Here's the Bloomberg write-up:
Dunne Sees Electronics Makers Stocks Gaining: Bloomberg Forum
New York, Sept. 26 (Bloomberg) -- Robertson Stephens & Co.
analyst J. Keith Dunne said shares of electronics parts
manufacturers should keep outperforming those of some of their
biggest customers.
Such companies as Jabil Circuit Inc. and ACT Manufacturing
Inc., essentially build the proprietary products of their biggest
vendors like Hewlett-Packard Co., Bay Networks Inc. and Compaq
Computer Corp.
``The contract manufacturers are growing their revenue about
40 percent compounded annually,'' Dunne told the Bloomberg Forum.
That's in contrast to the 10 percent growth of the overall global
electronics industry, he said.
The big technology companies are also farming out more of
their manufacturing to the smaller suppliers, which make a full
array of products from computer workstations to cellular phones.
``Not only are these companies benefiting from the
proliferation of electronics, they're also benefiting from the
trend to outsourcing and regional consolidation,'' Dunne said.
For example, some of the 11 companies he follows, such as
ACT Manufacturing and AdFlex Solutions Inc., have bought other
electronics makers. That consolidation will likely continue.
One of the fastest-growth stocks that Dunne follows is SCI
Systems Inc., the world's largest electronics contractor. Its
stock has more than doubled this year, and for the fiscal year
ended June 30, SCI's revenue was $5.76 billion, almost 27 percent
higher than $4.54 billion in the previous year.
While Hewlett-Packard, the No. 2 U.S. computer company,
accounts for about 40 percent of SCI revenue, other SCI customers
include International Business Machines Corp., Compaq and Dell
Computer Corp., Dunne said.
Greater Competition
Not all of Dunne's stocks have done well this year, though.
Shares of Vishay Intertechnology Inc., the world's largest maker
of ceramic capacitors and passive electronics that handle heat
and communications in personal computers, are up only 18 percent.
``There's a greater pace of competition,'' said Dunne, 38,
who joined Robertson Stephens in San Francisco last year. And
lower tariffs have reduced barriers to imports, even as Vishay
has shifted most of its manufacturing to Israel and Asia from the
U.S. and Europe.
Another Dunne laggard is CMC Industries Inc., which mainly
supplies telecommunications equipment makers. Its shares rose
only about 5 percent this year. The analyst said he evaluates the
company, its managers and overall prospects for new customers.
Investors who've had a good run with shares like Jabil,
which tripled this year, might want to shift into some of the
laggards for next year.
Dunne also detects some benefits from the economic turmoil
in Southeast Asian markets, which have been roiled by the
devaluation of the Thai baht and slowdowns in the Malaysian and
Indonesian economies -- all centers for electronics
manufacturing.
AdFlex recently shifted a lot of its manufacturing to
Thailand, he said. ``Its sales are in dollars, but many of its
costs are in Thai baht,'' he said.
AdFlex and most of its customers like H-P should benefit
from this unplanned lowering of production costs, he said. |
