U.S. stock markets put in a mixed performance last week, with the Dow Jones pulling back 0.41% and the S&P 500 trading mostly flat.
The rebound in technology stocks continued with the NASDAQ recovering 1.01%. The MSCI Emerging Markets Index also jumped 2.06%, as global stock markets regain their mojo.
This week’s Bull Market Alert recommendation keeps you in the rip-roaring tech sector, which has had a strong start to 2017.
Founded in 1961 and headquartered in Andover, Massachusetts, MKS Instruments, Inc. (MKSI) is a leading worldwide developer, manufacturer and supplier of instruments used to analyze gasses in semiconductors. The company also provides additional related products such as optical filters and fiber optics cables, as well as magnetic and optical storage devices.
As the chart below confirms, MKS has had a quite a run over the past three months.
MKS Instruments, Inc. (MKSI) versus the S&P 500 over three months.
Here’s why I expect MKSI to soar in the coming months.
First, the overall semiconductor market in the United States has been improving by leaps and bounds, driving MKS’ revenues higher. In Q3 2016, the company’s top line surged a whopping 82.3% year over year. In Q4 2016, MKS Instruments projected revenues up to $410 million versus $172 million in the same quarter a year prior. MKS is a serious growth story with the stock’s projected sales expected to climb 58% next year with earnings per share rising by 31%.
Second, MKS has boosted its profits by some well-timed acquisitions. Its buyout of Newport Corporation last April will generate $35 million cost savings over the next two to three years. The acquisition also expands the company’s potential market roughly by $4.8 billion through Newport’s portfolio of products.
Third, MKS is laser-focused on improving its operational and financial efficiency. Last year, the company improved gross margins by 50 basis points. Moreover, MKS also lowered its long-term financing costs by repaying certain high-interest-rate loans early.
Finally, MKS is also a new favorite among the top-performing small-cap strategies I track. The stock’s forward price-to-earnings (P/E) ratio of 17 also makes it a bargain for this kind of a growth stock.
MKS’ current target price of $74.00 means that there is almost 20% short-term upside in the stock.
So buy MKS Instruments, Inc. (MKSI) at market today, and place your stop at $54.00.
I am holding off on recommending options on this one for now.
Portfolio Update
You stopped out of Masimo Corporation (MASI) on Friday at $71.69 for a 23.82% gain.
The Chemours Company (CC) rocketed 15.55% last week, as the stock recovered strongly.
Click here to view the Portfolio Update table.
Sincerely,
Nicholas A. Vardy
