Expert Electronics Analyst From Deutsche Bank Discusses Key Trends And Safe Names In The Electronic Components Industry; Read The Exclusive Interview

Wall Street Transcript

67 WALL STREET, New York - July 10, 2012 - The Wall Street Transcript has just published its Electronic Components Report offering a timely review of the sector to serious investors and industry executives. This special report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Electronics Manufacturing Supply Chain - Secular Connector Demand Growth - Automotive, Data Center and Mobile Spending - Component Price Erosion

Companies include: AVX Corp. (AVX); Arrow Electronics (ARW); RELM Wireless Corporation (RWC); Amphenol (APH); Anixter International (AXE); Apple (AAPL); Avnet (AVT); Belden (BDC); Celestica (CLS); Flextronics (FLEX); Foxconn (2038.HK); HP (HPQ); IBMs (IBM); Jabil Circuit (JBL); Molex (MOLX); Multi-Fineline Electronix (MFLX); NetApp (NTAP); Nordson (NDSN); Nova Measuring Instruments Ltd. (NVMI); Plexus (PLXS); Research in Motion (RIMM); Sensata (ST); TE (TEL) and many more.

In the following brief excerpt from the Electronic Components report, a Deutsche Bank expert analyst discusses the outlook for the sector and for investors.

Sherri Scribner is a Vice President and Senior Research Analyst covering the technology supply chain at Deutsche Bank Securities Inc. She was recognized by The Wall Street Journal as a Best on the Street Analyst in 2010, and as one of the top 50 most influential people in electronics manufacturing services by Venture Outsourcing in 2012. Ms. Scribner has had lead research coverage of the hard disk drive industry and the supply chain since 2005 and 2007, respectively. She joined Deutsche Bank in 2002 as an Associate Analyst covering the IT hardware and storage industries. Before joining Deutsche Bank, Ms. Scribner worked as an Architect in New York and Southern California. She earned an MBA from the Columbia Business School in 2002 and also holds master's and bachelor's degrees in architecture.

TWST: What are some of your top picks right now and why do you like them?

Ms. Scribner: In this type of soft environment, there are a couple of names that we think are good safe names to invest in. One of those is Amphenol (APH), the connector maker. The company has a very solid track record of performing, growing revenue, growing EPS. They did a bit better than their peers in the downturn. So they're a bit safer of an investment in our group, although I would say overall in terms of stock performance, when the market goes down, supply chain companies tend to go down more than the overall market because they're high beta names. So we would focus on safe names like Amphenol.

We also like a company, Plexus (PLXS), which is a small-cap name. They're a contract manufacturer. They are one of the higher-margin contract manufacturers because they focus specifically on lower volumes and higher mix business. They also tend to be a bit safer of an investment because of their specific focus.

We also like Molex (MOLX), which is another connector maker. They have also proven to be a bit safer investment, not quite as safe as Amphenol, their peer, but a bit safer. Connector demand continues to be something that we expect to grow over the next five to 10 years driven by increasing demand for electronics because they use the connectors.

TWST: Anyone on the distributor side?

Ms. Scribner: We do like the distributors Arrow (ARW) and Avnet (AVT). Those are really nice value names. They are trading near their trough valuations on a p/e basis. The companies have high exposure to the semiconductor market, and we have already seen a cycle on a semiconductor market where we were working through inventory. It appears that inventory has been worked through. So we are anticipating normal seasonal growth for the semiconductor market going forward and that will be a positive for Avnet and for Arrow, who were seeing a bit of a drag in that semi business. The other piece of their business is server and storage for medium-sized businesses. In those segments, while server is maybe a tad bit softer than we had originally seen a couple of months ago, storage continues to be a strong growth driver. So those companies should see relatively decent levels of growth this year, and they are trading near trough valuations. So those are some nice value names that we like.

TWST: Is there anything out there on the horizon you are watching that you believe may either put the sector in a better position or may hurt it?

Ms. Scribner: In terms of the entire group, the group generally has very high correlation to global GDP. So the macro is the thing we are the most focused on right now, because that will be a key determinant for these companies in terms of driving their revenue growth.The semiconductor market is also highly correlated to many of these companies. It's correlated to the distributors. It's correlated to the connector companies, even though they are not really related, but if you think about where semiconductors go, connectors are going to be required there too. So there is a correlation between those markets. The things that we're paying the most attention to nowadays would be the economy and what we're seeing in the semi market, although as I mentioned, we appear to have seen a bottom in that cycle.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Electronic Components report is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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