From Star Wars blasters to laser pointers, few people would argue that lasers aren't awesome. But laser stocks remain relatively unknown among investors even when they consistently beat the S&P 500. The sector has outperformed the S&P 500 by 22.1% over the past month and 44.5% since the beginning of 2008, according to TickerSpy.
Here's a brief summary of the industry's five major players:
- IPG Photonics Corporation (IPGP), a vertically integrated developer and manufacturer of a line of fiber lasers for diverse applications in numerous markets, is the largest player in the laser sector with a market capitalization of $2.57 billion. The stock is also one of the top performers in the sector, rising more than 60% over the past 52-week period.
- Coherent Inc. (COHR), a supplier of photonics based solutions (read: lasers) in a range of commercial and scientific research applications, is the second fastest growing player and may be a better value at just 16x its trailing 52-week earnings. Last quarter, the firm reported on-target earnings of 82 cents per share and revenues of $190.8 million.
- II-VI Inc. (IIVI), develops, refines, manufactures and markets high technology materials and derivative precision components and products, is the third of the largest players in the laser sector with a $1.47 billion market capitalization. However, it's the only player in the sector that posted negative returns over the past six months and year frames.
- Electro Scientific Industries Inc. (ESIO), a supplier of laser-based manufacturing solutions for the microtechnology industry, is another key player in the laser sector that differentiates itself with a dividend. The company's 1.9% divided yield is perfect for investors looking to build out an income based portfolio.
- Newport Corporation (NEWP), a supplier of advanced technology products and systems to a wide range of industries, is one of the best performing laser companies over the past three months - up more than 50%. The firm recently acquired High Q Technologies GmbH, which could help add to its top and bottom line moving forward.
Numerous Catalysts for Growth
Surveying these companies' latest SEC filings, the market appears very well positioned moving forward. Most of the companies are largely focused on providing machinery to the semiconductor and other high technology industries, while some others provide components for consumer electronics and related commercial devices.
For instance, OLED TV demos at this year's Consumer Electronics Show drew significant interest and TV manufacturers are expected to ship later this year. Meanwhile, the outlook from semiconductor equipment manufacturers is improving and credit is expected to ease in China, leading to higher potential demand in those semiconductor markets.
While laser stocks are somewhat dependent on other industries, they may represent a great way to diversify into higher margin areas of the semiconductor business. This means less risk in the event of a downturn and more upside if things continue to improve.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.