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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BULLISH (since July 24, 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 Advanced Energy Industries (AEIS)
* Buy prices shown are net after commissions and fees. Today, Monday, July 26, 2010, I bought AEIS, for both client and my personal accounts. Advanced Energy Industries, Inc., together with its subsidiaries, designs, manufactures, sells, and supports industrial power conversion products that transform power into various usable forms. Here's why I bought this stock: + News: Last Thursday, before the open, the company announced results for the quarter ended June 30. Earnings came in at 31c per diluted share (vs a loss of (37c) last year and analysts' consensus 25c). Revenue was up 214% to $100.1 million (Street consensus $106.0 million). + A "true surprise"*: For several days prior to the news, the stock was trading in a tight sideways pattern. Then, last Thursday, after the news came out, it soared 23% 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). + Near breakout: Just one day, April 23, when the stock closed at $17.43, stands in the way of calling this a breakout from a 23-month trading range to a new 30-month high. + Volume spike, mostly on the buy side: Last Thursday's volume set a 12-month record. + Dramatic turnaround in recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -39%, -2%, +139%, and, most recently, as cited above, +214%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 09 vs Sep 08: (20c) vs 13c Dec 09 vs Dec 08: 4c vs (2c) Mar 10 vs Mar 09: 12c vs (30c) Jun 10 vs Jun 09: 31c vs (37c) + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2010 is 92c, revised upward from 78c 90 days ago (and up from 2009 loss of (84c)); and the consensus estimate for 2011 is $1.63, revised upward from $1.50 90 days ago. + Valuation: At 11 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 15%, the stock is still, even after recent gains, attractively priced. + History of earnings surprises: This company has reported earnings-per-share at least 6c above estimates in three of the past four quarters, including the just-reported quarter cited above, which "beat the Street" by 6c. + The company's industry group ("Elec - Semiconductor Equipment") is ranked #84 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: - As cited above, sales for the quarter ended June 30, though strong, came in shy of the Street consensus. -KD, Monday, July 26, 2010 Bought Informatica Corp. (INFA)
* Buy prices shown are net after commissions and fees. Today, Monday, July 26, 2010, I bought INFA, for both client and my personal accounts. Informatica Corp. provides enterprise data integration and data quality software and services in the United States and internationally. This stock is a component of the IBD 100 and the S&P 400 Midcap Index. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: Last Thursday, July 22, after the close, the company announced results for the quarter ended June 30. Earnings came in at 25c per diluted share (vs 19c last year and analysts' consensus 23c). Revenue was up 33% to $155.7 million (analysts' consensus $143.7 million). + A "true surprise"*: For more than a week prior to the news, the stock was trading in a tight sideways pattern. Then, on Friday, the stock soared 12% 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). + Breakout: Friday's price jump represents a breakout from a 4-month trading range to a new 9-year high. + Volume spike, mostly on the buy side: Friday's volume was almost 4x average. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +8%, +21%, +24%, and, most recently, as cited above, +33%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 09 vs Sep 08: 22c vs 19c Dec 09 vs Dec 08: 31c vs 24c Mar 10 vs Mar 09: 21c vs 18c Jun 10 vs Jun 09: 25c vs 19c + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2010 is $1.05, revised upward from $1.01 90 days ago (and up from 2009 actual earnings of 91c); and the consensus estimate for 2011 is $1.25, revised upward from $1.21 90 days ago. + Valuation: At 25 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 18%, the stock may not be exactly cheap, but it is at least priced within reason. + History of earnings surprises: This company has reported earnings-per-share at least a penny above estimates in each of the past four quarters, including the just-reported quarter cited above, which "beat the Street" by 2c. + 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 - Database") is ranked #96 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, Monday, July 26, 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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