JACO, I was adding on the pullback today
<<Distributors clearly won the popularity contest among electronics stocks last week. Distribution continued its resurgence for the fourth consecutive week, helping pull up the EBN/ Thomas Weisel Supply-Chain Stock Index during the four-day trading period ended April 26.
The distribution segment of the index jumped 8.67%, to a record 1,052.30. The upswing helped offset a 3% decline in OEM Products & Subsystems and lifted the overall index by 2.62%, to 2,699.93. During the same four-day period, the technology-laden Nasdaq fell 2%, to 3,630.09, while old-economy stocks on the Dow Jones Industrial Average rose 2.5%, to 10,945.5 from 10,674.96.
Low-cost distribution stocks caught the eye of many investors who shied away from highly valued stocks in the semiconductor and contract electronics manufacturing sectors, said Robert C. Damron, an analyst at Tucker Anthony Cleary Gull in Milwaukee, Wis.
"Distributors tend to be an afterthought because they tend to lag in earnings and stock price. [But] most had an outstanding first quarter, and because the stocks are cheap, investors bought them," Damron said.
Two New York-based distributors, Jaco Electronics Inc., Hauppauge, and Arrow Electronics Inc., Melville, led the distribution charge. Jaco's shares jumped 24%, to $16 from $12.88, on the heels of its agreement to distribute Methuen, Mass.-based MicroTouch Systems Inc.'s FPD products. At the same time, Arrow's strong earnings and news that it plans to acquire Tekelec Europe, a Paris-based distributor, raised the company's shares 20%, to $43.13 from $35.88.
However, San Jose-based Bell Microproducts Inc.'s shares fell nearly 5%, to $15.75 from $16.56, after the company revealed a deal to distribute electronic switching devices for Ancor Communications Inc. Shares of Kent Electronics Corp., Houston, fell 2%, to $26.69 from $27.25.
Tom Smith, an analyst at S&P Equity Group in New York, said investor interest in distributor stocks "could last six months or a year."
That's good news for distributors that have trailed other electronics-industry stocks in the past year. From a figure of 1,000 in January 1999, the distribution segment of the EBN/ Thomas Weisel Index fell to a low of 489.37 in March of that year and has been struggling to climb since then. Even now, the segment is up only about 5% from its January 1999 level, compared with an increase of 180% and 136% in the semiconductor and top-tier-CEM segments, respectively.
Analysts said they see a further upside for distribution stocks as the chip industry upturn stretches into 2001.>>
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