I'm back from 4 weeks in Italy.
You wrote:
Jabil is still not as cheap as flexf if its sales and earnings respond as discussed mainly by Paul K. Also HDCO is still cheaper especially when compared to SANM. By the way does anyone know what happened to Paul K?. I notice he has not posted since 3/8. Is he traveling?
And a lot has happened while I was gone. I just spent the last 18 hours reading and analyzing the posts on the ECM threads I follow. I guess a round of earnings warnings have really trashed our favorite sector, in spite of the broader market move to record highs. I think things have gotten a bit overdone here, similar to early December.
But this time there are some company and management specific problems cropping up. Hadco seems to be having some problems integrating their two acquisitions, but also seems to be seeing the general weakness among the board makers in both pricing and volumes. It looks really intriquing at 36, but I still prefer assemblers. Among the assemblers the big guys have experienced some leveling off of growth and earnings, but I believe this is simply a pause before a renewed growth spurt later this year. The smaller domestic ECM players have had a rougher time of it. I will update my comments on managements soon, especially after the absolutely dismal performance by ACTM's management. I sold my Plexus shares around 20. Although I expect them to do well, they will be a niche player.
Flextronics has held up really well relatively, and in order to raise some cash, I had to sell my Apr30 and Apr40 calls. I still expect good and better news from them as the year goes on. Jabil has run the mo guys out their stock once again, but it seemed like such a deal that I bought some shares this morning in the 32 range. I am a bit uncomfortable that it is trading at such a large discount to FLEXF and SLR, with similar earnings projections. Jabil's biggest customer's stocks, the networkers Cisco and 3Com, and Quantum seem to be telegraphing better times ahead, and I understand that Jabil is picking up a lot of business from Gateway and Dell. If Jabil continues today's bounce though, I will trade it.
DII Group hit a pothole with Orbit, and as much as I'd like to buy at this price, I may let it drift a bit first. I don't have enough funds to buy everything I'd like, and I'd like to find out more about the problems at Orbit. Sanmina reported good earnings tonight, although I haven't analyzed them yet. Among the smaller players, Smartflex had a good earnings report tonight, but I'd like to hear what they said in the conference call about the HDD business outlook.
In the international stocks, I see Nam Tai's screwball owner has done in again, and sold 560,000 shares on April 1. Deswell keeps expanding nicely, even if though the stock occasionally hits a pothole and hasn't kept up. Elamex has some margin and sales growth problems.
At the prices I saw this morning, I guess Jabil looked the best, and the market sure jumped on it. Trading at 12-13 times forward earnings, with their high growth high margin customer base intact, and they are adding big revenue customers like the PC makers, although with lower margins. I'll also keep an eye on Hadco, and avoid the smaller players. The large players seem more attractive; even SCI looks interesting here.
I am adjusting the way I buy these stocks though. I can't believe the volatility we see in these stocks, and I am thinking of being tougher on my buy criteria, and scaling back periodically across the portfolio to have more liquidity available at times like these.
My largest holdings in the sector are FLEXF, DSWLF, JBIL(most bought today), and NTAIF, in that order. I have underwater positions(mistakes)in ELAMF and ACTM that I'm not adding to, and will pare back if a reasonable opportunity presents itself. I have some very small positions in some other ECM players.
Well, just a few off-the-cuff observations. Now to really get to work, and post some more detailed comments on the individual threads.
Paul |
