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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since December 1, 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 AsiaInfo Holdings Inc. (ASIA)
* Buy prices shown are net after commissions and fees. Today, Tuesday, December 8, 2009, I bought ASIA, for both client and my personal accounts. AsiaInfo Holdings, Inc. provides telecommunications software solutions, and information technology (IT) security products and services for telecommunications service providers and other major enterprises in China. This stock is a component of the IBD New America Index. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: On Sunday, the company announced that it will merge with Linkage Technologies International Holdings Ltd. The transaction is expected to be accretive to non-GAAP earnings per share in 2010. The new merged company will be known as AsiaInfo-Linkage, Inc. + A "true surprise"*: On Friday, prior to the news, the stock closed near the low end of its 3-week range. Then, yesterday (Monday), the stock shot up +22% on extremely 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). + Volume spike: Yesterday's volume was about 8 times average and set a 12-month record. + The stock is giving back some of yesterday's gain in early trade this morning. I view this dip as a buying opportunity. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +32%, +46%, +39%, and, most recently, for the quarter ended September 30, +42% to $63.5 million. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Dec 08 vs Dec 07: 22c vs 18c Mar 09 vs Mar 08: 16c vs 11c Jun 09 vs Jun 08: 25c vs 13c Sep 09 vs Sep 08: 28c vs 16c + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2009 is $1.00, revised upward from 90c 90 days ago (and up from 2008 actual earnings of 62c); and the consensus estimate for 2010 is $1.20, revised upward from $1.06 90 days ago. (These estimates pre-date the merger news.) + Valuation: At 25 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 27%, the stock is still, even after yesterday's big gain, attractively priced. + History of earnings surprises: This company has reported earnings-per-share at least 2c above estimates in each of the past five quarters. Most recently, for the quarter ended Sep 30, they "beat the Street" by 4c. + 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 ("Computer Software - Enterprise") is ranked #25 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. -KD, Tuesday, December 8, 2009 Sold S&P Depositary Receipt (SPY) -0.1%
* Buy and sell prices shown are net after commissions and fees. This means that the gain/loss shown is also net after transaction expenses. Today, Tuesday, December 8, 2009, I sold SPY, first for client accounts, then for my personal accounts. I am selling just enough SPY to pay for ASIA. We remain fully invested. -KD, Tuesday, December 8, 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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