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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.
* Buy prices shown are net after commissions and fees. Today, Wednesday, August 4, 2010, I bought HLF, for both client and my personal accounts. Herbalife Ltd., a network marketing company, sells weight management, nutritional supplement, energy, sports and fitness, and personal care products worldwide. The company was founded in 1980 and is based in Grand Cayman, Cayman Islands. This stock is a component of the IBD 100 and IBD New America Indexes. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + News: Monday, August 2, after the close, the company announced results for the quarter ended June 30. Earnings came in at $1.32 per diluted share (vs 78c last year and analysts' consensus 93c). Revenue was up 20% to $688.8 million (analysts' consensus $644.7 million). + A "true surprise"*: For a week prior to the news, the stock was edging lower every day. Then, yesterday, as the market digested the news, it 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: The price movement yesterday was a breakout from a 3-month trading range to a new all-time high. + Volume spike: Yesterday's volume, mostly on the buy side, was more than 6 times average, and set a 12-month record. + Mostly excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: 0%, +23%, +19%, and, most recently, as cited above, +20%. + Mostly excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 09 vs Sep 08: $0.85 vs $0.89 Dec 09 vs Dec 08: $0.98 vs $0.69 Mar 10 vs Mar 09: $0.98 vs $0.68 Jun 10 vs Jun 09: $1.32 vs $0.78 + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2010 is $3.90, revised upward from $3.81 90 days ago (and up from 2009 actual earnings of $3.28); and the consensus estimate for 2011 is $4.37, revised upward from $4.31 90 days ago. + Valuation: At 12.5 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 13.5%, the stock is still, even after yesterday's big gain, attractively priced. + History of earnings surprises: This company has reported earnings-per-share at least 6c above estimates in each of the past six quarters, including the just-reported quarter cited above, which "beat the Street" by 39c. + 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 ("Cosmetics / Personal Care") is ranked #72 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been volatile over recent weeks and months -- most recently falling. -KD, Wednesday, August 4, 2010 Sold S&P Depositary Receipt (SPY) +3.0%
* 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, Wednesday, August 4, 2010, I sold SPY, for both client and my personal accounts. I sold off just enough SPY to buy two stocks -- HLF and the next (to be determined) stock. -KD, Wednesday, August 4, 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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