Motley Fool comments on sell-off:
With today's fall in Adaptec, investors fear that inventory levels of electronics components in the contract manufacturing and circuit board food chain are higher than desirable. Contract manufacturer Jabil Circuit (Nasdaq: JBIL)slipped $4 1/2 to $34 1/2; circuit board maker Sanmina (Nasdaq: SANM) lost $4 5/8 to $53 3/8; circuit board design company Praegitzer Industries (Nasdaq: PGTZ) slid $1 to $10; Solectron (NYSE: SLR) fell $1 1/2 to $39; and circuit board company Hadco (Nasdaq: HDCO) declined $6 3/16 to $37 31/32. A sell-off in these shares may be a conflation of the issues driving the individual companies. Hadco might have a very different set of revenue drivers than Jabil, for instance, even though they both share Hewlett-Packard (NYSE: HWP) as a large customer. H-P's PC sales may not be going well, but Hadco might not even deal with that line of H-P products, instead manufacturing circuit boards for H-P's medical products division. When the market throws out everything in the sector based on a few pieces of anecdotal evidence, the well-prepared value-sensitive investor is in his or her element.
I find incredible value in the sector today. One must be a contrarian and be willing to go against the crowd, but I suspect the bottom on the board makers may have been hit today with perhaps some follow-up selling on Monday. Hadco is selling at about 9 times earnings. At this point I don't even own any board makers, having concentrated my investment in the assemblers. Most of the assemblers still finished above the lows they hit in early December, and if they hold in this range next couple of weeks, will be building a bottom. The next big earnings reports will come from FLEXF, SCI, and DIIG this month, and they should all report significant revenue growth and new contracts. But this is fundamental analysis and the only kind of analysis that might explain this market is psychoanalysis.
I think there more than enough blood on the streets at this point. If anyone has the stomach for it, an example is Nam Tai(NTAIF). An Asian assembler of calculators, telephones, and personal organizers and today sold at $13.50 a share. It will earn about $2.00 a share this year. It has about $9 a share in cash(no debt) after raising money in a recent rights secondary where existing shareholders could buy shares plus a warrant at $17. The management also raised a lot of money by selling all their real estate in Hong Kong last spring (good timing that). A crafty insider owns over 20% of the stock. It is located on the same continent with Korea and Indonesia though, so this means the stock has to be sold now.
I could go on and on, but I suspect I'm preaching to the choir.
Paul |
