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 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, Wednesday, November 22, 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: + Technical Buy Signal: Yes, I just sold this stock yesterday morning, because it broke below my hard stop-loss price. Within hours of my selling, however, the stock, which was coming off of four straight down days and the beginning of a fifth, turned around sharply. What makes this reversal a technical buy signal, in my opinion, is the volume, which was more than 5x the daily average, and the highest since August. Indeed, the heaviest volume days over the past month have been up days. And average daily volume (most of it on the buy side) has increased recently. Also, at the bottom of this recent dip, yesterday morning, the stock briefly touched and bounced off of its rising 50-day moving average. This time around, my entry price is lower, and I have set my hard stop-loss price 25c lower, at $13.45, which is 5c below the recent closing low. FYI, here's a link to my original buy article from November 7: http://www.deencapital.com/newslett/2006/061107.235.html#2 The fundamentals and the valuation remain very compelling. Read on: + Excellent 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, for the quarter ended Sep 30, +228% to $33.4 million. + 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 16 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 27%, 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. The most recent quarter, ended Sep 30, was 9c 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 factors: - The company's industry group ("Diversified Operations") is ranked #83 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. - Downward earnings-per-share estimate revisions: According to recent data from First Call, the consensus earnings estimate for 2006 is 70c, revised downward from 71c 90 days ago (but up from 2005 actual earnings of 20c); and the consensus estimate for 2007 is 90c, revised downward from 96c 90 days ago. That's still very solid growth, however. And the large upside earnings surprises recently suggest a possible disconnect between analyst expectations and reality. -KD, November 22, 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||