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, Friday, November 16, 2007, I bought FLS, first for client accounts, then for my personal accounts. Flowserve Corp. designs, manufactures, distributes, and services industrial flow management equipment throughout the world. They provide pumps, valves, and mechanical seals primarily to the refinery and pipeline segments of the petroleum, chemical processing, power generation and water treatment industries. This stock is a component of the IBD New America Index and the S&P 400 Midcap Index. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: Two weeks ago, on Thu Nov 1 after the close, the company announced results for the quarter ended Sep 30. Operating earnings came in at $1.24 per diluted share (vs 49c last year and First Call consensus 93c). Revenue was up 19% to $919.2 million (First Call $910.7 million). + A "true surprise"*: Prior to the news, the stock was trading in a sideways pattern. On Nov 1, just before the news came out, the stock closed at a six-week low. Then, on Nov 2, the stock soared 12.94 points, or 17%, to $88.33, on extremely heavy volume, about six times 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). + Breakout: The price movement on Nov 2 was a breakout from a 12-week trading range to a 10-year (at least) high. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +20%, +23%, +24%, and, most recently, as cited above, +19%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 06 vs Dec 05: $0.70 vs $0.42 Mar 07 vs Mar 06: $0.59 vs $0.32 Jun 07 vs Jun 06: $0.98 vs $0.58 Sep 07 vs Sep 06: $1.24 vs $0.49 + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2007 is $3.88, revised upward from $3.56 90 days ago (and up from 2006 actual earnings of $2.13); and the consensus estimate for 2008 is $4.82, revised upward from $4.37 90 days ago. + Valuation: At 19 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 13%, the stock is moderately 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 31c above. + The company's industry group ("Machinery - General Industrial") is ranked #15 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been fairly stable over recent weeks and months. + The stock's 200-day moving average is rising, indicating a long-term uptrend. -KD, November 16, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||