There are at least two diametrically opposed camps in the investing world. One would tell you to buy only high-quality companies with a solid track record of performance. The other would have you believe that high-quality companies are generally recognized and priced as such, and urge you to instead focus on finding companies where things are bad today but will be better tomorrow.
In the case of electronic manufacturing services company Solectron
Unfortunately, Solectron uses the same gobbledygook as many other tech companies, talking about sequential performance and liberally quoting non-GAAP numbers. Any way you choose to look at it, though, there are signs of improvement -- and evidence that more improvement is still needed. It's also worth noting that the company is still free cash flow-positive.
That further improvement, if it arrives, should manifest in a few different areas. First, the company is still expecting new business from Lucent
Last and by no means least, the company continues to talk a good game about getting more active in markets like consumer goods, medicine, and aerospace and defense. These industries certainly have high-tech requirements, but they aren't formally considered part of the technology sector with which the electronic manufacturing industry is traditionally associated. A large percentage of consumer business has certainly served competitor Jabil
I've liked this stock as a risky turnaround idea for a little while now, and it's gone up more than 10% since then -- not a stunningly great performance, I'll grant, but better than a loss. I still don't think this is a good idea for anyone but the most risk-tolerant investors, but I also still think there's more potential here than the market wants to recognize today.
For related Foolishness:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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