Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since December 14, 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 Best Buy Co. Inc. (BBY)
* 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, December 18, 2007, I bought BBY, first for client accounts, then for my personal accounts. Best Buy Co., Inc. retails consumer electronics, personal computers, software, and appliances through its retail stores, as well as its web site. The Company also retails pre-recorded home entertainment products through retail stores. This stock is a component of the S&P 500 Index. Here's why I bought this stock: + Risk management: My indicators are still unanimously negative, and so my response to today's rally is extremely muted. Just one stock, a relatively small position. We remain heavily in cash even after this buy. + Very strong earnings surprise: This morning, before the open, the company announced results for the quarter ended Nov 30. Earnings came in at 53c per diluted share (vs 31c last year and First Call consensus 41c). Revenue was up 17% to $9.93 billion (First Call $9.43 billion). + A "true surprise"*: For a week prior to the news, the stock was trending lower. Even this morning, the initial reaction was negative. However, the stock has now reversed itself in late afternoon trade, and is in the plus column on unusually heavy trade, more than 3x 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). + Technical: I believe the early morning selloff in Best Buy stock was a symptom of the malaise of the overall market -- nothing specific to this stock. The stock touched its 50-day moving average at today's intraday low shortly after the opening bell, and has been climbing ever since. I consider this a technical buy signal. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +21%, +14%, +15%, and, most recently, as cited above, +17%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters: Feb 07 vs Feb 07: $1.55 vs $1.29 May 07 vs May 06: $0.39 vs $0.50 Aug 07 vs Aug 06: $0.55 vs $0.47 Nov 07 vs Nov 06: $0.53 vs $0.31 + Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 08 (ends Feb 29) is $3.12, revised upward from $3.10 90 days ago (and up from FY 07 actual earnings of $2.81); and the consensus estimate for FY 09 is $3.64, revised upward from $3.61 90 days ago. + Valuation: At 14 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 15%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings at least 3c above estimates in three of the past four quarters, including the just-reported quarter cited above, which was 12c above consensus. + The company's industry group ("Retail - Consumer Electronics") is ranked #69 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. -KD, December 18, 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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||