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 Western Digital Corp. (WDC)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Monday, November 5, 2007, I bought WDC, first for client accounts, then for my personal accounts. Western Digital Corp. designs and manufactures hard drives for desktop computers and home entertainment applications. This stock is a component of the S&P 400 MidCap Index. Here's why I bought this stock: + One striking thing about this new correction (if that's what it is) which began Nov 1 is how well tech stocks generally have held up. I am taking a nibble on one more tech stock, as this seems to be a pocket of strength in an otherwise weak market. + News: Last Thursday, Nov 1, after the close, the company announced results for the quarter ended Sep 28. Non-GAAP earnings came in at 79c per diluted share (vs 46c last year and First Call consensus 57c). Revenue was up 40% to $1.77 billion (First Call $1.66 billion). + Market Reaction: The next day, Fri Nov 2, the stock was up $2.89 to $27.66 on very heavy volume, more than 4x average. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +28%, +25%, +26%, and, most recently, as cited above, +40%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 06 vs Dec 05: 57c vs 47c Mar 07 vs Mar 06: 53c vs 45c Jun 07 vs Jun 06: 38c vs 44c Sep 07 vs Sep 06: 79c vs 46c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 08 (ends June 30) is $2.03, revised upward from $1.99 90 days ago (and up from FY 07 actual earnings of $1.94); and the consensus estimate for FY 09 is $2.71, revised upward from $2.15 90 days ago. + Valuation: At 10 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 13%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings at least 2c above estimates in each of the past five quarters, including the just-reported quarter cited above, which was 22c above. + The company's industry group ("Computer - Data Storage") is ranked #83 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally rising over recent weeks and months. + The stock's 200-day moving average is rising, indicating a long-term uptrend. -KD, November 5, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||