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.
* 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, December 7, 2007, I bought GEF, first for client accounts, then for my personal accounts. Greif Inc. manufactures and markets industrial packaging products and services. They provide steel, plastic, fiber, corrugated, and multi-wall containers and protective packaging for a wide range of multi-national and regional industries. They also produce containerboard and manage timber properties in North America. Here's why I bought this stock: + News: Two days ago, on Wednesday, after the close, the company announced results for the quarter ended Oct 31. Non-GAAP earnings came in at $1.05 per diluted share (vs 83c last year and First Call consensus 97c). Revenue was up 20% to $882.3 million (First Call $940.7 million). + A "true surprise"*: For five weeks prior to the news, the stock had been trending lower. Then, yesterday, the stock was 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). + Breakout: The price movement yesterday represents a breakout from a 9-month trading range to a 10-year high. We are buying today at a price slightly below yesterday's high of $65.10. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +29%, +31%, +27%, and, most recently, as cited above, +20%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Jan 07 vs Jan 06: $0.60 vs $0.30 Apr 07 vs Apr 06: $0.66 vs $0.52 Jul 07 vs Jul 06: $0.90 vs $0.73 Oct 07 vs Oct 06: $1.05 vs $0.83 + Valuation: At 14 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 21%, the stock is very attractively 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 8c above. + The company's industry group ("Containers") is ranked #98 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 factors: - As cited above, sales for the quarter ended Oct 31 came in below estimates. - Strong but falling earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 08 (ends Oct 31) is $3.83, revised downward from $4.01 90 days ago (but up from FY 07 actual earnings of $3.22); and the consensus estimate for FY 09 is $4.69, revised upward from $4.83 90 days ago. -KD, December 7, 2007
* Net buy prices include commissions. ** 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||