The Deen's ListTM
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Our goal: Outperform the S&P 500 in both up markets and down.
Our result: +57.9% for the 60 months ending January 10, 2011 (vs. +9.0% for the S&P)
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Vol.9 #8 Tuesday, January 11, 2011 11:56AM EST

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Market Stance: BULLISH (since December 1, 2010)


Typical Client Performance
Bought Interactive Intelligence (ININ)
Typical Client Portfolio
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Typical Client Performance

Deen Capital S&P 500
Year-to-date as of January 10, 2011 +0.8% * +1.0%
12 months (Jan 10, 2010 to Jan 10, 2011) +8.1% * +13.0%
24 months (Jan 10, 2009 to Jan 10, 2011) +48.6% * +48.8%
36 months (Jan 10, 2008 to Jan 10, 2011) +7.9% * -4.4%
48 months (Jan 10, 2007 to Jan 10, 2011) +33.8% * -2.4%
60 months (Jan 10, 2006 to Jan 10, 2011) +57.9% * +9.0%

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

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Bought Interactive Intelligence (ININ)

Initial percent of portfolio (approx.)6.0%
Net buy price in managed accounts*$36.56
Most recent close (Jan 10)$29.41
Net change (based on net buy price)+7.15
Today's volume as of 12:59pm EST439,107 ($16.1 million)
Average daily volume111,900 ($4.1 million)
This year's earnings-per-share$1.16 (est)
Next year's earnings-per-share$1.23 (est)
P/E using next year's earnings29.7 (est)
Earnings growth rate, next 5 years16% per year (est)
Corporate HeadquartersIndianapolis, IN

* 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

Typical Client Portfolio

Company Name Stock
% of
Interactive Intelligence ININ 01/11/11 $36.56 $36.78 0.0 5.0% +0.6%
Molex Inc. Cl A MOLXA 01/10/11 $20.09 $20.16 0.1 4.9% +0.3%
Alliance Fiber Optic AFOP 01/07/11 $17.40 $18.69 0.6 6.5% +7.4%
Ameresco, Inc. AMRC 12/29/10 $13.65 $15.68 1.9 6.6% +14.8%
Jabil Circuit Inc. JBL 12/21/10 $19.48 $21.03 3.0 4.8% +7.9%
Dice Holdings, Inc. DHX 12/13/10 $13.34 $14.54 4.1 5.2% +9.0%
Korn/Ferry International KFY 12/08/10 $19.60 $23.14 4.9 5.3% +18.0%
TTM Technologies, Inc. TTMI 12/06/10 $14.13 $14.26 5.1 5.8% +0.9%
S&P Depositary Receipt SPY 12/01/10 $120.47 $127.72 5.9 43.2% +6.0%
Buckeye Tech Inc. BKI 11/24/10 $20.13 $21.99 6.9 6.2% +9.2%
DDi Corp. DDIC 11/22/10 $10.84 $11.73 7.1 6.1% +8.2%
Cash 0.6%  
Total 100%  

* Buy prices shown are net after commissions.

** Current prices are at least 20 minutes old.

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