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 Palomar Medical Technologies, Inc. (PMTI)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Thursday, December 14, 2006, I bought PMTI, first for client accounts, then for my personal accounts. Palomar Medical Technologies, Inc. develops and supplies proprietary laser systems for hair removal and other cosmetic laser treatments. The Company's systems are installed in physician offices worldwide. This stock is a component of the IBD 100 Index. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: On Monday, before the open, the company announced that it has received clearance from the FDA to market a new light-based hair removal device for home use. This device, the first of its kind, was initially developed by Palomar and completed in cooperation with Gillette. It will be sold over-the-counter. The company calls this device "a major breakthrough in the aesthetic device industry". Gillette's president calls it "an exciting milestone, with significant future potential". + A "true surprise"*: Prior to the news, the stock had been trading sideways for about four weeks. Then, on Monday, the stock soared (up $5.39 or 10.8% to $55.35) on huge volume (more than 10 times average). * "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: Back in July, the stock topped out very close to $50, which was at the time a 9-year high. It dipped down to the low $30's in August, and then climbed back. It reached $52 briefly about a month ago. That was technically a breakout, but a weak one as volume was light. Last Friday, the stock closed at $49.96. One could argue the point, but I consider Monday's impressive panic buying to be the true breakout from this 5-month trading range. The stock is once again in 9-year-high territory. (The stock topped $100 in 1996, so we're a long ways from an all-time high.) + Good entry point: We are buying today a few points below Monday's close, but still above the breakout pivot point. I suspect yesterday's close at $52.12 marks the end of some normal post-spike profit-taking. + The stock looks like a buy even without this news, as the next six bullet points suggest: + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +32%, +32%, +101%, and, most recently, for the quarter ended Sep 30, +45% to $28.0 million. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 05 vs Dec 04: 27c vs 23c Mar 06 vs Mar 05: 31c vs 19c Jun 06 vs Jun 05: 86c vs 21c Sep 06 vs Sep 05: 41c vs 24c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2006 is $2.06, revised upward from $1.87 90 days ago (and up from 2005 actual earnings of 91c); and the consensus estimate for 2007 is $1.76, revised upward from $1.59 90 days ago. + Valuation: At 30 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 33.5%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings at least 6c above estimates in each of the past three quarters, including the most recently reported quarter, ended Sep 30, which was 11c 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 Street estimate for 2007 earnings, $1.76, is less than the estimate for 2006 earnings, $2.06. (If this new device becomes popular, perhaps that will change.) - The company's industry group ("Medical - Systems / Equip") is ranked #77 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. -KD, December 14, 2006 Sold Emerson Electric Co. (EMR) -1.5% (after commissions)
* The net buy (sell) price is the total net cost (proceeds) after commissions for all managed accounts divided by the total number of shares. I pick stocks that I expect to show a profit in short order. We've held this one for five weeks and it is a non-performer. Also, I have a probable sell signal today from my proprietary StockSell Program (Ver.13s). -KD, December 14, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||