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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. Bought Cytec Industries Inc. (CYT)
* Buy prices shown are net after commissions and fees. Today, Wednesday, July 21, 2010, I bought CYT, for both client and my personal accounts. Cytec Industries Inc. develops, manufactures, and sells chemical products worldwide. Their products include specialty chemicals, additives, coating resins, advanced composites and film adhesives. This stock is a component of the IBD New America Index and the S&P 400 Midcap Index. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: Yesterday, July 20, after the close, the company announced results for the quarter ended June 30. Earnings came in at $1.24 per diluted share (vs a loss of (1c) last year and analysts' consensus 67c). Revenue was up 28% to $873.9 million. + A "true surprise"*: For five weeks prior to the news, the stock has been generally weak. Then, this morning, it is soaring 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). + Possible breakout: As I write this, the stock is within pennies of breaking out of a three-month trading range to a new 20-month high. + Volume spike, mostly on the buy side: As I write this, not quite half way through the regular trading session, volume is already some 5 times average, and has already set a 9-month record. + Generally excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -23%, +8%, +29%, and, most recently, as cited above, +28%. + Generally excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Jun 09 vs Jun 08: $0.57 vs $1.06 Sep 09 vs Sep 08: $0.70 vs $0.10 Dec 09 vs Dec 08: $0.66 vs $0.06 Mar 10 vs Mar 09: $1.24 vs ($0.01) + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2010 is $2.52, revised upward from $2.31 90 days ago (and up from 2009 actual earnings of $1.32); and the consensus estimate for 2011 is $3.06, revised upward from $2.89 90 days ago. + History of earnings surprises: This company has reported earnings-per-share at least 13c above estimates in each of the past five quarters, including the just-reported quarter cited above, which "beat the Street" by 57c. + The company's industry group ("Chemicals - Specialty") 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. I chose to buy the stock in spite of the following negative factor: - Valuation: At 16 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 4%, the stock is very pricey by my usual PEG (price-to-earnings/growth) metric. -KD, Wednesday, July 21, 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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