Stock Index: Week Ended Nov. 28, Channel Stocks Enjoy Holiday Rally

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Investors loaded up on turkey, stuffing and channel stocks last week.

Indeed, the Ziff Davis Channel Zone Stock Index rose 3.97 percent for the week ending Nov. 28, closing at 1063.46. Tech Data Corp. (TECD), Agilysys Inc. (AGYS), DiamondCluster International Inc. (DTPI) and PC Connection Inc. (PCCC) led the rally. Advancers beat decliners by a whopping 9-to-1 margin. Of our 30 index members, only Covansys Corp. (CVNS) slid more than 1 percent during the week.

Tech Data shares led last week’s rally, rising 13.01 percent. Investors cheered the Clearwater, Fla.-based distributor’s 3Q results announced on Nov. 25. Year-over-year quarterly sales rose a healthy 15.3 percent to $4.4 billion. Net income slipped to $26.5 million, down from $32.8 million from the corresponding quarter last year.

Nevertheless, the results beat Wall Street’s expectations and Tech Data CEO Steven A. Raymund pointed to “improving demand conditions” within the channel. Tech Data’s results lifted shares in other distributors, including Agilysys (AGYS, +11.93 percent), Arrow Electronics Inc. (ARW, +5.94 percent) and Ingram Micro Inc. (IM, +5.65 percent).

A note of caution about Agilysys (formerly Pioneer-Standard Electronics): Some customers and journalists are confusing the distributor with Agilisys, a software company in Atlanta. At least twice in the last three months, the Dow Jones newswire has incorrectly linked Agilisys news to Agilysys, according to TheStreet.com.

Meanwhile, DiamondCluster (DTPI, +11.43 percent) shares have risen sharply from $1.38 earlier this year and are closing in on the $10 mark. The Chicago-based management consulting firm nearly drowned during the dot-com implosion, but DiamondCluster has righted its ship. During the first six months of its fiscal year, sales dipped only 7 percent to $82.6 million and net losses before certain charges shrank 82 percent to $9.6 million. Analysts expect the company to announce a 3Q profit on January 29, according to Earningswhispers.com.

PC Connection shares also rallied last week, climbing 12.18 percent after its lenders affirmed a $45 million line of credit to the Merrimack, N.H.-based IT solutions provider. In mid-November, PC Connection shares nosedived when the General Services Administration (GSA) canceled a lucrative government contract with the direct marketer of IT products.

The week’s only major index decliner, Covansys (CVNS), saw its shares slip 5.66 percent. Covansys investors apparently used the week to take some profits off the table. Shares in the company trade for about $9, up dramatically from a 52-week low of $2.15.

The Ziff Davis Channel Zone stock index tracks 30 channel-related stocks on a weekly basis. We don’t recommend buys, sells or holds. Rather, the index seeks to measure the channel’s financial health. We launched the index on October 24 with a value of 1000. Each stock in the index is equally weighted. For example, if one stock rises 5 percent and another falls 4 percent, the net result is a 1 percent gain.

Joseph C. Panettieri (joe_pan5@yahoo.com) has covered Silicon Valley since 1992. He is editorial director of the New York Institute of Technology and founder of JCP Media Inc.