Please read carefully our disclaimers at the end of this newsletter.
Market Stance: BULLISH (since December 1, 2010)
* 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, Tuesday, January 11, 2011, I bought ININ, for both client and my personal accounts.
Interactive Intelligence, Inc. develops contact center communications software and mission critical VoIP applications for large organizations.
Here's why I bought this stock:
+ News: Yesterday evening, the company announced preliminary results for the fourth quarter of 2010. The expect to report revenue between $49.0 million and $51.0 million (vs. consensus estimate $43.9 million), and non-GAAP earnings of 48c to 52c per diluted share (vs. consensus estimate 31c).
+ Breakout: The stock is up sharply on extremely heavy volume. If this move holds, it will be a breakout from a 3-year trading range to a new 10-year high.
+ Volume spike, mostly on the buy side: As I write this, roughly midway through the trading day, volume is already almost 4 times the full-day average.
+ Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +10%, +57%, +91%, and, now, for the December quarter, we're looking at a huge gain in excess of +500%.
+ Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Dec 09 vs Dec 08: 27c vs 18c Mar 10 vs Mar 09: 22c vs 16c Jun 10 vs Jun 09: 26c vs 24c Sep 10 vs Sep 09: 37c vs 31c
+ Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2010 is $1.16, revised upward from $0.97 90 days ago (and up from 2009 actual earnings of $0.99); and the consensus estimate for 2011 is $1.23, revised upward from $1.05 90 days ago.
+ The company's industry group ("Telecom - Infrastructure") is ranked #5 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been fairly stable 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:
- Valuation: At 30 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 16%, the stock may be a bit pricey. On the other hand, on the strength of last night's spectacular surprise, I am wondering if these earnings and growth estimates may be low.
-KD, Tuesday, January 11, 2011
* 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.
Your feedback is welcome. Send e-mail to firstname.lastname@example.org. 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.
The Deen's List
Copyright © 2011 Deen Capital Management, Inc.