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 Ultra Clean Holdings, Inc. (UCTT)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Tuesday, October 24, 2006, I bought UCTT, first for client accounts, then for my personal accounts. Ultra Clean Holdings, Inc. develops and supplies critical subsystems for the semiconductor capital equipment industry, focusing on gas delivery systems. These gas delivery systems enable the precise delivery of specialty gases used in a majority of the key steps in the semiconductor manufacturing process. Here's why I bought this stock: + News: Yesterday, Mon Oct 23, after the close, the company announced results for the quarter ended Sep 30. Operating earnings came in at 29c per diluted share (vs a loss of 3c last year and First Call 23c). Revenue was up 278% to $104.1 million (First Call $79.6 million). For the fourth quarter, the company now expects to report operating earnings in the range of 28c to 33c per share, and revenue in the range of $100 million to $108 million (First Call 23c and $83.6 million). + Strong chart: In September, the stock broke out of a 7-month trading range, and has been generally trending higher since then. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -6%, +36%, +74%, and, most recently, as cited above, +278%. + Three quarters of excellent and accelerating earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Sep 05 vs Sep 04: 7c vs 13c Dec 05 vs Dec 04: 16c vs 7c Mar 06 vs Mar 05: 22c vs 4c Jun 06 vs Jun 05: 29c vs (3c) + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2006 is 81c, revised upward from 72c 90 days ago (and up from 2005 actual earnings of 14c); and the consensus estimate for 2007 is $1.13, revised upward from $1.02 90 days ago. + Valuation: At 11 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 12%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings at least a penny above estimates in each of the past five quarters, including the just-reported quarter cited above, which 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 factor: - The company's industry group ("Elec - Semiconductor Equip") is ranked #95 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 24, 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||