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Our goal: Outperform the S&P 500 in both up markets and down.
Our result: +29.7% for the 60 months ending July 25, 2016 (vs. +79.3% for the S&P)
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Vol.14 #158 Tuesday, July 26, 2016 11:04AM EDT

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Market Stance: BULLISH (since July 1, 2016)


Typical Client Performance
Bought CryoLife Inc. (CRY)
Sold SPDR S&P 500 ETF (SPY) +3.5%
Typical Client Portfolio
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Typical Client Performance

Deen Capital S&P 500
Year-to-date as of July 25, 2016 +1.2% * +7.3%
12 months (Jul 25, 2015 to Jul 25, 2016) -1.6% * +6.4%
24 months (Jul 25, 2014 to Jul 25, 2016) +4.4% * +14.0%
36 months (Jul 25, 2013 to Jul 25, 2016) +13.3% * +36.1%
48 months (Jul 25, 2012 to Jul 25, 2016) +34.5% * +75.5%
60 months (Jul 25, 2011 to Jul 25, 2016) +30.8% * +79.3%

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

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Bought CryoLife Inc. (CRY)

Initial percent of portfolio (approx.)9.1%
Net buy price in managed accounts*$13.70
Most recent close (Jul 25)$12.02
Net change (based on net buy price)+1.68
Today's volume as of 11:19am EDT1.0 million ($14.3 million)
Average daily volume166,000 ($2.3 million)
This year's earnings-per-share$0.21 (est)
Next year's earnings-per-share$0.29 (est)
P/E using next year's earnings47.3 (est)
Earnings growth rate, next 5 years30% per year (est)
Corporate HeadquartersKennesaw, GA

* Buy prices shown are net after commissions and fees.

Today, Tuesday, July 26, 2016, I bought CRY, for both client and my personal accounts.

CryoLife, Inc. manufactures and distributes medical devices worldwide. It also processes and distributes implantable human tissues for use in cardiac and vascular surgeries.

Here's why I bought this stock:

+ Huge earnings surprise: Yesterday, July 25, after the close, the company announced results for the quarter ended June 30. Earnings came in at 13c per diluted share (vs 4c last year and analysts' consensus 2c). Revenue was up 33% to $47.1 million (analysts' consensus $44.2 million).

+ A "true surprise"*: For the eight prior trading sessions, the stock had been mostly edging lower. Now, this morning, it is soaring on extremely heavy volume.

* "True surprise" is my term to describe a company news item that ignites heavy buying and that was not preceded by a short-term run-up in the stock price (i.e. not preceded by rumor).

+ Breakout: The price movement this morning represents a breakout from a 3-month range to a new 7-year high.

+ Volume spike, mostly on the buy side: As I write this, less than two hours after the opening bell, volume is already more than 5 times the daily average, and is on track to set a 12-month record.

+ Accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: -1%, +7%, +27%, and, most recently, as cited above, +33%.

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

Jun 15 vs Jun 14: 10c vs 9c
Sep 15 vs Sep 14: 13c vs 6c
Dec 15 vs Dec 14: 10c vs 1c
Mar 16 vs Mar 15: 13c vs 4c

+ Rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2016 is 21c, revised upward from 12c 90 days ago (but down from 2015 actual earnings of 29c); and the consensus estimate for 2017 is 29c, revised upward from 26c 90 days ago.

+ History of earnings surprises: This company has reported earnings-per-share at least 4c above estimates in each of the past four quarters, including the just-reported quarter cited above, which "beat the Street" by 11c.

+ The company's industry group ("Medical Products") is ranked #36 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.

I chose to buy the stock in spite of the following negative factor:

- Valuation: At 47 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 30%, the stock is not cheap.

-KD, Tuesday, July 26, 2016

Sold SPDR S&P 500 ETF (SPY) +3.5%

Net sell price in managed accounts*$215.96
Date(s) boughtJul 6 2016
Net buy price in managed accounts*$208.67
Holding period2.9 weeks
Gain/loss in managed accounts*+3.5% (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, Tuesday, July 26, 2016, I sold SPY, for both client and my personal accounts.

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

-KD, Tuesday, July 26, 2016

Typical Client Portfolio

Company Name Stock
% of
CryoLife Inc. CRY 07/26/16 $13.70 $13.68 0.0 9.1% -0.2%
Silicom Ltd. SILC 07/25/16 $35.18 $35.40 0.1 9.1% +0.6%
NetEase, Inc. NTES 07/12/16 $197.11 $204.03 2.0 5.1% +3.5%
SPDR S&P 500 ETF SPY 07/06/16 $208.67 $216.06 2.9 52.3% +3.5%
Regal Entertainment RGC 07/01/16 $22.06 $23.60 3.6 9.4% +7.0%
BioTelemetry Inc. BEAT 07/01/16 $16.44 $18.70 3.6 9.9% +13.7%
MeetMe Inc. MEET 06/29/16 $5.47 $6.47 3.9 5.0% +18.2%
Cash 0.1%  
Total 100%  

* Buy prices shown are net after commissions.

** Current prices are at least 20 minutes old.

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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.

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