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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since September 4, 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. Bought DXP Enterprises, Inc. (DXPE)
* Buy prices shown are net after commissions and fees. Today, Monday, September 8, 2008, I bought DXPE, first for client accounts, then for my personal accounts. DXP Enterprises, Inc. makes fluid handling equipment, power transmission equipment, general mill and safety supplies, and electrical products for industrial customers. This stock is a component of the IBD 100 and the IBD New America Indexes. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + Market timing: The Feds seized control of Fannie Mae and Freddie Mac, and markets around the world are rallying sharply. From a technical point-of-view, this could be a major double-bottom in the NASDAQ, the S&P 500, and the Dow. I want to see how the market closes today, how big the volume is, and what my indicators say before I make a decision about turning bullish, but it's conceivable. Meanwhile, I am nibbling at least on this one especially attractive stock. + Recent breakout: You have to bring up a 3-year or longer chart to see this, but the stock has just recently (Aug 29) topped for the first time its closing peak of $57.80 set on May 10, 2006. That makes this a breakout from a 28-month trading range to a new 10-year high. + Volume spike: Aug 29 volume was more than 3x average. The next day, Sep 2, the stock was up again on even heavier volume -- more than 4x average. + The stock was down last Wednesday, Thursday and Friday on receding volume. That dip, I think, represents a buying opportunity. The stock is up in early trade this morning, and so, I suspect, that 3-day post-spike dip is over. + Outstanding and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +57%, +113%, +101%, and, most recently, for the quarter ended June 30, +120% to $187.8 million. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 07 vs Sep 06: 65c vs 52c Dec 07 vs Dec 06: 84c vs 61c Mar 08 vs Mar 07: 80c vs 65c Jun 08 vs Jun 07: 93c vs 56c + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2008 is $3.75, revised upward from $3.55 90 days ago (and up from 2007 actual earnings of $2.71); and the consensus estimate for 2009 is $4.63, revised upward from $4.12 90 days ago. + Valuation: At 13 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 25%, the stock is very attractively priced. + History of earnings surprises: This company has reported earnings-per-share at least 3c above estimates in three of the past four quarters. Most recently, for the quarter ended June 30, they "beat the Street" by 7c. + 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 ("Machinery - Gen Industrial") is ranked #11 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally falling just slightly over recent weeks and months. -KD, Monday, September 8, 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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