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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since April 27, 2010) Contents
Typical Client 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 SMART Modular Technologies (SMOD)
* Buy prices shown are net after commissions and fees. Today, Friday, June 18, 2010, I bought SMOD, for both client and my personal accounts. SMART Modular Technologies designs, manufactures, and supplies value added subsystems to original equipment manufacturers worldwide. Its subsystem products include memory modules; solid state drives (SSD); and embedded computing and thin film transistor-liquid crystal display (TFT-LCD) products. Here's why I bought this stock: + Earnings surprise news: Yesterday, after the close, the company announced results for the quarter ended May 31. Earnings came in at 26c per diluted share (vs 1c last year and analysts' consensus 18c). Revenue was up 120% to $201.2 million (analysts' consensus $180.0 million). + Market reaction: The stock is up about 4% this morning on very heavy volume. We're still in the first two hours of the trading day, and volume is already more than 3 times the daily average. + Dramatic turnaround in recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -38%, -13%, +47%, and, most recently, as cited above, +120%. + Dramatic turnaround in recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Jun 09 vs Jun 08: 5c vs 5c Sep 09 vs Sep 08: 8c vs 5c Dec 09 vs Dec 08: 23c vs 6c Mar 10 vs Mar 09: 26c vs 1c + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 10 (ends Aug 31) is 64c, revised upward from 38c 90 days ago (and up from FY 09 actual earnings of 17c); and the consensus estimate for FY 11 is 81c, revised upward from 55c 90 days ago. + Valuation: At 8 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 17%, the stock is very attractively priced. + History of earnings surprises: This company has reported earnings-per-share at least a penny above estimates in each of the past six quarters, including the just-reported quarter cited above, which "beat the Street" by 8c. + 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 ("Electronics - Semiconductor Mfg") is ranked #58 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, Friday, June 18, 2010
* Buy prices shown are net after commissions. ** 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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