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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerAmphenol Corporation (NYSE: APH) makes
electrical connectors and cables for communications, medical, aerospace, military and industrial systems. The firm's connectors are used in computers, aircraft, cars, office equipment and medical instruments. Its coaxial cable goes to cable TV clients and its flat-ribbon cables are used with computer and telecommunications products. Amphenol ships to more than 10,000 customer locations around the world.
Investors were pleased last week, when the firm reported Q1 EPS of 54 cents and revenues of $770.7 million. The Street had been looking for 51 cents and $748.1 million. The CEO noted particular strength in the military, commercial aerospace, wireless infrastructure and mobile device markets. Management also guided Q2 EPS to 57-59 cents (55 cent consensus), Q2 revenues to $820 million ($775.44M consensus), FY08 EPS to $2.26-$2.31 ($2.23 consensus) and FY08 revenues to $3.21 billion ($3.15B consensus). Deutsche Securities and Lehman Brothers subsequently reiterated "buy" ratings on the issue.
The stock
popped on the news and then passed into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers recommend the shares with three "strong buys", five "buys" and four "holds". Analysts expect a 20% average annual growth rate, through the next five years. The APH Price to Free Cash Flow ratio (24.73), Operating Margin (19.54%), Return on Assets (14.90%), Return on Investment (18.07%) and Return on Equity (33.92%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $32.13 and $47.24. A stop-loss of $39.20 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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