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 Emerson Electric Co. (EMR)
* 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, November 8, 2006, I bought EMR, first for client accounts, then for my personal accounts. Emerson Electric Co. manufactures and markets electrical, electromechanical, and electronic products and systems. The Company produces a variety of products, including process control, industrial automation, electronics, appliance components, and electric motors. Emerson sells its products around the world. This stock is a component of the S&P 500. Here's why I bought this stock: + News: Yesterday morning, Tue Nov 7, the company announced results for the quarter ended Sep 30. Earnings came in at $1.24 per diluted share (vs $1.02 last year and First Call $1.20). Revenue was up 19% to $5.52 billion (First Call $5.25 billion). For fiscal 2007, the company announced that it expects $5.02 to $5.15 per share; the First Call consensus is $5.03. I bought just minutes after the opening bell, at a price just slightly below yesterday's close. + A "true surprise"*: For two weeks prior to the news, the stock was trending lower. Then, yesterday, the stock jumped 6% 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 stock was up sharply yesterday on very heavy volume. This was a breakout from a 6-month trading range to at least a 10-year 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: +15%, +15%, +17%, and, most recently, as cited above, 19%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 05 vs Dec 04: $0.96 vs $0.70 Mar 06 vs Mar 05: $1.05 vs $0.83 Jun 06 vs Jun 05: $1.18 vs $1.00 Sep 06 vs Sep 05: $1.24 vs $1.02 + Rising next-year earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 07 (Sep) is $5.03, revised upward from $5.02 90 days ago (and up from FY 06 actual earnings of $4.43). The consensus for FY 08 is $5.56 (90-days-ago number not available). + Valuation: At 16 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 14%, the stock is moderately priced. + History of earnings surprises: This company has reported earnings at least 2c above estimates in each of the past five quarters, including the just-reported quarter cited above, which was 4c above. + 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. -KD, November 8, 2006
* Net buy prices shown are the total net purchase cost after commissions for all managed accounts divided by the total number of shares. 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||