The Deen's ListTM
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Our goal: Outperform the S&P 500 in both up markets and down.
Our result: +29.9% for the 60 months ending July 22, 2016 (vs. +78.8% for the S&P)
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Vol.14 #157 Monday, July 25, 2016 11:17AM EDT

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Market Stance: BULLISH (since July 1, 2016)


Typical Client Performance
Bought Silicom Ltd. (SILC)
Sold SPDR S&P 500 ETF (SPY) +3.6%
Typical Client Portfolio
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Typical Client Performance

Deen Capital S&P 500
Year-to-date as of July 22, 2016 +1.2% * +7.6%
12 months (Jul 22, 2015 to Jul 22, 2016) -5.5% * +5.0%
24 months (Jul 22, 2014 to Jul 22, 2016) +2.1% * +14.1%
36 months (Jul 22, 2013 to Jul 22, 2016) +11.9% * +36.0%
48 months (Jul 22, 2012 to Jul 22, 2016) +31.1% * +72.8%
60 months (Jul 22, 2011 to Jul 22, 2016) +29.6% * +78.8%

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

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Bought Silicom Ltd. (SILC)

Initial percent of portfolio (approx.)9.2%
Net buy price in managed accounts*$35.17
Most recent close (Jul 22)$31.30
Net change (based on net buy price)+3.87
Today's volume as of 11:18am EDT257,953 ($9.1 million)
Average daily volume43,900 ($1.5 million)
This year's earnings-per-share$1.88 (est)
Next year's earnings-per-share$2.22 (est)
P/E using next year's earnings15.8 (est)
Earnings growth rate, next 5 years15% per year (est)
Corporate HeadquartersKfar Sava, Israel

* Buy prices shown are net after commissions and fees.

Today, Monday, July 25, 2016, I bought SILC, for both client and my personal accounts.

Silicom Ltd. is an Israeli manufacturer of server networking adapter cards and network-based communication devices.

Here's why I bought this stock:

+ Huge earnings surprise: This morning, before the open, the company announced results for the quarter ended June 30. Earnings came in at 63c per diluted share (vs 40c last year and analysts' consensus 48c). Revenue was up 52% to $26.0 million (analysts' consensus $22.0 million).

+ Breakout: The stock is up sharply on extremely heavy volume this morning, and is breaking out of a 9-month range to a new 12-month high.

+ Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +22%, +20%, +14%, and, most recently, as cited above, +52%.

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

Jun 15 vs Jun 14: 57c vs 41c
Sep 15 vs Sep 14: 86c vs 74c
Dec 15 vs Dec 14: 41c vs 52c
Mar 16 vs Mar 15: 63c vs 40c

+ Valuation: At 16 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 15%, the stock may still be, even after this morning's price jump, attractively priced.

+ History of earnings surprises: This company has reported earnings-per-share at least 13c above estimates in three of the past four quarters, including the just-reported quarter cited above, which "beat the Street" by 15c.

+ 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:

- Falling earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2016 is $1.88, revised down from $2.17 90 days ago (and down from 2015 actual earnings of $2.35); and the consensus estimate for 2017 is $2.22, unchanged from 90 days ago.

- The company's industry group ("Computer Networking") is ranked #132 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally falling slightly over recent weeks and months.

-KD, Monday, July 25, 2016

Sold SPDR S&P 500 ETF (SPY) +3.6%

Net sell price in managed accounts*$216.16
Date(s) boughtJul 6 2016
Net buy price in managed accounts*$208.67
Holding period2.7 weeks
Gain/loss in managed accounts*+3.6% (after commissions)

* Buy and sell prices shown are net after commissions and fees. This means that the gain/loss shown is also net after transaction expenses.

Today, Monday, July 25, 2016, I sold SPY, for both client and my personal accounts.

I sold just enough SPY to pay for SILC. We remain fully invested.

-KD, Monday, July 25, 2016

Typical Client Portfolio

Company Name Stock
% of
Silicom Ltd. SILC 07/25/16 $35.17 $35.27 0.0 9.2% +0.3%
NetEase, Inc. NTES 07/12/16 $197.11 $197.95 1.9 5.0% +0.4%
SPDR S&P 500 ETF SPY 07/06/16 $208.67 $216.25 2.7 61.8% +3.6%
Regal Entertainment RGC 07/01/16 $22.06 $23.82 3.4 9.5% +8.0%
BioTelemetry Inc. BEAT 07/01/16 $16.44 $17.34 3.4 9.3% +5.5%
MeetMe Inc. MEET 06/29/16 $5.47 $6.54 3.7 5.1% +19.5%
Cash 0.1%  
Total 100%  

* Buy prices shown are net after commissions.

** Current prices are at least 20 minutes old.

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Past performance is not necessarily indicative of future results.

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