Trading is not a game of exacts. Perfectionists need not apply. Markets are made up of many irration...
A Bubbling Tech?
11/17/2006 12:00 am EST
Kevin Kennedy has earned industry respect with his insightful stock-picking ability. Here, he harkens back to a company that saw its fortunes rise and fall in the aftermath of the tech bubble, only to be ready for a new beginning.
"There's not a lot of breakout prospects in tech land as most of the stocks have
been moving well since July or August. That leaves us either chasing really extended stocks or trolling for steady stocks that have pulled back lately and then bounced well off that drop. But here's a good prospect, Newport Corporation (NEWP NASDAQ), a leading global supplier of advanced photonics technologies to customers in the scientific research, microelectronics manufacturing, aerospace and defense/security, life and health sciences and precision industrial manufacturing markets worldwide.
"Newport's innovative solutions leverage its expertise in high-power semiconductor, solid-state and ultrafast lasers, photonics instrumentation, sub-micron positioning systems, vibration isolation and optical subsystems, and precision automation to enhance the capabilities and productivity of its customers' manufacturing, engineering, and research applications.
"Newport broke out an eight-month base at $20.18 on three-to-four times normal volume October 26, after reporting earnings the day before. It closed just two pennies shy of another fresh 52-week high Friday, the highest it's been since April 2002. Third-quarter revenues rose 11% to $114.3 million, its second straight quarter of all-time record sales. That's not bad for a company with a market cap below $1 billion. Net income for the third quarter of 2006 was $0.25 per share, or $10.3 million, compared with a net loss of $0.05 per share, or $2.3 million, in the comparable prior-year period. The prior-year period included a loss of $9.1 million, or $0.22 per share, from discontinued operations related to the company's robotic systems operations, which were sold in the fourth quarter of 2005. Sales for the fourth quarter of 2006 are expected to be in the range of $118 million-$121 million.
"The company expects earnings per share to be in the range of $0.22-$0.25. Newport comes by its Tech Bubble Survivor credentials fair and square. It traded as high as $192.06 in September 2000-and that was after a three-for-one stock split that June. It fell as low as $8.96 in October 2002. I just missed getting filled below $18 in early October, but it still looks like a real nice prospect if it pulls back a bit.
"Newport is part of the Standard & Poor's Midcap 400 Index. For more information, visit www.newport.com. Here's our possible strategy: buy at $20.53 or less with stop at $17.99."
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