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 Pericom Semiconductor (PSEM)
* 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 PSEM, first for client accounts, then for my personal accounts. Pericom Semiconductor Corp. designs, develops, and markets interface integrated circuits for the transfer, routing, and timing of high-speed digital and analog signals. This stock is a component of the S&P 600 SmallCap Index. Here's why I bought this stock: + News: On Tue, Oct 30, after the close, the company announced results for the quarter ended Sep 29. Earnings came in at 15c per diluted share (vs 6c last year and First Call consensus 11c). Revenue was up 25% to $38.5 million (First Call $34.1 million). + A "true surprise"*: For four weeks prior to the news, the stock was in a tight trading range. Then, on Wednesday, the stock soared $3.18, or 27%, to $14.94 on huge 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 on Wednesday represents a breakout from a 46-month trading range to a new five-and-a-half year high. + Volume on Wednesday was just incredible -- some 20x average. I often buy on a volume spike, and the extraordinary magnitude of this one is a major reason in my decision to buy. + The stock showed signs of continued strength during yesterday's market selloff. + Accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +17%, +8%, +8%, and, most recently, as cited above, +25%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 06 vs Dec 05: 8c vs 6c Mar 07 vs Mar 06: 10c vs 7c Jun 07 vs Jun 06: 8c vs 8c Sep 07 vs Sep 06: 15c vs 6c + Valuation: At 24 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 22%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings at least a penny above estimates in each of the past three quarters, including the just-reported quarter cited above, which was 4c 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: - Strong but falling earnings-per-share estimates for next year: According to recent data from First Call, the consensus earnings estimate for FY 08 (ends June 30) is 52c, revised upward from 49c 90 days ago (and up from FY 07 actual earnings of 32c); and the consensus estimate for FY 09 is 66c, revised downward from 67c 90 days ago. - The company's industry group ("Elec - Semiconductor Mfg") is ranked #42 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, November 2, 2007 Sold Gildan Activewear (GIL) +16.4% (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. We've had a very nice run in this stock, but it's showing some technical signs of topping out. Also, I need to sell something in order to buy HOS and PSEM today and still maintain a very high level of cash, consistent with my bearish stance. -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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||