You hit it on the head with regard to the main question being that of timing - are we too early? I found that I'm prone to buying too early, but that's OK, in that what I am looking for is long term growth - the company here is not going bankrupt, has the technical expertise, and is in a growing industry segment. I doubt that it would sell for long at market prices much below book value, setting a "floor" for us to work off of.
The main concern I have is that with the growing number of ECM's out there margins will be very thin - but I'm gambling that SFLX's technical abilities will put them in a position to make some money, even in a very competitive environ.
Here's an article, somewhat dated, and illustrates the principle that we are "buying on the bad news", hopefully to sell at a big profit on the good news:
Copyright 1997 Times Mirror Company
Los Angeles Times
June 12, 1997, Thursday, Orange County Edition
BAD NEWS FROM SEAGATE SPLASHES TUSTIN SUPPLIER; COMPUTERS: SHARES OF SMARTFLEX OFF ANOTHER 11.4% IN RIPPLE EFFECT FROM GIANT CUSTOMER'S WOES.
BYLINE: JOHN O'DELL, TIMES STAFF WRITER
In a dramatic example of how the food chain works in the stock market, bad
news from Seagate Corp. has battered the stock of an Orange County company that
is one of the giant disk drive maker's key suppliers.
Shares of Tustin-based Smartflex Systems Inc. fell 11.4% Wednesday after a
7.9% drop Tuesday as industry analysts said the company would likely see a drop
in earnings as Seagate curtails orders. Smartflex shares closed Wednesday at $
11.625, off $ 1.50, in heavy Nasdaq trading. The price was down almost 20% from
$ 14.50 on Monday.
Seagate said last week that the market for its high-end computer disk drives
was soft and that it could not predict when demand would rise again. Seagate is
expected to curtail production of the drives, which use electronic connection
devices made by Smartflex.
David Kang, a technology industry analyst with Seidler Cos. in Los Angeles,
said investors are nervous because Seagate is one of Smartflex's largest
customers. Smartflex recently opened a manufacturing facility in the Philippines
to handle Seagate products, and "that plant may now be severely underutilized,"
Kang said.
Other Seagate suppliers also could be hurt by the downturn in the Scotts
Valley, Calif., disk maker's fortunes. Shares of an Arizona electronic
connectors supplier, Adflex Solutions Inc., fell 62.5 cents Wednesday to $
18.375, for example. But Smartflex is taking the biggest hit because Seagate is
one of its top five revenue sources.
William Healey, Smartflex chairman and chief executive, said he does not know
yet just how Seagate's sales problems will affect his company.
"We just began talking with Seagate last week, and we suspect their orders
may be off," he said. "But we have other business that may be strengthening, so
one could offset the other. About 60% of our business is at the high end of the
disk drive market, and we play across the whole spectrum, so if one customer
isn't strong, another one usually is."
****
Have a good 4th everyone - I appreciate all your input and insights on SFLX and the industry in general.
Best- Joe |
