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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.
* Buy prices shown are net after commissions and fees. Today, Thursday, September 18, 2008, I bought RGLD, first for client accounts, then for my personal accounts. Royal Gold, Inc. invests in public companies that hold and manage royalties on precious metals properties. They hold investments in a number of properties in the United States, Argentina, Greece, and Bulgaria. Here's why I bought this stock: + This is primarily a play on the price of gold. Gold looks very attractive right now. First, in a climate of financial panic such as we have now, many investors view gold as a safe haven. And there is good reason for this present panic. Our biggest banks, Wall Street houses, and insurance companies are either failing or in serious distress. Second, gold looks to me like a buy, just on the strength of the chart pattern. A multi-year chart shows a clear long-term uptrend which remains well intact in spite of a significant pullback this year. Since peaking just above $1,000 per ounce in mid-March, gold has traded mostly lower. Now, after hitting a nadir around $740 just last week, the precious metal has started to rally again. As I right this, it's right around $877. + Near-Breakout yesterday: If we could ignore for a moment the July 21 close of $37.55, we could say that yesterday's heavy-volume rally in this stock was a breakout from a 9-week trading range to a 20-month high. Today, as I write this, it's up again, trading above even that July 21 mark. + Volume spike: Yesterday's volume was almost 4 times average. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +29%, +20%, +74%, and, most recently, for the quarter ended June 30, +51% to $21.7 million. + Strong and rising earnings-per-share estimates for next year: According to recent data from First Call, the consensus earnings estimate for FY 09 (ends June 30) is $1.11, revised downward from $1.11 90 days ago (but up from FY 08 actual earnings of 68c); and the consensus estimate for FY 10 is $1.22, revised upward from $1.04 90 days ago. + The company's industry group ("Metal Ores - Gold/Silver") is ranked #185 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has just recently been on the rise. + 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: - Negative recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 07 vs Sep 06: 20c vs 21c Dec 07 vs Dec 06: 20c vs 24c Mar 08 vs Mar 07: 12c vs 14c Jun 08 vs Jun 07: 16c vs 20c - If today turns out to be an up day in this stock, it will be the 7th up day in a row, suggesting the stock is short-term over-bought. - History of earnings surprises: This company has reported earnings-per-share shy of estimates in each of the past four quarters. - Valuation: At 31 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 5%, the stock looks over-valued. (On the other hand, I think the price of gold will dictate the direction of this stock's price.) -KD, Thursday, September 18, 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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