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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since June 25, 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.
* Buy prices shown are net after commissions and fees. Today, Wednesday, July 14, 2010, I bought ADTN, for both client and my personal accounts. ADTRAN, Inc. designs, manufactures, markets, and services network access solutions that enable voice, data, video, and Internet communications across wireline and wireless networks worldwide. This stock is a component of the S&P 400 Midcap Index. Here's why I bought this stock: + I'm still bearish, but I am on the knife edge of turning bullish. + News: Yesterday, after the close, the company announced results for the quarter ended June 30. Earnings came in at 44c per diluted share (vs 32c last year and analysts' consensus 35c). Revenue was up 24% to $150.4 million (analysts' consensus $137.9 million). + Breakout: This morning, the stock is up sharply one extremely heavy volume. The price movement this morning represents a breakout from a 12-week trading range to a new four-and-a-half year high. + Volume spike, mostly on the buy side: Volume so far is already more than 3x average, not quite half-way through the trading session, and is on track to set a new 12 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: -7%, +11%, +15%, and, most recently, as cited above, +24%. + Mostly excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Jun 09 vs Jun 08: 36c vs 38c Sep 09 vs Sep 08: 32c vs 26c Dec 09 vs Dec 08: 31c vs 27c Mar 10 vs Mar 09: 47c vs 32c + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2010 is $1.38, revised upward from $1.36 90 days ago (and up from 2009 actual earnings of $1.27); and the consensus estimate for 2011 is $1.60, revised upward from $1.58 90 days ago. These numbers, good as they are, still have not factored in yesterday's news. Valuation: At 19 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 12%, the stock is still, even after this morning's big gain, may not be quite the bargain I usually seek, but is at least priced within reason. + History of earnings surprises: This company has reported earnings-per-share at least 2c above estimates in each of the past five quarters, including the just-reported quarter cited above, which "beat the Street" by 9c. + The company's industry group ("Telecom - Cable / Satellite Eqp") is ranked #32 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally rising over recent weeks and months. + The stock's 200-day moving average is rising, indicating a long-term uptrend. -KD, Wednesday, July 14, 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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