In short: The first of Josh Brown's two best-stocks risk-management updates, and one of the segment's two biggest winners. The record: written up June 20th at $93 a share, up about 70% since. The quarter: "the biggest quarter in the company's 94 year history — 8.8 billion in sales, up 55%, a record 29.8% adjusted operating margin, which is itself 420 basis points" — and the reason it works, stated as a rule: "rapidly growing sales and rapidly growing operating margin — when you get that combination, of course you're going to get a stock that works." The thesis has matured from edge to consensus: "we first talked about this as a data center play that people weren't thinking about. Obviously that's changed" — data centers were 33% of sales when he wrote it up last summer, "now it's up to 43% and it is obviously the fastest growing part of the business." Risk management: "we updated our stop. We want to use 145 for investors, that's that rising 200 day… when you have a winner like this, you want to give it space" — with the practical warning that the 2-for-1 split lands tomorrow, "so all of those values will get cut in half. Adjust your risk management accordingly." Terranova adds the long-term holder's view: "we took a position in this on November 17th of 2020, $31.75. We still hold that position today because they have delivered on every metric" — roughly 400% — and, notably for a momentum manager, says the valuation is still defensible: "it's a mid 30s valuation for a company that's giving you really consistent strong revenue growth."
Amphenol makes connectors and cable assemblies — the unglamorous parts that physically link servers, racks and networking gear together. Data centres are now 43% of its sales, up from 33% a year ago, and the latest quarter was the biggest in the company's 94-year history: $8.8 billion of sales, up 55%, with an operating margin of 29.8%, itself 4.2 percentage points better than a year earlier.
Brown's rule from that combination is worth remembering: when sales and margins are both accelerating at the same time, profits compound twice over, and the stock almost always follows. He wrote it up at $93 in June and it is up about 70%.
The practical content is risk management rather than the story. He has raised his stop to 145 — the rising 200-day average — as the level below which a weekly close would change his mind, deliberately far from the current price because "when you have a winner like this, you want to give it space." And a housekeeping detail that matters more than it sounds: the stock splits two-for-one tomorrow, so every price level in your head halves overnight. Terranova, who has held it since November 2020 at $31.75, adds the valuation check — mid-30s times earnings for a business growing revenue this consistently is not a stretched price.
In short: On Evercore's top-six tech-hardware list (with Apple, Arista, Cisco, Seagate and Western Digital) and one Brown has written up off his own screen: "we've written about Amphenol, Cisco — we've done pretty much all of these names over the course of the last year." His caveat is about correlation rather than quality: "we all know these stocks trade up and down together. They're in all these baskets at Goldman Sachs, the program traders, the pod shops… I do appreciate that there are differences between them, but in the end, we all know why they're rallying."
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