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.
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Tuesday, November 13, 2007, I bought ENS, first for client accounts, then for my personal accounts. EnerSys manufactures, markets, and distributes industrial batteries. They also manufacture, market, and distribute related products such as chargers, power equipment, and battery accessories. Here's why I bought this stock: + News: Last Wednesday, Nov 7, after the close, the company announced results for the quarter ended Sep 30. Non-GAAP adjusted earnings came in at 35c per diluted share (vs 24c last year and First Call consensus 24c). Revenue was up 30% to $461.5 million (First Call $431.8 million). + A "true surprise"*: Prior to the news, the stock was trending sideways to lower. On Wednesday, Nov 7, just before the news came out, the stock closed at a 3-month low. Then, the next day, the stock soared $1.65, or 9.4%, to $19.20, on very heavy volume, about 4x 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). + Near-Breakout: The stock is about 25c away from breaking out of a three-and-a-half-month trading range to a 15-month high. + Tight Stop-Loss: The chart suggests like support at around $19, just below our buy price. I'm setting my hard stop-loss price at $18.95. I'm particularly interested in minimizing our downside risk given current ugly market conditions. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +17%, +17%, +20%, and, most recently, as cited above, +30%. + Recent turnaround in earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 06 vs Dec 05: 19c vs 20c Mar 07 vs Mar 06: 20c vs 25c Jun 07 vs Jun 06: 30c vs 22c Sep 07 vs Sep 06: 35c vs 24c + Mostly rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 08 (ends March 31) is $1.09, revised upward from $1.05 90 days ago (and up from FY 07 actual earnings of 87c). The consensus estimate for FY 09 is $1.33, revised downward from $1.43 90 days ago, but up from $1.21 one week ago.. + Valuation: At 15 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 a penny above estimates in each of the past four quarters, including the just-reported quarter cited above, which was 11c above. + The company's industry group ("Electrical Equipment") is ranked #33 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 13, 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||