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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector
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To: Steven Dopp who wrote (1962)1/25/1999 2:57:00 PM
From: kolo55  Read Replies (2) of 2542
 
I haven't been following the smaller players recently.

I see BHE has acquired a EMS provider in New Hampshire, and is acquiring a STratus(Ascend) facility in Ireland. Still, the revenue run rate is less than $600M, and so BHE is one-third the size of a mid-tier player like FLEX and less than one-tenth the size of SLR. I just don't see them participating in the big outsourcing wave to the same extent as the bigger players.

You can make a fairly strong relative valuation case for the smaller players. But selecting an EMS stock based solely on valuation has not always worked well. I think its important to understand the growth strategy. These smaller players need a niche, and I guess my lnog term favorite is Plexus based on their value added engineering design niche. I understand their strategy, and believe it should work. It could make them an attractive takeover candidate down the road.

But when the sector got bashed last fall, my money didn't go to Plexus, it went elsewhere. I'm not saying you can't make good return on your investments in the smaller players; obviously some have. I'm still gun shy after seeing ACT Manufacturing wake up one morning with $13M worth of inventory missing, and no explanation of where it ever went, even to this day.

This is just my opinion. If you understand the company's strategy, and its a good strategy, I'm sure you might do well in a stock like BHE.

Paul
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