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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 China Automotive Systems (CAAS)
* Buy prices shown are net after commissions and fees. Today, Friday, October 9, 2009, I bought CAAS, first for client accounts, then for my personal accounts. China Automotive Systems, Inc., through its interests in Sino-foreign joint ventures, engages in the manufacture and sale of automotive systems and components for the automobile industry in China. The company offers automotive parts, power steering gears, automotive steering gears, steering pumps, sensor modular, and electric power steering. It also offers integral power steering gear and pinion power steering gear for light and heavy-duty vehicles and cars. Here's why I bought this stock: + Breakout: Today, the stock is breaking out of an 8-week trading range to a new 32-month high on extremely heavy volume. + Volume spike: As I write this, about an hour before the close, volume is more than 6 times average, and is setting a 12-month record. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +18%, +2%, +8%, and, most recently, for the quarter ended June 30, +34% to $62.5 million. + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2009 is 53c, revised upward from 42c 90 days ago (and up from 2008 actual earnings of 46c); and the consensus estimate for 2010 is 62c, revised upward from 52c 90 days ago. + Valuation: At 17 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 37.5%, the stock is still, even after today's big gain, very attractively priced. + For the quarter ended June 30, earnings came in 9c above the Street consensus. (This is not news, though.) + The company's industry group ("Auto/Truck - Original Equipment") is ranked #8 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. + 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: - Spotty recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 08 vs Sep 07: 9c vs 11c Dec 08 vs Dec 07: 2c vs 9c Mar 09 vs Mar 08: 8c vs 18c Jun 09 vs Jun 08: 21c vs 18c -KD, Friday, October 9, 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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