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Please read carefully our disclaimers at the end of this newsletter. Market Stance: BEARISH (since August 11, 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 Nanometrics Inc. (NANO)
* Buy prices shown are net after commissions and fees. Today, Thursday, August 12, 2010, I bought NANO, for both client and my personal accounts. Nanometrics Inc. provides high-performance process control metrology systems used primarily in the fabrication of semiconductors, high-brightness LEDs, data storage devices, and solar photovoltaics. Here's why I bought this stock: + This and RADS are two of my best recent stock picks, and they are holding up surprisingly well in the face of a newly bearish market. Their chart patterns remain very bullish. I am viewing recent very mild weakness as a buying opportunity. Note also that our portfolio remains decidedly bearish, with a high level of cash. Even after these buys, we are exposed to less risk than the market, as is appropriate under bearish market conditions. + Huge earnings surprise: One week ago, Thursday, August 5, after the close, the company announced results for the quarter ended June 30. Earnings came in at 51c per diluted share (vs a loss of (38c) last year and analysts' consensus 27c). Revenue was up 250% to $50.8 million (analysts' consensus $39.3 million). + Market reaction: On Friday, August 7, the stock soared +25% on huge volume, more than 7 times average. + Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +12%, +29%, +269%, and, most recently, for the quarter ended June 30, +250% to $50.8 million. + Dramatic recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Sep 09 vs Sep 08: 8c vs (24c) Dec 09 vs Dec 08: (1c) vs (14c) Mar 10 vs Mar 09: 26c vs (58c) Jun 10 vs Jun 09: 51c vs (38c) + Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2010 is $1.91, revised upward from $1.11 90 days ago (and up from 2009 loss of (87c)); and the consensus estimate for 2011 is $1.80, revised upward from $1.37 90 days ago. + Valuation: At 7 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 20%, the stock is still, even after recent gains, very attractively priced. + History of earnings surprises: This company has reported earnings-per-share at least 14c above estimates in three of the past four quarters, including the just-reported quarter cited above, which "beat the Street" by 24c. + 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: - Next year's earnings-per-share estimate is less than this year's. - The company's industry group ("Elec - Semiconductor Equip") is ranked #100 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, Thursday, August 12, 2010 Bought Radiant Systems Inc. (RADS)
* Buy prices shown are net after commissions and fees. Today, Thursday, August 12, 2010, I bought RADS, for both client and my personal accounts. Radiant Systems, Inc. provides point-of-sale, self-service, and back-office management systems for the hospitality and retail industries. Here's why I bought this stock: + This and NANO are two of my best recent stock picks, and they are holding up surprisingly well in TER face of a newly bearish market. Their chart patterns remain very bullish. Note also that our portfolio remains decidedly bearish, with a high level of cash. Even after these buys, we are exposed to less risk than the market, as is appropriate under bearish market conditions. + See also my buy article from last Friday: http://www.deencapital.com/newslett/2010/100806.171.html#2 -KD, Thursday, August 12, 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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