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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since November 16, 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, Tuesday, November 17, 2009, I bought CAAS, for both client and my personal accounts. China Automotive Systems, Inc. manufactures and sells automotive systems and components for the Chinese automobile industry. This stock is a component of the IBD 100 Index. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + Blowout earnings news: Last Thursday, Nov 12, before the open, the company announced results for the quarter ended Sep 30. Earnings came in at 28c per diluted share (vs 9c last year and analysts' consensus 15c). Revenue was up 75% to $64.7 million (analysts' consensus $53.3 million). + Breakout: The stock was up sharply (+11%) that day, Nov 12, on extremely heavy volume. That move was a breakout from a 5-year trading range to a new all-time high. + Volume spike: Thursday's volume was more than 8x average, and a 12-month record. + We are buying today at a price well within last Thursday's price range. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +2%, +8%, +34%, and, most recently, as cited above, +75%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Dec 08 vs Dec 07: 2c vs 9c Mar 09 vs Mar 08: 8c vs 18c Jun 09 vs Jun 08: 21c vs 18c Sep 09 vs Sep 08: 28c vs 9c + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2009 is 54c, revised upward from 53c 90 days ago (and up from 2008 actual earnings of 46c); and the consensus estimate for 2010 is 70c, revised upward from 62c 90 days ago. + Valuation: At 24 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 37%, the stock is still, even after Thursday's big gain, very attractively priced. + Earnings surprises: For the quarter ended June 30, the company "beat the Street" by 9c. Now, for the quarter ended September 30, they beat by 13c. + The company's industry group ("Auto/Truck - Original Equipment") is ranked #7 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally rising 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: - Not a "true surprise"*: For two weeks prior to the news, the stock price was clearly rising. * "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). -KD, Tuesday, November 17, 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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