(This is “The Best Stocks in the Market,” brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — About a million years ago (in 1998), I spent a summer pitching a stock called Flextronics, an electronics contract manufacturer based in Asia. There was a whole group of these companies with names like Smart Modular, Jabil Circuit, Sanmina, and they were rising. The PC revolution created giant companies like Compaq, Dell, and Gateway, but these companies excelled at innovation and marketing rather than manufacturing. Someone had to gather all the components, assemble the machine, box it up, and ship it to Best Buy. The guy was probably one of the electronic contract manufacturers and we had a great story. These are all Nasdaq-listed companies, and my old brokerage firm, Lou Lieberbaum (don’t ask), was creating a market in them. This meant that we had inventory under these names and therefore had a vested interest in unloading them to our customers. But they were working hard and everyone was happy. Then the “Asian Epidemic” struck, world currencies collapsed, then-Federal Reserve Chairman Alan Greenspan issued an emergency rate cut, and young stockbroker Josh Brown learned how to force his clients to honor margin calls. This wasn’t very interesting. I was 21 years old and listening to a grown man cry on the phone. Thirty years later, only a handful of these companies still exist. Today I’d like to talk about the king of contract manufacturing companies. Formerly known as Flextronics (sounds like a stock Christopher Moltisanti would pitch), it’s now known as Flex LTD (FLEX). A lot has changed in this space, with Flex moving from quickly assembling consumer electronics to doing more strategic work for customers on longer cycles. Flex designs, builds, and sources electronics for more than 1,000 companies, from Cisco to Hewlett-Packard, Apple to Tesla. The company supplies automotive electronics, medical equipment, industrial equipment, and data center infrastructure to all major technology companies around the world. They are deeply embedded in global supply chains and are moving upstream in terms of importance in product design. This mix shift is the real story and how stock prices are different than what people like me remember. Flex divides its business into two segments, the key one being Flex Reliability Solutions (FRS). This is good. Long-cycle, high-value programs in automotive electronics, medical devices, industrial equipment, and data center infrastructure. These are multi-year relationships where Flex not only assembles the critical components, but also helps design, build and manage them. Another segment, Flex Agility Solutions, is more consumer-oriented and short-cycle work. Faster turns mean more competition and lower profit margins. That’s the old flex. Wall Street has been patiently waiting for this new cycle, rediscovering many old technology names from the 1990s that were quietly biding their time. This list includes Western Digital, Sandisk, Ciena, Corning, and Dell. These are all things we’ve featured in our list of the market’s best stocks over the past year, thanks to the data center capital investment theme. You can also add Flex to this list. Without their involvement, we will not be able to ship the physical technology needed to justify $700 billion in annual AI capital spending. Founded in Singapore but operated out of Austin, Texas, the company is a proven HALO, global, and important to the game’s biggest players. Sean explains the basics. Then I’ll come back and explain breakout and how to play it. Somewhere in broker heaven, the gods are smiling on me as I revive one of my old stock pitches for you. Stocks to watch: Flex Ltd. (FLEX) Sean — Flex is a contract manufacturer. They basically build products for other companies on a contract basis. They work with a variety of brands across automotive, healthcare, industrial, communications, and data center applications. The single biggest fundamental driver is, of course, AI and data center augmentation. Flex manufactures power systems and networking hardware for hyperscalers and data center operators. The company’s data center division grew 50% year over year and is expected to grow 35% next year. Flex’s data center manufacturing has higher margins than other manufacturing products, and revenue is improving as cloud-related products become an increasingly larger portion of revenue. Gross profit margin nearly doubled from 5.5% in 2020 to 8.4% in 2025. Flex has grown its EPS at an impressive 51% per year and has reduced its share count by 27% over the past eight years. Flex’s management has vowed to use share buybacks to increase free cash flow, and the company’s stock price has increased every year except for 2018, at an annualized rate of 23% over the past 10 years. Looking ahead, the company plans to report 9% revenue growth and 20% profit growth in its next report in May. Risk Management Josh — Flex is doing what strong stocks do at high prices. It rallied to $73, but instead of retreating, it held firm and built a foundation right at the breakout level. The trend remains the same. The price is above the 50-day rally near $64 and the 200-day steady increase near $59. The bottom is even higher and there is no real sign of distribution. RSI of 62 confirms momentum without increasing. There is a gap below the price action in early March, roughly in the range of $66 to $68. If this backs up, it will be the first real test. Strong stocks don’t need to close the gap, but if they do, the price movement there will tell you everything. If you stay in that zone, it becomes just a routine shakeout. If we lose that, we’ll talk about going back to 50 days. The risk for the trader is 50 days at $64 on a closing price basis. For investors, that’s 200 days close to $59. Anything above $73 will resolve higher. But even if there is a pause, a tight move at the high, with the gap below it acting as support, is exactly how a sustained trend continues. Disclosure: (none) All opinions expressed by CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, its parent or affiliates, and may have been previously disseminated on television, radio, the Internet, or another medium. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
