The Deen's ListTM
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Our goal: Outperform the S&P 500 in both up markets and down.
Our result: +61.0% for the 60 months ending January 6, 2011 (vs. +9.7% for the S&P)
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Vol.9 #4 Friday, January 7, 2011 3:43PM EST

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Market Stance: BULLISH (since December 1, 2010)


Typical Client Performance
Bought Alliance Fiber Optic (AFOP)
Typical Client Portfolio
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Typical Client Performance

Deen Capital S&P 500
Year-to-date as of January 6, 2011 +1.3% * +1.4%
12 months (Jan 6, 2010 to Jan 6, 2011) +10.1% * +14.1%
24 months (Jan 6, 2009 to Jan 6, 2011) +41.3% * +42.3%
36 months (Jan 6, 2008 to Jan 6, 2011) +8.5% * -3.5%
48 months (Jan 6, 2007 to Jan 6, 2011) +35.4% * -1.6%
60 months (Jan 6, 2006 to Jan 6, 2011) +61.0% * +9.7%

* An average of managed accounts, net after all commissions and fees.

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Bought Alliance Fiber Optic (AFOP)

Initial percent of portfolio (approx.)6.0%
Net buy price in managed accounts*$17.40
Most recent close (Jan 06)$16.91
Net change (based on net buy price)+0.49
Today's volume as of 3:41pm EST246,704 ($4.3 million)
Average daily volume109,200 ($1.9 million)
This year's earnings-per-share$0.72 (est)
Next year's earnings-per-share$0.87 (est)
P/E using next year's earnings20.0 (est)
Earnings growth rate, next 5 years25% per year (est)
Corporate HeadquartersSunnyvale, CA

* Buy prices shown are net after commissions and fees.

Today, Friday, January 7, 2011, I bought AFOP, for both client and my personal accounts.

Alliance Fiber Optic Products, Inc. makes connectors, adapters, multiplexers, splitters and couplers for telecom equipment and service providers.

Here's why I bought this stock:

+ Recent breakout: One week ago, Dec 31, this stock jumped 14% on very heavy volume. This was a breakout from a 7-year trading range to a new 9-year high.

+ End of dip? The stock was up big both Friday and Monday, then pulled back the rest of this week. The stock is up today on an uptick in volume, and I suspect this could be the end of a minor 4-day profit-taking dip.

+ Dramatic rise in average trading volume: Over the past month, average trading volume has risen fourfold. Most of the new volume has been on the buy side.

+ Three quarters of excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -8%, +10%, +57%, and, most recently, for the quarter ended Sep 30, +91% to $13.3 million.

+ Two quarters of excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:

Dec 09 vs Dec 08:  5c vs 10c
Mar 10 vs Mar 09:  5c vs  5c
Jun 10 vs Jun 09: 18c vs  5c
Sep 10 vs Sep 09: 23c vs  3c

+ Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2010 is 72c, revised upward from 60c 90 days ago (and up from 2009 actual earnings of 17c); and the consensus estimate for 2011 is 87c, revised upward from 75c 90 days ago.

+ Valuation: At 20 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 25%, the stock is still, even after recent gains, attractively priced.

+ History of earnings surprises: This company has reported earnings-per-share at least 5c above estimates in each of the past three quarters. Most recently, for the quarter ended Sep 30, they "beat the Street" by 9c.

+ The company's industry group ("Telecom - Fiber Optics") is ranked #23 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, January 7, 2011

Typical Client Portfolio

Company Name Stock
% of
Alliance Fiber Optic AFOP 01/07/11 $17.40 $17.45 0.0 6.1% +0.3%
Ameresco, Inc. AMRC 12/29/10 $13.65 $15.81 1.3 6.7% +15.8%
Jabil Circuit Inc. JBL 12/21/10 $19.48 $21.09 2.4 4.9% +8.2%
Dice Holdings, Inc. DHX 12/13/10 $13.34 $14.05 3.6 5.0% +5.3%
ASML Holding NV ASML 12/09/10 $37.52 $36.36 4.1 5.7% -3.1%
Korn/Ferry International KFY 12/08/10 $19.60 $22.30 4.3 5.2% +13.7%
TTM Technologies, Inc. TTMI 12/06/10 $14.13 $14.02 4.6 5.8% -0.8%
S&P Depositary Receipt SPY 12/01/10 $120.47 $127.15 5.3 43.3% +5.6%
Buckeye Tech Inc. BKI 11/24/10 $20.13 $22.76 6.3 6.4% +13.1%
DDi Corp. DDIC 11/22/10 $10.84 $11.85 6.6 6.2% +9.4%
Cash 5.0%  
Total 100%  

* Buy prices shown are net after commissions.

** Current prices are at least 20 minutes old.

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