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 Blue Coat Systems Inc. (BCSI)
* 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 20, 2007, I bought BCSI, first for client accounts, then for my personal accounts. Blue Coat Systems, Inc. provides web security appliances which protect corporate networks against web-based viruses, unfiltered web communication, and inappropriate web content. This stock is a component of the IBD New America Index. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: This morning, before the open, the company announced results for the quarter ended Oct 31. Non-GAAP earnings came in at 30c per diluted share (vs 21c last year and First Call consensus 24c). Revenue was up 85% to $73.4 million (First Call $68.9 million). + A "true surprise"*: For more than four weeks leading up to the news, the stock was trending lower. Then, this morning, the stock is soaring on very 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). + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +33%, +51%, +71%, and, most recently, as cited above, +85%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 06 vs Dec 05: 14c vs 15c Mar 07 vs Mar 06: 16c vs 10c Jun 07 vs Jun 06: 16c vs 1c Sep 07 vs Sep 06: 22c vs 8c + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 08 (ends April 30) is 98c, revised upward from 90c 90 days ago (and up from FY 07 actual earnings of 54c); and the consensus estimate for FY 09 is $1.31, revised upward from $1.20 90 days ago. + Valuation: At 30 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 26%, the stock is moderately priced. + History of earnings surprises: This company has reported earnings at least 2c above estimates in each of the past four quarters, including the just-reported quarter cited above, which was 6c above. + 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: - The company's industry group ("Computer Software - Security") is ranked #30 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally falling over recent weeks and months. -KD, November 20, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||