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.
* 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, October 13, 2006, I bought EZPW, first for client accounts, then for my personal accounts. EZCORP, Inc. owns and operates pawn shops that serve as sources for consumer credit and retail previously-owned merchandise. The Company operates in the United States. This stock is a component of the IBD 100 and the IBD New America Indices. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: Yesterday, after the close, the company announced that it now expects to report earnings for the fiscal fourth quarter ended Sep 30 in the range of 61c to 64c per share, far above both last year's 27c and the First Call consensus 45c. They also said they expect FY '07 earnings to be in the range $2.40 to $2.45 (First Call $2.30). The company opened 46 new stores during the quarter. They expect to open 100 stores during fiscal 2007. They will officially announce earnings on Thu Nov 9 after the close. + A "true surprise"*: Yesterday, the stock traded at a 3-month low intraday. Then, this morning, the stock is up sharply on extremely heavy volume. I bought within minutes of the opening bell, and the stock was already up about 17% on more than the average full-day 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). + Near-Breakout: The stock is at an 11-week high as I write this early Friday morning, and is less than a point away from an all-time 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: +14%, +23%, +25%, and, most recently, for the quarter ended June 30, +31% to $73.8 million. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Sep 05 vs Sep 04: 27c vs 22c Dec 05 vs Dec 04: 50c vs 33c Mar 06 vs Mar 05: 56c vs 29c Jun 06 vs Jun 05: 40c vs 16c (Sep 06 vs Jun 05, as cited above, should be at least 61c vs 27c.) + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 06 (Sep) is $1.90, revised upward from $1.81 90 days ago (and up from FY 05 actual earnings of $1.04); and the consensus estimate for FY 07 is $2.30, revised upward from $2.26 90 days ago. + Valuation: At 18.5 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 19.8%, the stock is attractively priced. (Even more so when you consider that next year's estimated earnings, we found out late yesterday, is probably low.) + History of earnings surprises: This company has reported earnings at least 2c above estimates in each of the past three quarters. As cited above, the quarter ended Sep 30 should be at least 16c 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 factor: - The company's industry group ("Financial Services - Misc") is ranked #65 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 13, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||