Brian, Based on your questions on SI, I know you have been doing your research over the past several weeks on Brightpoint. Your decision to add a position reflects a wise thoughtful decision. You certainly are getting CELL at a discount. I averaged down and increased my position again on Friday's dip.
You said "Only worry is that 40% of business is derived from Asia/Pacific. Any comments on why this will/won't be a factor?
First, the market assumes that ALL companies doing business in Asia will miss their numbers and the market discounted ALL the Asian-related stocks accordingly. This is an understandable reaction. CELL's stock price right now assumes they will miss this quarter's estimates. In order to weed out the weak, the market pre-builds disappointment into share prices and will now let EPS announcements determine the directional move of a stock. When earnings are released, the troubled companies will continue downward and a few good companies will surprise the market and will rise. It's survival of only the fittest. Will ALL these companies remain strong? No way. Only the strongest will survive. 60% will probably be 'dead money' for a couple of years.
That's why you have to be picky and pick strong solid globally aggresive companies. Strong companies are defined as companies that return consistent shareholder value in good times and bad times.
How can a strong global company survive when one part of the world, Asia in this case, is suffering?
1) First, the company must be globally diverse. This year it is Asia seeing weakness. Two years from now it may be the US seeing weakness. How can you expect to remain strong through isolated weaknesses unless you are globally diverse. Based in the US, Brightpoint is now in every part of the globe and is expanding like wildfire through ongoing acquisitions.
2) Second, the company must be flexible, efficient and aggresive enough to quickly shift focus to other areas of the globe and exploit strengths in other areas of the globe. Look at the last 6 quarterly reports. From quarter to quarter, Brightpoint has demonstrated surprising ability to quickly increase revenues in one part of the globe and de-emphasize focus on other areas. In the 4th quarter, they have exploited the strength of Europe and reduced their reliance on Asia. Why? Brightpoint has a-g-g-r-e-s-s-i-v-e, f-l-e-x-i-b-l-e, well run, m-a-n-a-g-e-m-e-n-t and s-a-l-e-s. EVERY EMPLOYEE is held accountable to deadlines and sales.
3) Third, they must do business in sectors that can shrug-off a slowdown longer than other sectors while the company re-focuses its efforts in other geographic areas. Brightpoint does most of their Asian business with the China government, who can shrug-off any slowdown a lot longer than the consumer based sector. This shrug-off keeps a steady flow revenues coming in while the company re-focuses its efforts in other geographic areas.
4) Forth, a global company must limit the impact that currency fluctuations will have on overall revenue. Brightpoint does all its business in US dollars and as a result, will be virtually unaffected by the currency fluctuations.
The bottom-line is that a company must carefully plan in advance for such an event, and be prepared to act quickly if the event occurs. Many companies are not prepared, and will suffer. IBM, DELL and CELL are companies that have weathered economic slowdowns well in the past. In the almost 4 years that CELL has been public, during several market downturns, CELL has always held its previous support levels and subsequently gone on to hit new highs. Right now we are trading at August support levels around $15. Once CELL again shows the street it knows how to shift gears and beat estimates even during a slowdown, CELL will separate from the pack and be on its way to new highs.
Here's a chart showing how 5 global companies have faired through the market downturns and upturns over the past 50 months.
www3.techstocks.com
Hope that helps.
David |
