Please read carefully our disclaimers at the end of this newsletter.
Market Stance: BULLISH (since April 10, 2018)
* An average of managed accounts, net after all commissions and fees.
Click here for more performance data.
Click here for information on managed accounts.
* Buy prices shown are net after commissions and fees.
Today, Friday, May 11, 2018, I bought GDOT, for both client and my personal accounts.
Here's why I bought this stock:
+ Earnings surprise: Two days ago, Wednesday, May 9, the company announced results for the quarter ended March 31. Earnings came in at $1.40 per diluted share (vs $1.00 last year and analysts' consensus $1.29). Revenue was up 25% to $315.0 million (analysts' consensus $297.4 million).
+ A "true surprise"*: For more than two months prior to the news, the stock was trading mostly sideways or edging lower. Then, yesterday, it jumped +14.6% 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: Yesterday's price move represents a breakout from an 11-week range to a new all-time high.
+ Volume spike, mostly on the buy side: Yesterday's volume was more than 4x average, and set a 12-month record.
+ The stock is down slightly this morning. I view this as a buying opportunity.
+ Excellent recent sales growth. Here are the quarterly year-to-year sales growth rates from the last four quarters, in chronological order: +28%, +31%, +31%, and, most recently, as cited above, +25%.
+ Excellent recent earnings-per-share growth. Here are the quarterly EPS figures for the last eight quarters:
Jun 17 vs Jun 16: $0.55 vs $0.27 Sep 17 vs Sep 16: $0.34 vs $0.21 Dec 17 vs Dec 16: $0.29 vs $0.19 Mar 18 vs Mar 17: $1.40 vs $1.00
+ Strong and rising earnings-per-share estimates: According to recent data from First Call, the consensus earnings estimate for 2018 is $2.87, revised upward from $2.59 90 days ago (and up from 2017 actual earnings of $2.16); and the consensus estimate for 2019 is $3.26, revised upward from $2.97 90 days ago.
+ Valuation: At 22 times next year's estimated earnings and a projected 5-year annualized earnings growth rate of 30%, the stock may still be, even after yesterday's price jump, attractively priced.
+ History of earnings surprises: This company has reported earnings-per-share at least 4c above estimates in each of the past seven quarters, including the just-reported quarter cited above, which "beat the Street" by 11c.
+ 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:
- The company's industry group ("Finance - Credit Card / Payment Processing") is ranked #50 for relative strength out of 197 industry groups tracked by Investor's Business Daily. This ranking changes daily, and it has been generally falling over recent weeks and months.
-KD, Friday, May 11, 2018
* 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, Friday, May 11, 2018, I sold SPY, for both client and my personal accounts.
I sold just enough SPY to pay for GDOT. We remain fully invested.
-KD, Friday, May 11, 2018
* Buy prices shown are net after commissions.
** Current prices are at least 20 minutes old.
Welcome to The Deen's ListTM, an e-mail stock newsletter from Deen Capital Management, Inc.
My intention is to inform you as quickly as is practical regarding my stock market moves.
Your feedback is welcome. Send e-mail to email@example.com. To subscribe or unsubscribe, include the word "subscribe" or "unsubscribe" in the Subject line.
This newsletter is free to managed account clients. For a limited time, it is also free to all interested parties.
Your personal information, including your e-mail address, will be held in strict confidence by Deen Capital Management, Inc. We will not share it with or sell it to others.
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.
The information contained herein has been compiled from sources deemed to be reliable; however, we are not responsible for its accuracy or completeness.
The Deen's List
Copyright © 2018 Deen Capital Management, Inc.