Meyer Burger AG: On the 'Cutting' Edge of Success

What happens when a highly specialized industry begins to grow very quickly? Solar power, one of the fastest growing of alternative energy sources, relies on a system of very specific machinery to work successfully. But market growth has lagged behind demand due to a bottleneck in the manufacturing process -- in the production capacity of poly-silicon, a vital component in photovoltaic cell production.

I think the potential for a company that could help break-up that bottleneck could be really extraordinary, and that's why I'm recommending Meyer Burger [MBTN: Swiss Exchange] as one of my best picks for 2008.

Meyer Burger is a market leader in a small but incredibly important market, technology-wise -- the manufacturing of machines that contain highly precise saws for cutting silicon and other crystals for use in solar power, optics and semiconductors.

Why I am so excited about a company that makes saws, of all things? High tech companies are like any other manufacturing business -- without the right materials, there's no product. And their materials can't be ordered from just any supplier -- the specificity of the product means that there are often only a few companies in the world that can get high tech manufacturers what they need. And so, when a high tech industry like solar power or semi-conductor manufacturing takes off, demand quickly outstrips supply, and prices go up in a big way.

Meyer Burger is a great pick here not only because it's part of an about-to-be-booming industry, but because it is poised to take the most advantage of it. The company is already a powerful player in its field; Meyer Burger and its competition, HCT Shaping Systems, currently control about 68% of the market. But beyond that, Meyer Burger is looking to expand in a big way: It has increased production capacity by 300% in the past year, and is expected to double that by the end of the first quarter of 2008.

The company is also branching out into bricking machine production -- a machine that breaks up the material before it is run through the splicing process done by Meyer Burger's saws -- and the company expects demand for these machines to grow in tandem with the growth of the industry as a whole. All of this means that Meyer Burger is ideally placed to take advantage of a market that is desperate for its product, and increase supply to keep up with demand.

Goldman Sachs says that Meyer Burger, which only trades on the Swiss market, is significantly undervalued, and have anointed Meyer Burger a conviction buy. I couldn't agree more -- I fully expect this stock, which is currently trading in the mid SFr300s, to easily hit SFr500 within the next 12 months.

Type of Stock: Meyer Burger is a leading supplier of high-precision machines with wire saws, band saws and ID / OD slicing systems for cutting hard and brittle materials such as silicon, sapphire or other crystals.

Price Target: Goldman Sachs is anticipating that the forthcoming third quarter earnings will report continued revenue growth: I agree with Goldman Sachs and see 50% upside in the near-term. Currently trading at SFr 364.00, expect SFr500 in short order.

Disclosure: The author is the beneficial owner of shares (long) of Meyer Burger.