, and, most recently, for the quarter ended June 30, +3% to $439.1 million. - Uneven recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Sep 05 vs Sep 04: 42c vs 51c Dec 05 vs Dec 04: 57c vs 57c Mar 06 vs Mar 05: 44c vs 30c Jun 06 vs Jun 05: 44c vs 66c - The company's industry group ("Medical - Ethical Drugs") is ranked #41 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally flat to falling just slightly over recent weeks and months. -KD, October 9, 2006
* 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 © 2006 Deen Capital Management, Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||