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, Wednesday, November 14, 2007, I bought SSRX, first for client accounts, then for my personal accounts. 3SBio, Inc. is a biotechnology company. They research treatments in the areas of nephrology, oncology, supportive cancer care, inflammation, and infectious diseases. This stock is a component of the IBD 100 and the IBD New America Indexes. Here's why I bought this stock: + I am still bearish, still maintaining a high level of cash. However, this is a very strong buy, worthy of a nibble even under present conditions. + News: Yesterday, after the close, the company announced results for the quarter ended Sep 30. Earnings came in at 15c per diluted share (vs 6c last year and First Call consensus 12c). Revenue was up 65% to $7.5 million (First Call $6.5 million). + A "true surprise"*: For two weeks prior to the news, the stock has been falling sharply. Then, this morning, the stock is soaring on extremely heavy 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). + Technical Buy Signal: My read of the chart pattern suggests that we have a technical buy signal today. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +40%, +31%, +57%, and, most recently, as cited above, +65%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 06 vs Dec 05: 4c vs 2c Mar 07 vs Mar 06: 10c vs 4c Jun 07 vs Jun 06: 14c vs 4c Sep 07 vs Sep 06: 15c vs 6c + Valuation: At 27 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 54%, the stock is very attractively priced. + History of earnings surprises: This company has reported earnings at least 3c above estimates in each of the past three quarters, including the just-reported quarter cited above, which was 3c above. + The company's industry group ("Medical - Genetics") is ranked #18 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. I chose to buy the stock in spite of the following negative factor: - Strong but falling earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2007 is 47c, revised downward from 49c 90 days ago (but up from 2006 actual earnings of 18c); and the consensus estimate for 2008 is 62c, revised downward from 65c 90 days ago. This data does not factor in yesterday's earnings surprise. -KD, November 14, 2007
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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||