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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since November 24, 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, November 30, 2009, I bought HEAT, for both client and my personal accounts. SmartHeat, Inc. manufactures and sells plate heat exchangers (PHEs) and packages, thermometer testing devices, and heat usage calculators in China. Its PHE and PHE units reduce energy waste and enhance temperature and pressure controls and cooling equipment. Here's why I bought this stock: + Technical: This stock was up sharply on heavy volume for 4 days in a row Nov 16 - 19. That move was in response to a blowout earnings surprise, and was a breakout from an eight-plus week trading range to a new all-time high. Prior to the breakout, the 12.50 area was a resistance level. Now, it appears to be a support level. Last Tuesday, Wednesday, and Friday, the stock tested that 12.50 area and support held. This morning, the stock is up ... this could be the start of a renewed upward move. + Technical: Average volume has increased dramatically since that earnings surprise of mid-November, and most of this new volume has been on the buy side. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -57%, +102%, +125%, and, most recently, for the quarter ended Sep 30, +83%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Dec 08 vs Dec 07: 4c vs 9c Mar 09 vs Mar 08: 5c vs 3c Jun 09 vs Jun 08: 11c vs 3c Sep 09 vs Sep 08: 36c vs 18c + Valuation: At 18 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 30%, the stock is still, even after today's big gain, very attractively priced. + History of earnings surprises: This company has reported earnings-per-share at least 3c above estimates in each of the past four quarters. Most recently, for the quarter ended Sep 30, they "beat the Street" by 8c. + The company's industry group ("Pollution Control Equipment") is ranked #16 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 factors: - Strong but falling earnings-per-share estimates for next year: According to recent data from First Call, the consensus earnings estimate for 2009 is 63c, revised downward from 62c 90 days ago (but up from 2008 actual earnings of 29c); and the consensus estimate for 2010 is 74c, revised downward from 87c 90 days ago. -KD, Monday, November 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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