Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since November 8, 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 Watts Water Technologies, Inc. (WTS)
* 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, November 17, 2006, I bought WTS, first for client accounts, then for my personal accounts. Watts Water Technologies, Inc. designs, manufactures, and sells a line of products to the water regulation and control markets. The Company has manufacturing plants and distribution channels in the United States, Canada, and Europe, as well as a joint venture in The People's Republic of China. This stock is a component of the S&P 600 SmallCap Index. Here's why I bought this stock: + Breakout: Earlier this month, the stock broke out of a 6-month trading range to at least a 10-year high on heavy volume. + End of dip? The stock closed at $44.68 on Monday. After a couple of down days Tuesday and Wednesday, the stock was down again yesterday morning, only to reverse and close in the plus column yesterday. This bullish reversal was accompanied by huge volume -- about 9x the daily average. I am treating the dip as a buying opportunity. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +10%, +26%, +32%, and, most recently, for the quarter ended Sep 30, +40% to $325.1 million. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 05 vs Dec 04: 47c vs 38c Mar 06 vs Mar 05: 46c vs 39c Jun 06 vs Jun 05: 58c vs 43c Sep 06 vs Sep 05: 67c vs 43c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2006 is $2.32, revised upward from $2.15 90 days ago (and up from 2005 actual earnings of $1.72); and the consensus estimate for 2007 is $2.66, revised upward from $2.50 90 days ago. + Valuation: At 16 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 15%, 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 four quarters. The most recent quarter ended Sep 30 was 11c above. + The company's industry group ("Bldg - Construction Products / Misc") is ranked #73 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 17, 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||