Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since November 28, 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 Atwood Oceanics Inc. (ATW)
* The "Net buy price" is the total net purchase cost after commissions for all managed accounts divided by the total number of shares. Today, Thursday, November 29, 2007, I bought ATW, first for client accounts, then for my personal accounts. Atwood Oceanics, Inc. performs contract drilling of exploratory and development oil and gas wells in offshore areas, and provides related support, management, and consulting services. They also provide labor, supervisory, and consulting services to operator-owned platform rigs in Australia. This stock is a component of the IBD 100, the IBD New America, and the S&P 600 SmallCap Indexes. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: Yesterday, Nov 28, after the close, the company announced results for the quarter ended Sep 30. Earnings came in at $1.69 per diluted share (vs 74c last year and First Call consensus $1.43). Revenue was up 49% to $121.6 million (First Call $115.9 million). + A "true surprise"*: For four weeks prior to the news, the stock price was edging lower. It closed yesterday at a 5-week low. Then, today, the stock is up sharply on 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). + Near-Breakout: As I write this, just one day (Oct 31, when the stock closed at $84.24) stands in the way of calling this a breakout from a 12-week trading range to a 10-year high. I call this a "near breakout". In my book, this is as good as a true breakout. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +60%, +40%, +37%, and, most recently, as cited above, +49%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Dec 06 vs Dec 05: $0.67 vs $0.22 Mar 07 vs Mar 06: $1.01 vs $0.50 Jun 07 vs Jun 06: $1.00 vs $0.86 Sep 07 vs Sep 06: $1.69 vs $0.74 + Valuation: At 12 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 67%, the stock is very attractively priced. + 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 factors: - Very strong, but falling, earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 08 (ends Sep 30) is $7.00, revised downward from $7.41 90 days ago (but up from FY 07 actual earnings of $4.37). I could not find estimate data for FY 09. - Poor earnings surprise history: This company has reported earnings which were shy of estimates in three of the past five quarters. - The company's industry group ("Oil&Gas - Drilling") is ranked #83 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 29, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||