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The Aggressive Trader Vol. 2, No. 53
Ken Deen's THE AGGRESSIVE TRADER(tm)
"Seeking double-digit profits in one to four months"
Vol. 2, No. 53 March 26, 1993 12:45pm New York Time
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Market Stance: Cautiously bullish
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ALERT ITEMS:
Market Commentary: See below
Marginable Account (editor's personal account):
* Copley Pharmaceutical (NASDAQ: CPLY)
EPS:99, RS:87, GR:48->51, PE:43, Medical-Generic Drugs
Today I bought 300 shares at 44. This $13,231 purchase represents
33.7% of the account value.
After this trade, the account value is $39,302. Of that, $31,313 is
long stocks and $7,990 is cash.
IRA Account (editor's personal account):
* Copley Pharmaceutical (NASDAQ: CPLY)
EPS:99, RS:87, GR:48->51, PE:43, Medical-Generic Drugs
Today I bought 300 shares at 44. This $13,231 purchase represents
30.8% of the account value.
After this trade, the account value is $42,934. Of that, $35,550 is
long stocks and $7,384 is cash.
DESI(tm) Account (a computer-simulated hypothetical account): No trades
DESI(tm) Buy/Sell Signals (computer-generated): None
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Market Commentary
I am changing my market stance to cautiously bullish, based on the facts
that my earnings surprise stocks have been behaving well, and long-term
bond yields came down dramatically a few weeks ago. I remain cautious,
however, due to the fact that my technical market timing program is still
bearish. This cautiousness means primarily that I plan to avoid buying on
margin.
**********
Copley Pharmaceutical
This stock has most of the characteristics I like to see, and in spades.
This is an enthusiastic recommendation! The story here is a tremendous
earnings surprise on an already fast-growing company. This hot earnings news
just crossed the wires today. Let's review the characteristics I like to see
in an ideal buy:
Bullish market environment. This one is questionable, but I am cautiously
bullish. Refer to market commentary above. This is the single biggest risk
factor, but I am not excessively worried due to the continued ultra-low
interest rate environment.
The EPS rank is ideal at 99, the highest possible. The RS rank, at 87,
is also very high.
The sales and earnings growth rate over the past four quarters is high
and accelerating. The sales and earnings announced today extend this accel-
eration. Here are the last four quarters of sales and earnings:
Quarter
Ended Sales($mil) Earnings-per-share
--------- ---------------- -------------------
Apr 30 92 9.9 vs 6.5 +53% 0.22 vs 0.09 +0.13
Jul 31 92 9.9 vs 6.5 +53% 0.22 vs 0.08 +0.14
Oct 31 92 13.3 vs 7.7 +73% 0.27 vs 0.11 +0.16
Jan 31 93 18.8 vs 8.2 +131% 0.32 vs 0.15 +0.17
I also like to see a strongly positive initial market reaction. So far,
the stock is up 3 points on three times normal volume, and the trading day
is only a few hours old!
The P/E, at 43, is less than half the recent growth rate, and is down
from a P/E of 47 prior to the earnings news.
On the technical side, the stock is not overbought, as it has been
trending slightly downward over the past week and a half. There is technical
resistance at 45 -- the all-time high set on Feb. 9. This resistance could
delay the further ascent of the stock price, but I doubt it will hold it back
for more than a few weeks. The stock, a new issue, went public last October
at $19.
The industry group (Generic Drugs) has been holding its own very well in
the face of a general rout of medical stocks. Generic drug companies are
generally perceived as part of the solution to the health care cost problem,
and therefore have been doing well. The group currently ranks 51st (out of
199) for six-month price performance. That is down slightly from an average
of 48 over the prior eight weeks. This is not enough of a drop to indicate
a trend.
Copley Pharmaceutical, headquartered in Canton, Mass. (617-821-6111),
manufactures a broad range of off-patent prescription and over-the-counter
pharmaceutical products.
All rankings in today's Alert are from Investor's Business Daily.
<Stock chart appears here in printed/fax version.>
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Previous Alert: Vol.2 #51 (March 25, 1993)
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*** To all who download this newsletter ***
On May 1, 1993, this newsletter will be available only for a subscription
fee. There will be no further uploads on or after that date.
From now through April 30, 1993, I am offering at-cost subscriptions (very
very inexpensive) by e-mail, fax, and postal mail. These are alternatives to
downloading. E-mail via Internet is free during this trial period.
Monthly Status Reports (available in printed form only) are an essential
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send your paper mail address.
-Ken Deen
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The Aggressive Trader is edited and published at irregular intervals, but
at least monthly, by Deen Capital Management, Inc., P.O. Box 4791, Santa
Barbara, California 93140, (805) 565-2039.
CompuServe: 72020,2050 Internet: 72020.2050@compuserve.com
Deen Capital Management, Inc., its principals, employees, affiliates,
and/or clients may have positions in securities recommended herein and may
make additional purchases and/or sales in these securities.
Recommendations made in this publication involve a high degree of risk and
may result in losses. Readers should not assume that recommendations will be
profitable or will equal past performance. The information in this
publication is collected from sources believed to be reliable, but neither the
accuracy nor the completeness of this information is guaranteed.
The Aggressive Trader, Deen Earnings Surprise Index, DESI, and DESI-3 are
all trademarks of Deen Capital Management, Inc.
Copyright (c) 1993 Deen Capital Management, Inc.
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