Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since November 1, 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 Hornbeck Offshore Services (HOS)
* 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 2, 2007, I bought HOS, first for client accounts, then for my personal accounts. Hornbeck Offshore Services, Inc, provides marine transportation services to the offshore oil and gas industry. The Company owns and operates deepwater offshore supply vessels in the Gulf of Mexico, which support day-to-day operations of oil drilling rigs and production platforms. Hornbeck also owns and operates ocean going-tugs and barges in the northeastern United States and Puerto Rico. Here's why I bought this stock: + With the price of oil doing a fast march toward $100 a barrel, the oil services sector just might perform well even if we do have a significant correction. + News: Yesterday morning, November 1, before the open, the company announced results for the quarter ended Sep 30. Earnings came in at $1.09 per diluted share (vs 86c last year and First Call consensus 82c). Revenue was up 22% to $94.8 million (First Call $88.93 million). + A "true surprise"*: The stock traded lower for three days in a row leading up to the news. Then, yesterday, the stock jumped $4.29, or 11.0%, to $43.39 on extremely heavy volume, more than 5x 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). + Possible Breakout: In early trading this morning, the stock is up again, surpassing the old all-time closing high of $44.32 set on July 25. If this gain holds at the close, this will be a breakout from a 3-month trading range to a new all-time high. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +14%, +12%, +6%, and, most recently, as cited above, +22%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 06 vs Dec 05: $0.63 vs $0.55 Mar 07 vs Mar 06: $0.67 vs $0.54 Jun 07 vs Jun 06: $0.80 vs $0.72 Sep 07 vs Sep 06: $1.09 vs $0.86 + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2007 is $3.15, revised upward from $2.75 90 days ago (and up from 2006 actual earnings of $2.76); and the consensus estimate for 2008 is $3.88, revised upward from $3.55 90 days ago. + Valuation: At 12 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 10%, the stock is moderately priced. + History of earnings surprises: This company has reported earnings at least a penny above estimates in each of the past five quarters, including the just-reported quarter cited above, which was 27c 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 #26 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally falling slightly over recent weeks and months. -KD, November 2, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||