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 Buffalo Wild Wings, Inc. (BWLD)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Wednesday, October 25, 2006, I bought BWLD, first for client accounts, then for my personal accounts. Buffalo Wild Wings Inc. owns, operates, and franchises casual dining restaurants. The restaurants feature made-to-order menu items including New York style chicken wings. The company operates restaurants in multiple states. Here's why I bought this stock: + News: Yesterday, Tue Oct 24, after the close, the company announced results for the quarter ended Sep 24. Earnings came in at 40c per diluted share (vs 26c last year and First Call 31c). Revenue was up 32% to $68.3 million (First Call $64.9 million). + Breakout on huge volume: This morning, about an hour and a half after the opening bell, the stock is up some 21% on volume that is already about 9 times the full-day average. This is a breakout from a 6-month trading range to an all-time high. + 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 . + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +21%, +27%, +29%, and, most recently, as cited above, +32%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Sep 05 vs Sep 04: 38c vs 28c Dec 05 vs Dec 04: 40c vs 28c Mar 06 vs Mar 05: 28c vs 22c Jun 06 vs Jun 05: 40c vs 26c + Strong earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2006 is $1.45, revised downward from $1.46 90 days ago (but up from 2005 actual earnings of $1.14); and the consensus estimate for 2007 is $1.78, revised downward from $1.79 90 days ago. + Valuation: At 28 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 25%, the stock is moderately priced. + History of earnings surprises: This company has reported earnings at least 2c above estimates in two of the past three quarters, including the just-reported quarter cited above, which was 9c above. + The company's industry group ("Retail - Restaurants") is ranked #66 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. + 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: - As cited above, earnings estimates for 2006 and 2007 have come down just slightly over the past 90 days. However, I think it likely that estimates will rise in the wake of yesterday's big surprise. -KD, October 25, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||