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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector
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To: rich evans who wrote (995)12/18/1997 12:42:00 PM
From: 18acastra  Read Replies (1) of 2542
 
I think some of the best opportunities are with low multiple stocks. Oftentimes, Wall Street gets enamored with what they believe to be the best companies and completely forget about valuation. The risk/reward on some overlooked plays can be exceptional. Great examples were Elexsys at $10, and Flextronics in the low $20's. Time and time again, people forget about valuation. For me it is an incredibly important metric. But cheap is not also always best. You also have to have a fundamental opinion that the cheap company will somehow right itself. If you believe that fundamentally Plexus or ACTM will continue to grow at 20+% you have got an easy 2x stock here. If you believe they are strategically challenged business and they are going to go away over time, than the stock is expensive here. Not all companies in good growth sectors are good stock investments. Look at Cabletron. Hard to think of a better sector than networking, but Cabletron is continually losing share and shrinking. In the end a combination of fundamentals and valuation drive investing success. Sometimes, stocks get so cheap, not a lot one needs to believe in to buy (Graham & Dodd). Plexus and ACTM are not that cheap yet, so you need a fundamental story to be a buyer.

My opinion.
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