|
Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since October 23, 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.
* Buy prices shown are net after commissions and fees. Today, Monday, October 26, 2009, I bought NFLX, first for client accounts, then for my personal accounts. Netflix, Inc. provides online movie rental subscription services in the United States. Its members can get DVDs delivered to their homes and can also instantly watch movies and TV episodes streamed to their TVs and PCs. This stock is a component of the IBD 100 and S&P 400 Midcap Indexes. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: Last Thursday, Oct 22, after the close, the company announced results for the quarter ended Sep 30. Non-GAAP earnings came in at 55c per diluted share (vs 36c last year and analysts' consensus 46c). Revenue was up 24% to $423.1 million. + A "true surprise"*: For a week prior to the news, the stock was trading in a sideways pattern. Then, last Friday, Oct 23, the stock jumped 11% on very 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). + Breakout: Friday's move was a breakout from a six-month trading range to a new all-time high. + Volume spike: Friday's volume was more than 6 times average, and a 7-month record. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +19%, +21%, +21%, and, most recently, as cited above, +24%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 08 vs Sep 07: 41c vs 26c Dec 08 vs Dec 07: 40c vs 23c Mar 09 vs Mar 08: 58c vs 45c Jun 09 vs Jun 08: 55c vs 36c + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2009 is $1.88, revised upward from $1.72 90 days ago (and up from 2008 actual earnings of $1.44); and the consensus estimate for 2010 is $2.21, revised upward from $2.08 90 days ago. + Valuation: At 25 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 16%, the stock is still, even after Friday's big gain, moderately priced. + History of earnings surprises: This company has reported earnings-per-share at least 4c above estimates in each of the past four quarters, including the just-reported quarter cited above, which "beat the Street" by 9c. + 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 ("Retail - Leisure Products") is ranked #116 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, Monday, October 26, 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.
The Deen's List Copyright © 2009 Deen Capital Management, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||