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Tech stocks - Friday, July 25, 2008

Coherent Is More Than A Logical Choice For Investors

As we watch the Dow drop like the San Diego Padres in the National League West, it reminds of some statements Bank of America (BOA:NYSE) CEO Ken Lewis made earlier in the week how the economy is beginning to turn the corner. Mr. Lewis might have been trying to distract reporters from inquiring about the Countrywide acquisition but the latest report from the National Association of Realtors saying that home sales have hit a 10-year low. With home sales 15.5 percent lower than a year ago and the media home price dropping 6.1 percent, this doesn't give the impression that the housing market is turning the corner. We would suggest that Mr. Lewis look out the window once in a while on the limo ride home each day and view the "for sale" signs in Charlotte.

With investors in need of something positive today, we at tech:stocker decided to take a look at Coherent (COHR:NASDAQ). According to their press releases, Coherent is a world leader in providing photonics based solutions to the commercial and scientific research markets. For the non-technophiles reading this, they make lasers. Coherent's lasers service the following markets: microelectronics, materials processing, OEM components and instrumentation, scientific research and government programs, and graphic arts and display.

To Coherent's credit, they have delivered positive yearly earnings over the last two years and are expected to have a solid fiscal year in 2008. Occasionally Coherent delivers a dud one quarter but rebounds in the following quarter.

What we like most about Coherent is the remarkable consistency in expenditures from quarter to quarter. Research and development costs have only increased by a little over a million in the last three quarters while its selling and general administrative costs have barely fluctuated.

On the lighter side, Coherent is involved with several charities including Sunday Friends, Athletes Racing For Charity, Habitat For Humanity, and Housing Trust. While their charity work is not a reason to pour in your hard-earned "Benjamins", it's good to see that a company this consistent in its actions still finds time to help others.

So why shouldn't you buy this stock? The only reason we can come up with is that Coherent's stock price has grown steadily recently and is currently near its 52-week high. While the stock still has room to grow in our opinion, conservative investors might want to wait for the fiscal third quarter earnings report.

The Web site is a little lacking in information but if providing viewers with little thing like management bios and a more informative press section would cause the company to lower its earnings, then we can live without the information.

Overall, Coherent belongs in any tech portfolio and should continue to deliver solid returns over the next 12 months. We at tech:stocker wish more companies were this consistent.