This week, in our focus on the winning analysts in each industry category from our
Analyst Rankings -- Equity 2000
, we profile the top analysts tracking electronic equipment and instruments. Beginning in October, we start our focus on the financial sector -- on Oct. 3, we look at analysts covering banks. (Our last focus was on
computer storage and peripherals.)
The electronic equipment and instruments sector includes a wide variety of products and services. Our two first-place analysts, Keith Dunne and Jerry Labowitz, track companies that range from electronic manufacturing service providers and distributors to firms that produce electronic connectors and components, printed wire boards and power systems. (Our third-place winner, Laura Conigliaro, no longer has broad coverage of this sector.)
Optimism runs high in this industry: With electronics making up a bigger proportion of the gross domestic product than ever before, both analysts predict continued growth and sizable profits for their companies across all sectors.
Dunne and Labowitz also agree that the most compelling story in this sector is the electronic manufacturing service provider group. The EMS companies' evolution from simple contract manufacturers to full-service providers has had a major impact on how electronic equipment is built and distributed.
Labowitz's top stock pick,
( SLR), is a standout in a group he refers to as mega-EMS providers. These are huge companies that have a global footprint and revenue of more than $5 billion. The Merrill analyst believes Solectron is currently undervalued, and he tags it as an excellent long-term investment. Over the past year, the stock has outperformed the
index by 17.8%.
Dunne's top stock pick,
, is a niche provider. Dunne believes Sanmina's exposure to the exploding communications market will continue to drive its profit margins. Over the past year, it has outperformed the S&P by 148%.
"You definitely want to have the EMS group as part of your portfolio's core holdings" says Dunne. "If you look at the period from 1995 to 1999, the compounding rate of growth for the EMS group was 79%, while the S&P 500 was 26% and Nasdaq was 40%."
Investors should be aware, however, that this is a fairly volatile sector. Consider, for example, the precipitous plunge in shares of
earlier this month. The stock tumbled 18% in a single day after SCI warned of a fiscal first-quarter earnings shortfall of 4 cents, due to weakness in PC box demand and tightness in the components market.
While conceding the sector's turbulence, both Dunne and Labowitz insist that this is an industry with explosive long-term growth potential.
Electronic Equipment and Instruments*
*3rd-place winner Laura Conigliaro no longer has broad coverage of this sector.
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