IPGP ===> The Gobble Gobble Winner
($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
I used to watch American Gladiators when I was all hung over and didn’t want to get up from the couch. Those were the days when no one had remote control on their TV. They had names like Hawk, Turbo, Nitro and Laser. Actually, Laser set the record for the series, appearing in 127 episodes. Laser was the only Gladiator to appear in all seven seasons of the original series. He's now a fitness guru.
Yes…Laser was my favorite…why? I guess I just like lasers.
Today I bought stock in IPG Photonics Corporation (IPGP) at 228.48. I will sell it in 4 to 6 weeks at 262.99. Here’s why I like IPGP:
First of all…look at this amazing chart:
There is nothing…absolutely nothing…about this chart which would lead you to believe that this stock is going anywhere but up. That’s a good thing. In fact, this stock is up 146% for the last 12 months. That’s about 12% per month…a pretty good clip. Now, with a trailing PE of 40, this stock might only be for the bravehearts. But there is a reason why it’s stock price is rocketing. It’s all about the bling bling ka-ching ka-ching.
IPG Photonics Corporation develops and manufactures a range of high-performance fiber lasers, fiber amplifiers, and diode lasers used in various applications, primarily in materials processing worldwide. The amazing success of fiber laser technology and its revolutionary impact on laser-based manufacturing bear the hallmarks of more widely publicized technology game changers, such as the displacement of vacuum tubes by the transistor. The analogy is apt when we consider that legacy lasers are bulky, inefficient and short lived devices which are difficult to assemble and require frequent service. Fiber lasers, on the other hand, are compact, highly efficient and robust devices which offer service-free operation through the entire application lifetime. Don’t you love when industry gets transformed? Think about videotapes, DVDs and now Netflix. IPG Photonics Corporation was founded in 1990 and is headquartered in Oxford, Massachusetts. Oxford is about 12 miles south of Worcester, MA where my Uncle Jimmy and Auntie Freda used to live…hey want a hamburg?
Just last month, IPG Photonics Corporation was upgraded by ANAL-ysts at Zacks Investment Research from a “hold” rating to a “strong-buy” rating. The ANAL-ysts know that IPGP has positive record of earnings surprises in recent quarters.
What IPGP plans to remain a leader in its industry by making fibre lasers more economical for a wide array of their uses. This will allow them to grow market share while maintaining their barriers to entry for competition. Simply put, IPG is the best of breed in the laser and amplifiers market. It makes the best fiber lasers with the highest margins of any company in this field.
Lasers are used for cutting and welding, marking and engraving, remote sensing, internet and broadband access, and for medical laser based equipment. They are also used by stupid people who shine them in pilot’s eyes when they are trying to land their planes. Brilliant! Anyway, there are hundreds of uses for lasers – but the big news is that all of the old CO2 and crystal based lasers are switching over to fiber based lasers. Why? Fiber lasers are much easier to use and much more accurate. On top of that, fibre lasers are cheaper. There is no need to get into the technical aspect of this. I read hundreds of pages about it….it makes sense. This will be a gold mine for IPGP and it will last for a while. Constant R&D expenditure is necessary in order to make the necessary innovations to maintain a leading market position. Obviously, the development of this technology requires a lot of capital.
IGPG works very closely with their customers so that they can provide the customization that best suits the need of the customer. This then marries IGPG to the customer for the long run and then IPGP can also sell the accessory components of the laser itself. IPG has a unique understanding of the industries where their products are used. Their marketing people are using the strategy of providing solutions to customers in order to fortify their sales.
The other good news is the fact that these lasers serve a wide array of different industries. As a result there is no specific customer that has a very large percentage of IPGP’s total sales. This diversification smooths out the EBITDA risk and is a primary reason why the company’s profits have grown so smoothly over the years. In recent years, IPG has made some strategic acquisitions of smaller companies (Menara, Optigrate, JPSA, ILT, Mobius, BSI) to complement their existing portfolio of product offerings. All of these companies had leading products that benefitted from IPG’s marketing presence as well as feeding the vertical integration chain that IPG has expertly constructed. It has given them access into new markets and new technologies. The accretion to their earnings has been obvious as well.
The international opportunities will be like betting on the Patriots in the Super Bowl…can’t lose! Both the Chinese and Indian markets – with their enormous capacity – are really underdeveloped when it comes to how far along they are in the laser market. The laser market is expected to grow at twice the GDP – which means that, simply put, IPG will outperform the stock market just like a the high beta stock that it is.
This company remains very healthy, with virtually zero long term debt. With an operating margin of 38%, Return on Assets of 16% and Return on Equity of 20%, this company is flying down the highway like the Corvette I don’t own.
Listen…what I know about lasers can’t even fill a hat. I don’t know the difference between a Fiber laser and Laser on American Gladiators. As far as fiber goes, all I know is that I should have more in my diet. People have told me I should use a laser to remove the hair on my back. Now why should I even care about that? Having said that, the success of this company can always be measured in its earnings and what I love to see is the story that these earnings tell you:
2009 2010 2011 2012 2013 2014 2015 2016 sales 186 299 474 563 648 770 901 1006 Income 5 54 117 145 156 200 242 261 EPS $ 0.12 $ 1.16 $ 2.48 $ 2.87 $ 3.02 $ 3.85 $ 4.59 $ 4.91
That’s quite the trend, and the ANAL-ysts are onto it, projecting earnings of $7.70 per share on 1.54 billion in sales. I don’t have much problem with these growth projections other than the fact that the macro economic growth we are seeing right now probably should inflate these IPG numbers – remember the lasers are going to grow at TWICE the economic rate. On top of that, IPGP has beaten ANAL-ysts projections by an average of 16% over the last few quarters. So if you take the $7.70 per share projection and multiply it by the historical earnings beat, you get $8.93 per share.
Now if you take the $8.93 per share and multiply it by the PE of 38, you get a share price of :
$8.93 x 38 = $339.34 which is well past my target price. Works for me.
With these laser sharp profits from this trade, I am going to run to the bank and buy about 10 turkey sandwiches.
I am HUGE!
$$$MR. MARKET$$$
I have 35 consecutive profitable trades of 15% or better. How is this possible? Every day there are hundreds of stocks setting new highs, no matter what happens in the overall market. Many of these stocks are still at very reasonable valuations. Afraid of buying stocks at their highs? Think of it this way: a new high is really a future floor for companies with solid financial underpinnings. Quantitative momentum modeling makes it easy to identify stocks that can continue this upward momentum trend. Why does this happen? It's really very simple..ask me about what investors and cows have in common. I am $$$ MR. MARKET $$$. I AM HUGE!!! Bring me your finest meats and cheeses. You can join in on the fun. Register for free and you'll be able to post messages on this forum and also receive emails when $$$ MR. MARKET $$$ makes his own trades. ($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
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Originally Posted by blindsquirrel
