Stock Spotlight: Coherent (COHR)

However much the ranks of our top Long Term PowerRatings are filled with recession-beating stocks from industries like utilities, drug manufacturers and personal products, we still seem to come across the occasional stock that has high Long Term PowerRatings of 9 or 10, yet comes from a lesser-known industry.

Often, these stocks can be particularly valuable additions to a stock portfolio because they are relatively unknown to the wider investing public. Consider a stock like Edwards Life Sciences (EW@EW | Quote | Chart | News | PowerRating), which was just featured here at PowerRatings.net. This company is the biggest heart value company in the world, a major player in the medical equipment industry, yet many investors - even those with portfolios loaded up with healthcare stocks - have never heard of them.

Another stock that many investors have likely not heard much about - but perhaps should - is Coherent Inc. (COHR | Quote | Chart | News | PowerRating). Coherent Inc. is a member of the Scientific and Technical Instruments industry group - in fact, Coherent is the highest rated stock in that group, ahead of the 8-rated Dionex Corporation (DNEX@DNEX | Quote | Chart | News | PowerRating). The company is in the business of using photonics - such as lasers and precision optics - to serve customers and clients in a variety of scientific and research industries.

Coherent has a Long Term PowerRating of 9 and comes from an industry with a PowerRatings of 9. With regard to the stock, we found through our research that stocks with Long Term PowerRatings of 9 have been both more reliable and better performers than the average stock. Specifically, we found that 9-rated stocks were higher one year later more than 79% of the time. Stocks with Long Term PowerRatings of 9 have also tended to gain, on average, more than 18% after one year.

Compare both of these statistics to those of the average stock, which has been higher less than 68% of the time after one year according to our research going back to 1995. The average stock has also significantly underperformed the 9-rated stock, tending to gain between 12-13% on average in a year's time.

Coherent is trading in the top half of its 52-week price range from $34.15 to $26.99. The company last reported earnings in April, blowing away analyst estimates by more than 13 cents. Coherent next reports earnings on July 24th, with analysts anticipating EPS of 0.32.

I mentioned that Coherent comes from the Scientific and Technical Instruments industry. This industry group has an Industry PowerRating of 9. Our research into industry group behavior between 1995 and 2007 indicates that industries with PowerRatings of 9 have produced average annualized returns of more than 24%. This is more than 900 basis points above the performance of the average industry group.

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David Penn is Senior Editor at PowerRatings.net.