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A laser-toting drone hovers outside a third-floor window at a secure military facility.
Inside the office sits an open flatbed scanner – and a computer network already infected with malware.
The Pentagon's cybersecurity system had rendered the malware harmless.
But that's where the drone's laser – a simple one you or I could purchase online – comes in.
The laser infiltrates that scanner – and takes 3.2 seconds to transmit data that takes command of the Pentagon computer network.
What happens next – "shut down defense systems"… "launch missile" – I'll leave to your imagination.
This isn't a plot line from the latest "Mission: Impossible" series.
It's a recent "thought experiment" conducted by two researchers from the Cyber Security Research Center at Israel's Ben-Gurion University.
I share this scenario not to scare you but to highlight the resourcefulness of lasers.
While you may still think of lasers as "fantasy" weapons in "Star Wars" movies, they're used for optical communications, engraving, measuring, positioning, bar-code scanning, 3D printing, surgery, and machine vision. The Pentagon is testing them as a weapon. No semiconductor could be built without them.
And the tech, defense, medical, and industrial sectors find new uses for them every day.
Indeed, MarketsandMarkets says the laser market's value will rise by 44.4% from the 2015 base year to a value of $14.7 billion by 2022.
That's a trend… a growth curve… we want to be in on.
So today let's look at a company – a laser "pure play" – with one of this market's deepest product lineups.
I've identified five reasons why this is a tech stock you want to own – and I'll reveal all of those.
But here's the reason that matters most.
Way Beyond Laser Tag
Laser weapons are quickly becoming a reality of modern warfare.
Indeed, Boeing Co. (NYSE: BA) recently received a $90 million contract to field laser pods for fighter jets by 2021. That follows a $39.3 million contract that Northrup Grumman Corp. (NYSE: NOC) received in August to develop the laser-beam director turret for this system.
Boeing and Northrup are two of the biggest and most powerful defense firms in the world today with deep expertise in advanced military technology. Their move into the Self-Protect High Energy Laser Demonstrator (SHiELD) program means this cutting-edge tech stands an excellent chance of being fielded by the Pentagon's target date.
And it would put our fighter jets well ahead of threats posed by other countries.
But as much as I like Boeing and Northrup, there's a better way – a faster-growing way – to invest in laser technology.
Beyond defense, lasers are used across the high-tech landscape: from high-output solar cells and biosensors to holographic displays and precision cutting in chip "fabs."
That's what makes Coherent Inc. (Nasdaq: COHR) such an enticing play.
The company got started in 1966 in a Palo Alto, Calif., laundry room, where its founders put together their first laser using a 220-volt power outlet and a piece of rain gutter. Today, it ranks as the world's leading laser company, with more than 5,000 employees and 20,000 customers.
But this is no "legacy" firm coasting on its past laurels.
Coherent is a full-service firm with products for defense, life sciences, materials processing, industrial and scientific uses, graphics display, and microelectronics. With this one play, we gain access to virtually every conceivable use for lasers.
Now based down the road from Palo Alto in Santa Clara, Coherent has plenty of upside ahead – in fact, it's going to double very quickly.
To see what I'm talking about, let's run it through the five filters of Your Tech Wealth Blueprint – the five "rules" we use to find top-notch market-beating investments…
Rule No. 1: Identify Companies with Great Operations
As I define it, companies with "great operations" are well-run firms with first-rate leaders.
Coherent CEO John Ambroseo is a technical master. He has a doctorate in chemistry from the University of Pennsylvania. That makes him a rare breed in Silicon Valley – a trained scientist who also is a very skilled business leader.
Since Ambroseo became CEO on Oct. 1, 2002, when Silicon Valley was still in the grips of the "dot-com bust," the stock has been a great performer, rising some 980%. That demolishes the S&P 500 during the period by more than fivefold.
Rule No. 2: Separate the Signal from the Noise
To create real wealth, you have to ignore the hype and find companies that have rock-solid fundamentals.
This is a firm that has zero hype about it. Take a look at its website…
There are no fancy slogans or dazzling graphics meant as eye candy to excite clients and investors. Instead, Coherent stands on its own merits.
The focus is on its broad range of products and applications.
Plus, this is a very well-run firm. Over the past three years, profits have risen six times faster than sales.
Rule No. 3: Ride the Unstoppable Trends
Look for stocks in red-hot sectors because they offer the best chance for life-changing gains.
There's no question that Coherent has this base covered as well. Lasers now play critical roles in healthcare, manufacturing, communications, and elsewhere. And they're set to transform our nation's defense system in the next few years.
Recall that the laser market's value stands rise by 44.4% through 2022. MarketsandMarkets observes that the main reason the market is growing so fast is because manufacturing facilities are employing lasers in greater numbers for more precise output and advanced material handling.
Rule No. 4: Focus on Growth
Companies that have the strongest growth rates almost always offer the highest stock returns.
If you just looked at the firm's sales growth, you might think it didn't pass through this filter. After all, over the past three years it has increased sales by a yearly average of just 3%.
Profit growth, however, is a much different story. During that same period, earnings per share grew an average of 18%. That's about 20% better than that of, for instance, Alphabet Inc. (Nasdaq: GOOGL), the search and mobile giant with a market value that is 115 times that of Coherent.
The firm recently set itself up for even more growth by completing the $942 acquisition of Rofin-Sinar Technologies Inc. That company serves the semiconductor, automotive, machine tool, and solar sectors and had roughly $520 million in sales for the fiscal year ended Sept. 30.
Rule No. 5: Target Stocks That Can Double Your Money
This is where we look at the firm's earnings growth and see how long it will take the firm to double profits. By doing that, we can figure out how long on average it should take for the share price to roughly double.
I've gone through the firm's financials in detail and I'm projecting earnings per share will grow by an average 18% over the next five years.
Now we use what I call my Doubling Calculator. Mathematicians call it the Rule of 72. Let's divide the compound growth rate of 18 into the number 72. We find that it should take just four years for Coherent to give us 100% gains.
Those are 100% gains you can use to fill up your retirement account – or fund a dream vacation. And you won't have to wait long.
The stock trades at roughly $202, giving it a $4.92 billion market cap. It has a forward price-to-earnings ratio that is roughly in line with the S&P 500.
That's a bargain, because you're paying the same rate as the broad market for a stock that beat the S&P 500 by 16-fold just in the past two years.
That makes owning this laser firm a great foundational play.
And you didn't need to employ bleeding-edge spycraft to find it – just our "five rules."
We'll be using them again soon – to find the next tech company best positioned to yield us hefty profits.
I'll see you then.
- Strategic Tech Investor: This Defense Juggernaut Gained 22% in 2015, but This Year Promises to Be Even Better
- Strategic Tech Investor Special Report: Your Tech Wealth Blueprint
The post You Can't Kill Terrorists With Lasers, Yet – but You Can Double Your Money appeared first on Strategic Tech Investor.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.