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. Bought Layne Christensen (LAYN)
* 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 LAYN, first for client accounts, then for my personal accounts. Layne Christensen Company provides water well drilling, mineral exploration drilling, geotechnical construction, oil and gas services, and related products and services. The company's customers include municipalities, industrial, oil, gas, and mining companies, and consulting and engineering firms located in the United States, Canada, Mexico, Australia, Africa, and South America. Here's why I bought this stock: + Technical: This drilling stock has held up much better than its peers in the face of the recent dramatic slide in the price of oil. It's been trading in a sideways pattern, at or near a 10-year high, for a month and a half now. This is impressive given the present very negative environment for oil and the very poor performance of the oil services group. + Technical: The stock broke out of an 8-month trading range last December. Since then, the floor in the stock's price, around $32.5 or so, corresponds to its prior ceiling. Yesterday, the stock bounced off of this support area on very heavy volume, the heaviest volume in over a year. The price gain was only 34c, but an advance in volume often precedes an advance in price. + Technical: Over the past two months, the four heaviest volume days have been up days. + Yesterday's gain was particularly impressive because oil had another very bad day, as February crude fell $1.78 to $51.21 a barrel, a 20-month low. + My thesis with this stock is that if it can hold its own, near a 10-year high, with volume data indicating accumulation, in such a hostile environment for oil, then it stands a good chance of taking off when oil stabilizes. I also like the fact that there is a natural stop-loss point so close to (less than a point below) our buy price. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +64%, +62%, +76%, and, most recently, for the quarter ended Oct 31, +64% to $185.8 million. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Mar 06 vs Mar 05: 20c vs 9c Jun 06 vs Jun 05: 30c vs 21c Sep 06 vs Sep 05: 47c vs 35c Dec 06 vs Dec 05: 50c vs 31c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 07 (Jan) is $1.48, revised upward from $1.37 90 days ago (and up from FY 06 actual earnings of $1.05); and the consensus estimate for FY 08 is $1.70, revised upward from $1.57 90 days ago. + Valuation: At less than 20 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 31%, the stock is very attractively priced. + History of earnings surprises: Earnings came in 9c above Street estimates two quarters ago, and the most recently reported quarter, ended Oct 31, was 15c 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 factor: - The company's industry group ("Oil&Gas - Field Services") is ranked #151 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, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||