Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since January 11, 2007)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.
* 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, January 17, 2007, I bought ASML, first for client accounts, then for my personal accounts. ASML Holding N.V. develops, produces, and markets semiconductor manufacturing equipment. The Company's products allow semiconductor manufacturers to choose the optimal numerical aperture and wavelength for their applications, assure uniformity, and produce more using less floor space. Here's why I bought this stock: + News: This morning, before the open, the company announced results for the quarter ended Dec 31. Earnings came in at 55c per diluted share (vs 13c last year and First Call 44c). Revenue was up 117% to $1.41 billion (well above the First Call consensus of $1.26 billion). + A "true surprise"*: Yesterday, the stock was down, closing near a 9-week low. Today, the stock is soaring 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 price movement today represents a breakout from a 5-year trading range to a 5-year high. (The stock peaked at just under $26 in early 2005, a high that has only today been breached.) + Three quarters of dramatically accelerating sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -14%, +31%, +90%, and, most recently, as cited above, +117%. + Three quarters of excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Mar 06 vs Mar 05: 19c vs 26c Jun 06 vs Jun 05: 42c vs 27c Sep 06 vs Sep 05: 44c vs 12c Dec 06 vs Dec 05: 55c vs 13c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2007 is $1.70, revised upward from $1.56 90 days ago (and up from 2006 actual earnings of $1.60). + Valuation: At 15.5 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 16.5%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings at least 5c above estimates in each of the past three quarters, including the just-reported quarter cited above, which was 11c above. + The company's industry group ("Elec - Semiconductor Equip") is ranked #26 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been rising dramatically over recent weeks and months. + The stock's 200-day moving average is rising, indicating a long-term uptrend. -KD, January 17, 2007 Sold Apple, Inc. (AAPL) -0.2% (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 still like Apple stock, and I may buy it again someday, but I changed my mind about holding it through their earnings news, which will be reported later today. Expectations are extremely high, and the stock has run up considerably in advance of the news. Because of this, a "true surprise", by my definition, is not possible. If Apple's numbers later today fail to impress, the stock price will surely sell off. Even if the numbers are fabulous, the stock just might sell off anyway. There's a very good chance that Apple's earnings will be great, but only a so-so chance that the market will bid up the stock in response. I don't like the odds. -KD, January 17, 2007
* 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 © 2007 Deen Capital Management, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||