Jabil Circuit, Inc. (JBL): A Less Obvious Play on the Big Boys Of Tech

Anyways, Jabil Circuit’s next largest customer is Cisco Systems, Inc. (NASDAQ:CSCO), which accounts for 13% of sales.  Cisco is one of the big boys of tech and is completely dominant in their field, as I wrote about in detail in a recent post HERE.  Cisco is on a short list of what I would call “5-star” stocks and is a rock solid company with plenty of growth ahead.  In terms of Jabil Circuit, it simply adds a layer of safety when considering that a good chunk of the company’s earnings are linked to BlackBerry and other volatile companies.

The third largest is everyone’s favorite, Apple Inc. (NASDAQ:AAPL), which accounts for almost $2 billion of Jabil Circuit’s annual sales, or about 12%.  Jabil Circuit manufactures casings and accessories for Apple, and iPhone 5 sales data that has been mediocre could be a large part of the reason Jabil hasn’t followed the market’s recent climb.  However, according to UBS, the company saw lower margins in the early part of the iPhone 4 product cycle, particularly the first two quarters.  If iPhone 5’s (or any Apple products) outpace expectations, Jabil will definitely be a beneficiary.

Apple is an irrational stock at the current time, to say the least.  Apple trades at ridiculously low valuations, and even if it were trading at the peer average P/E ratio of 15 (and Apple has a growth rate above the peer average), the shares would be worth $662.25, and that’s not including all of the cash Apple is sitting on.  That’s how the market goes, I suppose.  If the behavior of every stock “made sense,” we’d all be rich!

Anyways, Jabil is a nice way to get exposure to potential growth stories like BlackBerry, which maintaining stability with a list of rock-solid customers such as Cisco, Apple, General Electric, IBM, and more.  In the near term, I would expect the success (or failure) of the BlackBerry 10 to have a profound effect on the share price, but over the long run, the trend is still up as more and more electronic devices are produced.

The article A Less Obvious Play on the Big Boys Of Tech originally appeared on Fool.com and is written by Matthew Frankel.

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