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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector -- Ignore unavailable to you. Want to Upgrade?

To: rich evans who wrote (2095)	5/21/1999 12:36:00 PM
From: kolo55	Read Replies (1) \| Respond to of 2542

Another interesting pair trade idea: Jabil has dropped like a rock after Keith Dunne at Robby Stephens downgraded from Buy (their highest rating) to LT Attractive (their second highest rating). His reasoning was that JBL is trading at a high stock price compared with the rest of the sector. Well, take a look at JBL versus SLR. Both are expected to earn about 29 cents a share for the MayQ. And JBL's estimate for next year is higher than SLR's estimated earnings. Over the next year, I believe that JBL will grow top and bottom line much faster (on a percentage basis) then SLR. For JBL, the new Dell, Nortel (see announcement last fall), big increases in Cisco and HP sales, and rumored Lucent business could grow top line by 80+% over the next year. Yet SLR trades at 55+ while JBL trades at 49. This gap should close fast. It wouldn't surprise me to see both stocks trade at the same price as soon as June 16; right after SLR's earnings on the 14th and JBL's on the 15th. And by the end of the summer, JBL could trade at 10-15% premium to SLR. This looks like a good pair trade to me, so today I shorted some SLR soon after the opening, and bought JBL. This is just my opinion, and reflects the pair trade mechanics that I have outlined in my previous posts. I know the differential in prices looks relatively small, but in a pair trade, there isn't any real capital tied up, and I believe the risks are significantly mitigated. Paul