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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since November 6, 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 Fuel Systems Solutions Inc. (FSYS)
* Buy prices shown are net after commissions and fees. Today, Friday, November 7, 2008, I bought FSYS, first for client accounts, then for my personal accounts. Fuel Systems Solutions Inc. provides advanced alternative fuel systems technology and components for internal combustion engines. Their products enable these engines to function using environmentally friendly gaseous fuels such as propane, natural gas, and biogas. This stock is a component of the IBD New America Index. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + Spectacular earnings surprise: Yesterday, after the close, the company announced results for the quarter ended Sep 30. Earnings came in at 73c per diluted share (vs 16c last year and analysts' consensus 26c). Revenue was up 62% to $105.5 million (analysts' consensus $105.5 million). + A "true surprise"*: Prior to the news, the stock was trading near a 5-month low. Then, today, the stock is soaring 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). + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +53%, +73%, +50%, and, most recently, as cited above, +62%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Dec 07 vs Dec 06: 31c vs (8c) Mar 08 vs Mar 07: 40c vs 7c Jun 08 vs Jun 07: 54c vs 3c Sep 08 vs Sep 07: 73c vs 16c + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2008 is $1.50, revised upward from $1.01 90 days ago (and up from 2007 actual earnings of 56c); and the consensus estimate for 2009 is $1.82, revised upward from $1.26 90 days ago. + Valuation: At 21 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 25%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings-per-share at least 14c above estimates in each of the past four quarters, including the just-reported quarter cited above, which "beat the Street" by 47c. + 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 #159 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, November 7, 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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