Sanmina Up Again, Despite Down Market

I have been eying Sanmina-SCI Corporation (SANM) since it popped up on the list the first time. It had a beaten-down share price whose recent rally generated the TradeRadar BUY signal. Apparently, many other investors are also taking notice and buying with enthusiasm. It has attracted the attention of Barron's Tech Trader Daily blog. Writer Eric Savitz had the following to say (I include the entire post as it is rather brief):

There sure are a lot of people piling into Sanmina-SCI (SANM) shares. But there’s still no obvious reason for the move.

As I noted last week, the contract electronics manufacturer’s shares have been on an absolute tear.

To review: On July 14, the stock his a 14-year low at $1.07, and has been climbing relentlessly ever since. The initial spur for the stock was the company’s July 15 announcement that June quarter results were ahead of expectations; the actual results were reporting a week later, along with a plan for a reverse stock split. (Somewhere between 1-for-3 and 1-for-10, the company said.)

Since then, it has been off to the races. Today, the stock is up 20 cents, or 8.5%, to $2.55. In the last four days alone, the stock is up 25%. Since its bottom in July, the shares have gained 138%. One commenter on the previous post theorized that that the company might be a target for rival Flextronics (FLEX), which today happens to be off 25 cents, or 2.8%, to $8.67. That seems like a reasonable explanation for the move; whether anything is actually going on I have no idea.

The rapid ascent of SANM is clearly visible in the following chart. Note also the cross-over of the 20-day moving average over the 50-day moving average, typically a very bullish development.

With a puny Price/Sales ratio of 0.12 and PEG ratio of 0.65, the company is sporting numbers like a value stock, not a tech stock. Despite a closing price today of only $2.62, the company is no micro-cap; its market capitalization is $1.39B. The company is now free cash flow positive. It is also nearing the end of a restructuring phase and embarking on increasing capacity in India.

The recent rally leaves SANM clearly in over-bought territory but the company would be pretty tempting on a pull-back.

Source: Sanmina: The Rally Continues

Disclosure: none

Comments

[flashguy:]

"With a puny Price/Sales ratio of 0.12 and PEG ratio of 0.65, the company is sporting numbers like a value stock, not a tech stock."

You don't know what you're talking about. This is a low margin contract manufacturing business. Low margin = punny P/S ratio. And its valuation should have absolutely nothing to do with that of a tech stock: SANM spends 0.3% of its revenues on R&D.

This is standard chart monkey analysis. There's no depth to this.

No love.

2008 Sep 03 12:54 AM