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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 Priceline.com Inc. (PCLN)
* Buy prices shown are net after commissions and fees. Today, Wednesday, August 4, 2010, I bought PCLN, for both client and my personal accounts. Priceline.com Inc. is an online travel company. They provide various travel services, including airline tickets, hotel rooms, car rentals, vacation packages, cruises, and reservation services. In the U.S., they offer a Name Your Own Price service. They offer products and services under the priceline.com, Booking.com, Active Hotels, Agoda, Lowestfare.com, Rentalcars.com, Breezenet.com, MyTravelGuide.com, and Travelweb brands. This stock is a component of the IBD 100 and the S&P 500 Indices. ("IBD" = "Investor's Business Daily") Here's why I bought this stock: + Earnings surprise: Yesterday, after the close, the company announced results for the quarter ended June 30. Earnings came in at $3.09 per diluted share (vs $2.02 last year and analysts' consensus $2.65). Revenue was up 27% to $767.4 million (analysts' consensus $733.0 million). + A "true surprise"*: For almost two weeks prior to the news, the stock was trading in a tight sideways pattern. Then, this morning, the stock is soaring more than +20% 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: This morning's price movement, if it holds at the close, will be a breakout from a 3-month trading range to a new all-time high. + Volume spike, mostly on the buy side: As I write this, a little over 2 hours after the opening bell, volume is approaching 3x the daily average. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +30%, +33%, +26%, and, most recently, as cited above, +27%. + Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 09 vs Sep 08: $3.45 vs $2.39 Dec 09 vs Dec 08: $1.99 vs $1.29 Mar 10 vs Mar 09: $1.70 vs $1.09 Jun 10 vs Jun 09: $3.09 vs $2.02 + Valuation: At 22 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 19%, the stock is still, even after this morning's big gain, moderately priced. + History of earnings surprises: This company has reported earnings-per-share at least 4c above estimates in each of the past 17 quarters, including the just-reported quarter cited above, which "beat the Street" by 44c. + The company's industry group ("Leisure - Travel Booking") 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 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: - Strong but falling earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2010 is $10.89, revised downward from $11.21 90 days ago (but up from 2009 actual earnings of $8.52); and the consensus estimate for 2011 is $13.02, revised downward from $13.54 90 days ago. -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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