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, Tuesday, November 13, 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 Index. Here's why I bought this stock: + I am still bearish, and maintaining a high level of cash. Within that context, though, there is room for one more nibble. + Technical Buy Signal: The stock has found support at or near its 50-day moving average a number of times since mid-May. It's been trading above that rising moving average line almost continuously since then. Yesterday, it fell down to and touched that line; today it is bouncing off of it. I consider this a technical buy signal. + There was a huge price/volume spike on November 2, fueled by a huge earnings surprise. I refer you to my earlier buy article on that date for more details ( http://www.deencapital.com/newslett/2007/071105.269.html ). + 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, for the quarter ended Sep 30, +40% to $1.766 billion. + Mostly 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 + Hugely rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 08 is $2.73, revised upward from $1.96 90 days ago (and up from FY 07 actual earnings of $1.94); and the consensus estimate for FY 09 is $2.95, revised upward from $2.17 90 days ago. + Valuation: At 9 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 13%, the stock is very attractively priced. This was also a major consideration in my decision to buy. + Tight stop-loss: I am setting my hard stop-loss at $25. + 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 #90 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||