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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since July 17, 2008) Contents
Performance
* An average of managed accounts, net after all commissions and fees. Click here for more performance data. Click here for information on managed accounts.
* Buy prices shown are net after commissions and fees. Today, Friday, August 22, 2008, I bought SKIL, first for client accounts, then for my personal accounts. SkillSoft PLC provides electronic learning courseware and referenceware for business and information technology professionals. Here's why I bought this stock: + News: This morning, before the open, the company announced results for the quarter ended July 31. Earnings from continuing operations came in at 10c per diluted share (vs 1c last year and analysts' consensus 7c). Revenue was up 17% to $83.3 million (analysts' consensus $82.4 million). + A "true surprise"*: Prior to the news, the stock was trading in a sideways pattern. It closed yesterday at a 4-week low. Today, the stock is up sharply 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). + Breakout: Today, the stock is breaking out of a 14-week trading range to a new 15-week high. + Volume spike: As I write this, just minutes before the close, volume has set a 9-month record, at nearly 7 times average. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +31%, +34%, +43%, and, most recently, as cited above, +17%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 07 vs Sep 06: 56c vs 7c Dec 07 vs Dec 06: 15c vs 8c Mar 08 vs Mar 07: 7c vs 7c Jun 08 vs Jun 07: 10c vs 1c + Valuation: At 22 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 17.5%, the stock is moderately priced. + History of earnings surprises: This company has reported earnings-per-share at least 2c above estimates in each of the past five quarters, including the just-reported quarter cited above, which "beat the Street" by 3c. + 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: - Strong but slightly falling earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 09 (ends Jan 31) is 34c, revised downward from 35c 90 days ago (and up from FY 08 actual earnings of 29c); and the consensus estimate for FY 10 is 48c, revised downward from 51c 90 days ago. - The company's industry group ("Computer Software - Education / Entertainment") is ranked #84 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, Friday, August 22, 2008 Model Portfolio
* Buy prices shown are net after commissions and fees. ** 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.
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