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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 Ancestry.com Inc. (ACOM)
* Buy prices shown are net after commissions and fees. Today, Friday, July 30, 2010, I bought ACOM, for both client and my personal accounts. Ancestry.com Inc. operates as an online resource for family history for subscribers worldwide. Its subscribers use the proprietary online platform, digital historical record collection, and technology to research their family histories, build their family trees, collaborate with other subscribers, upload their own records, and publish and share their stories with their families. Here's why I bought this stock: + News: Yesterday, after the close, the company announced results for the quarter ended June 30. Earnings came in at 18c per diluted share (vs 12c last year and analysts' consensus 15c). Revenue was up 36% to $74.5 million (analysts' consensus $70.3 million). + Market reaction: The stock is up sharply today on heavy volume. + Near Breakout: If you ignore May 3, when the stock closed at $20.20, today's move could be said to be a breakout from a 16-week trading range to a new all-time high. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +14%, +15%, +21%, and, most recently, for the quarter ended June 30, +36% to $74.5 million. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 09 vs Sep 08: 9c vs 5c Dec 09 vs Dec 08: 21c vs (3c) Mar 10 vs Mar 09: 8c vs 8c Jun 10 vs Jun 09: 18c vs 12c + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2010 is 83c, revised upward from 74c 90 days ago (and up from 2009 actual earnings of 50c); and the consensus estimate for 2011 is 83c, revised upward from 74c 90 days ago. + Valuation: At 24 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 20%, the stock is still, even after today's big gain, moderately priced. + History of earnings surprises: This company has reported earnings-per-share at least a penny above estimates in each of the past three quarters, including the just-reported quarter cited above, which "beat the Street" by 3c. + 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 factors: - The earnings news yesterday was not exactly a "true surprise": For five weeks prior to the news, the stock price had been edging higher. - The company's industry group ("Internet Content") is ranked #171 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, July 30, 2010 Bought Skyworks Solutions (SWKS)
* Buy prices shown are net after commissions and fees. Today, Friday, July 30, 2010, I bought SWKS, for both client and my personal accounts. Skyworks Solutions, Inc., together with its subsidiaries, offers analog and mixed signal semiconductors worldwide. This stock is a component of the IBD 100 Index. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: One week ago, Thursday, July 22, the company announced results for the quarter ended June 30. Earnings came in at 32c per diluted share (vs 16c last year and analysts' consensus 30c). Revenue was up 44% to $275.4 million (analysts' consensus $269.4 million). + A "true surprise"*: For five weeks prior to the news, the stock was trading in a sideways pattern. Then, Friday, July 23, one week ago today, the stock jumped 4% on moderately 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: Last week, the stock broke out of a 12-week trading range to a new 8-year high. + Since the breakout, the stock has given back all of its post-news gain and then some. I am viewing this weakness as a buying opportunity. + Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -2%, +17%, +38%, and, most recently, as cited above, +44%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 09 vs Sep 08: 24c vs 21c Dec 09 vs Dec 08: 27c vs 17c Mar 10 vs Mar 09: 24c vs 12c Jun 10 vs Jun 09: 32c vs 16c + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for FY 10 (ends Sep 30) is $1.19, revised upward from $1.04 90 days ago (and up from FY 09 actual earnings of $0.69); and the consensus estimate for FY 11 is $1.44 revised upward from $1.23 90 days ago. + Valuation: At 12 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 15%, the stock is attractively priced. + History of earnings surprises: This company has reported earnings-per-share at least a penny above estimates in each of the past 12 quarters, including the just-reported quarter cited above, which "beat the Street" by 2c. + The company's industry group ("Elec - Semiconductor Mfg") is ranked #20 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, Friday, July 30, 2010 Sold S&P Depositary Receipt (SPY) +1.0%
* 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, Friday, July 30, 2010, I sold SPY, for both client and my personal accounts. I sold just enough SPY to pay for ACOM and SWKS. We remain fully invested. -KD, Friday, July 30, 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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