Jabil Circuits Gave Investors A Second Chance.(THE SMART INVESTOR)(WINNING WAYS)

Byline: KEN HOOVER

Jabil Circuit looked like it was in big trouble in February 1996. It had lost its biggest customer, Quantum Corp., which accounted for 25% of its business. Investors took the stock out and shot it. It fell from the low 20s to 2.56.

But the St. Petersburg, Fla., company that makes circuit boards for other companies' products had an ace up its sleeve.

Jabil was in the process of moving its business away from making boards for PCs and computer peripherals and into higher margin businesses dealing with the development of the Internet. Cisco, 3Com and Hewlett-Packard would become among its best customers.

Savvy investors knew this and started to bid up the stock. It recovered quickly, built a 17-week base and jumped 290% in nine months.

Then investors who'd kicked themselves for missing out got a second chance. The stock built a new base and made another nice advance from there.

When it moved out of its second base in May 1997, its fundamentals sent a mixed message. Earnings for the four previous quarters were up 313%, 9%, 52% and 71%. Sales weren't as good. The year-over-year changes for four quarters were 66%, -15%, -13% and -6%. That could have caused many investors to shy away. Rising earnings and falling sales usually means the company is cutting costs rather than selling more units. You can do that only so much.