The Deen's ListTM
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Our goal: Outperform the S&P 500 in both up markets and down.
Our result: +55.6% for the 60 months ending May 7, 2018 (vs. +81.1% for the S&P)
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Vol.16 #99 Tuesday, May 8, 2018 12:20PM EDT

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Market Stance: BULLISH (since April 10, 2018)


Typical Client Performance
Bought Stoneridge Inc. (SRI)
Sold SPDR S&P 500 ETF (SPY) +0.8%
Typical Client Portfolio
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Typical Client Performance

Deen Capital S&P 500
Year-to-date as of May 7, 2018 -0.8% * +0.5%
12 months (May 7, 2017 to May 7, 2018) +10.0% * +13.5%
24 months (May 7, 2016 to May 7, 2018) +43.7% * +35.0%
36 months (May 7, 2015 to May 7, 2018) +26.7% * +35.7%
48 months (May 7, 2014 to May 7, 2018) +37.3% * +53.7%
60 months (May 7, 2013 to May 7, 2018) +55.3% * +81.1%

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

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Bought Stoneridge Inc. (SRI)

Initial percent of portfolio (approx.)5.0%
Net buy price in managed accounts*$27.89
Most recent close (May 07)$27.78
Net change (based on net buy price)+0.11
Today's volume as of 12:20PM EDT68,382 ($1.9 million)
Average daily volume299,000 ($8.3 million)
This year's earnings-per-share$1.97 (est)
Next year's earnings-per-share$2.15 (est)
P/E using next year's earnings13.0 (est)
Earnings growth rate, next 5 years49% per year (est)

* Buy prices shown are net after commissions and fees.

Today, Tuesday, May 8, 2018, I bought SRI, for both client and my personal accounts.

Here's why I bought this stock:

+ Earnings surprise: Last Tuesday, May 2, after the close, the company announced results for the quarter ended March 31. Earnings came in at 50c per diluted share (vs 38c last year and analysts' consensus 48c). Revenue was up 11% to $225.9 million (analysts' consensus $214.2 million).

+ A "true surprise"*: For two weeks prior to the news, the stock was trending lower. Then, May 3, after the news, it jumped +2.3% on moderately 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).

+ Technical: I like the chart pattern. There was an extremely heavy breakout on March 20. That breakout has not failed, but neither has it kicked off any rally. Our buy price today is slightly below the March 20 close.

+ Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +12%, +17%, +20%, and, most recently, as cited above, +11%.

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

Jun 17 vs Jun 16: 42c vs 41c
Sep 17 vs Sep 16: 36c vs 36c
Dec 17 vs Dec 16: 42c vs 34c
Mar 18 vs Mar 17: 50c vs 38c

+ Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2018 is $1.97, revised upward from $1.71 90 days ago (and up from 2017 actual earnings of $1.57); and the consensus estimate for 2019 is $2.15, revised upward from $2.05 90 days ago.

+ Valuation: At 13 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 49%, the stock is, by my usual metric, attractively priced.

+ History of earnings surprises: This company has reported earnings-per-share at least 2c above estimates in each of the past six quarters, including the just-reported quarter cited above, which "beat the Street" by 2c.

+ The company's industry group ("Electronics - Parts") is ranked #109 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.

-KD, Tuesday, May 8, 2018

Sold SPDR S&P 500 ETF (SPY) +0.8%

Net sell price in managed accounts*$266.31
Date(s) boughtApr 10 2018
Net buy price in managed accounts*$264.27
Holding period4.0 weeks
Gain/loss in managed accounts*+0.8% (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, May 8, 2018, I sold SPY, for both client and my personal accounts.

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

-KD, Tuesday, May 8, 2018

Typical Client Portfolio

Company Name Stock
% of
Stoneridge Inc. SRI 05/08/18 $27.89 $27.84 0.0 5.0% -0.2%
NV5 Global, Inc. NVEE 05/07/18 $64.08 $61.35 0.1 4.8% -4.3%
Nanometrics Inc. NANO 05/07/18 $35.55 $35.79 0.1 5.1% +0.7%
Malibu Boats, Inc. MBUU 05/03/18 $40.74 $41.69 0.7 5.1% +2.3%
Centene Corp. CNC 05/03/18 $114.88 $113.53 0.7 4.9% -1.2%
Enova International, Inc. ENVA 05/01/18 $28.90 $31.65 1.0 5.4% +9.5%
Solaris Oilfield Infrastruct SOI 04/30/18 $19.11 $18.52 1.1 4.9% -3.1%
DMC Global, Inc. BOOM 04/27/18 $39.54 $38.48 1.6 5.0% -2.7%
SPDR S&P 500 ETF SPY 04/25/18 $262.51 $266.36 1.9 11.7% +1.5%
SPDR S&P 500 ETF SPY 04/10/18 $264.27 $266.36 4.0 48.1% +0.8%
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.

Past performance is not necessarily indicative of future results.

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