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Our goal: Outperform the S&P 500 in both up markets and down.
Our result: +70.2% for the 60 months ending March 13, 2018 (vs. +96.0% for the S&P)
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Vol.16 #49 Wednesday, March 14, 2018 10:13AM EDT

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Market Stance: BULLISH (since March 5, 2018)


Typical Client Performance
Bought Baozun Inc. (BZUN)
Sold SPDR S&P 500 ETF (SPY) +3.9%
Typical Client Portfolio
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Typical Client Performance

Deen Capital S&P 500
Year-to-date as of March 13, 2018 +5.7% * +3.8%
12 months (Mar 13, 2017 to Mar 13, 2018) +18.0% * +18.6%
24 months (Mar 13, 2016 to Mar 13, 2018) +51.7% * +42.1%
36 months (Mar 13, 2015 to Mar 13, 2018) +35.3% * +42.8%
48 months (Mar 13, 2014 to Mar 13, 2018) +40.3% * +61.8%
60 months (Mar 13, 2013 to Mar 13, 2018) +70.2% * +96.0%

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

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Bought Baozun Inc. (BZUN)

Initial percent of portfolio (approx.)5.0%
Net buy price in managed accounts*$46.48
Most recent close (Mar 13)$46.46
Net change (based on net buy price)+0.02
Today's volume as of 11:01AM EDT909,986 ($42.3 million)
Average daily volume2.2 million ($102.5 million)
This year's earnings-per-share$1.24 (est)
Next year's earnings-per-share$1.87 (est)
P/E using next year's earnings24.9 (est)
Earnings growth rate, next 5 years11% per year (est)

* Buy prices shown are net after commissions and fees.

Today, Wednesday, March 14, 2018, I bought BZUN, for both client and my personal accounts.

Here's why I bought this stock:

+ Earnings surprise: Last week, between Monday's close (March 5) and Tuesday's open (March 6), the company announced results for the quarter ended Dec 31. Earnings came in at 42c per diluted share (vs 18c last year and analysts' consensus 31c). Revenue was up 31% to $240.4 million.

+ A "true surprise"*: For several weeks prior to the news, the stock was trading in a sideways pattern. Then, on March 6, after the surprise, it jumped 31% 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 jump on March 6 represents a breakout from a 6-month range to a new all-time high.

+ Volume spike, mostly on the buy side: March 6 volume was more than 12 times average, and set a 12-month record.

+ Our buy price today is lower than the March 6 close.

+ Excellent and accelerating recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +13%, +24%, +19%, and, most recently, as cited above, +31%.

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

Mar 17 vs Mar 16:  7c vs  4c
Jun 17 vs Jun 16: 11c vs  2c
Sep 17 vs Sep 16:  9c vs  8c
Dec 17 vs Dec 16: 42c vs 18c

+ Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2018 is $1.24, revised upward from $1.12 90 days ago (and up from 2017 actual earnings of 70c); and the consensus estimate for 2019 is $1.87, revised upward from $1.74 90 days ago.

+ The company's industry group ("Computer Software - Enterprise") is ranked #4 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:

- As mentioned above, the financial results reported last week included revenue of $240.4 million for the quarter ended Dec 31. This falls short of the analysts' consensus of $245.2 million.

- Valuation: At 25 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 11%, the stock is, by my usual metric, over-priced. (I suspect, however, that that growth rate estimate may be low.)

-KD, Wednesday, March 14, 2018

Sold SPDR S&P 500 ETF (SPY) +3.9%

Net sell price in managed accounts*$277.12
Date(s) boughtMar 2 2018
Net buy price in managed accounts*$266.69
Holding period1.7 weeks
Gain/loss in managed accounts*+3.9% (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, Wednesday, March 14, 2018, I sold SPY, for both client and my personal accounts.

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

-KD, Wednesday, March 14, 2018

Typical Client Portfolio

Company Name Stock
% of
Baozun Inc. BZUN 03/14/18 $46.48 $45.86 0.0 5.0% -1.3%
NV5 Global, Inc. NVEE 03/13/18 $55.05 $54.00 0.1 5.0% -1.9%
Medifast Inc. MED 03/07/18 $91.27 $89.88 1.0 5.3% -1.5%
Xcerra Corp. XCRA 03/05/18 $9.95 $11.10 1.3 5.4% +11.6%
Upland Software Inc. UPLD 03/05/18 $27.31 $28.53 1.3 5.1% +4.5%
SPDR S&P 500 ETF SPY 03/02/18 $266.69 $276.82 1.7 74.2% +3.8%
Cash 0.0%  
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.

Past performance is not necessarily indicative of future results.

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