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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since September 26, 2009) 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 American Superconductor (AMSC)
* Buy prices shown are net after commissions and fees. Today, Wednesday, September 30, 2009, I bought AMSC, first for client accounts, then for my personal accounts. American Superconductor Corp. provides megawatt-scale wind turbine designs and electrical control systems. They also offer a host of smart grid technologies, including superconductor power cable systems, grid-level surge protectors, and power electronics-based voltage stabilization systems for power grid operators. They operate through two segments: AMSC Power Systems and AMSC Superconductors. Here's why I bought this stock: + I am very close to returning to a bullish stance. We're having a fabulous week so far. + News: Yesterday, after the close, the company announced a $100 million contract with Sinovel for follow-on electrical components for 3 megawatt wind turbines. + A "true surprise"*: Prior to the news, the stock was trading near the low end of its 2-month range. Then, today, the stock up sharply 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). + Technical: Back on July 30, the stock broke out of a 3-month trading range to a new 10-month high on huge volume. Since then, the stock has been locked in a range defined by the intraday low and high of July 30. It's entirely possible that this news could provide the catalyst for the next breakout. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +87%, +27%, +60%, and, most recently, for the quarter ended June 30, +83% to $73.0 million. + The company has just recently become profitable. Here are the quarterly EPS figures for the last eight quarters:
Sep 08 vs Sep 07: (10c) vs (17c) Dec 08 vs Dec 07: (18c) vs (18c) Mar 09 vs Mar 08: 3c vs (4c) Jun 09 vs Jun 08: 12c vs (2c) + Strong and sharply rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 10 (ends March 31) is 46c, revised upward from 3c 90 days ago (and up from an FY 09 actual loss of (27c); and the consensus estimate for FY 11 is 91c, up from 46c 90 days ago. + History of earnings surprises: This company has reported earnings-per-share at least 2c above estimates in each of the past three quarters. Most recently, for the quarter ended June 30, they "beat the Street" by 12c. + 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: - Valuation: At 37 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 20%, the stock appears pricey by my usual metric. However, this is often the case for strong stocks which have, like this one, just recently turned profitable. - The company's industry group ("Electrical Equipment") is ranked #57 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, Wednesday, September 30, 2009 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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