Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since November 1, 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 Metretek Technologies, Inc. (MEK)
* 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, November 7, 2006, I bought MEK, first for client accounts, then for my personal accounts. Metretek Technologies, Inc. provides energy measurement products, services, and data management systems. The Company serves industrial and commercial consumers and suppliers of natural gas and electricity. Metretek provides its services through Southern Flow Companies Inc., Metretek Inc., PowerSpring, and PowerSecure Inc. Here's why I bought this stock: + Yesterday's rally was impressive, and erased the big drop of last Wednesday that triggered a double-top signal from my proprietary NASDAQ Timing Model. I'm not ready to return to a bullish stance, but I am moving today toward a more market-neutral stance. + News: Yesterday, Mon Nov 6, before the open, the company announced results for the quarter ended Sep 30. Earnings came in at 17c per diluted share (vs 1c last year and First Call 8c). Revenue was up 229% to $33.4 million (First Call $24.4 million). + A "true surprise"*: For a week prior to the news, the stock was selling off mildly. Then, yesterday, the stock soared 16% on more than 6x average daily 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). + Explosive and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +65%, +90%, +158%, and, most recently, as cited above, +229%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 05 vs Dec 04: 11c vs 5c Mar 06 vs Mar 05: 4c vs 1c Jun 06 vs Jun 05: 25c vs 7c Sep 06 vs Sep 05: 17c vs 1c + Valuation: At 15 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 27.5%, the stock is very attractively priced. + History of earnings surprises: This company has reported earnings at least 7c above estimates in each of the past two quarters, including the just-reported quarter cited above, which was 9c above. (I have no earnings surprise data prior to the past two quarters.) + The company's industry group ("Diversified Operations") is ranked #46 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: - Falling earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2006 is 71c, revised downward from 79c 90 days ago (but up from 2005 actual earnings of 20c); and the consensus estimate for 2007 is 96c, revised downward from $1.07 90 days ago. I'm willing to overlook this negative because a) the earnings surprise is so huge that one has to suspect that the analysts don't have a clue, and b) even after the downward revision, analysts are still project very strong sales and earnings growth. -KD, November 7, 2006 Bought Republic Airways Holdings, Inc. (RJET)
* 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, November 7, 2006, I bought RJET, first for client accounts, then for my personal accounts. Republic Airways Holdings Inc., the parent of Chautauqua Airlines, provides passenger services. The company operates as US Airways Express, America West Express, and American Connection. Republic provides US Airways, American and America West with portions of their regional service, including service out of Boston, Columbus, Indianapolis, New York, Philadelphia, Pittsburgh and St Louis. Here's why I bought this stock: + Yesterday's rally was impressive, and erased the big drop of last Wednesday that triggered a double-top signal from my proprietary NASDAQ Timing Model. I'm not ready to return to a bullish stance, but I am moving today toward a more market-neutral stance. + The company recently reported a significant earnings surprise (50c for the quarter ended Sep 30, 5c above First Call). + Breakout: Last Tuesday, Oct 31, the stock broke out of a 4-month trading range on very heavy volume. For the next three days, the stock was down on mild profit-taking. Yesterday, the stock was up again, marking, I suspect, the end of that dip and a good entry point.. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +34%, +23%, +33%, and, most recently, for the quarter ended Sep 30, +33% to $306.1 million. + Turnaround in recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 05 vs Dec 04: 37c vs 56c Mar 06 vs Mar 05: 39c vs 49c Jun 06 vs Jun 05: 47c vs 40c Sep 06 vs Sep 05: 50c vs 35c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2006 is $1.81, revised upward from $1.72 90 days ago (and up from 2005 actual earnings of $1.59); and the consensus estimate for 2007 is $2.12, revised upward from $2.04 90 days ago. + Valuation: At 8.5 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 14%, the stock is very attractively priced. + History of earnings surprises: This company has reported earnings at least 3c above estimates in each of the past four quarters, including the just-reported quarter cited above. + The company's industry group ("Transportation - Airline") is ranked #3 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. -KD, November 7, 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. The Deen's List Copyright © 2006 Deen Capital Management, Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||