TRADE INSTRUCTIONS
Date: June 21, 2017
Name: IPG Photonics Corp.
Symbol: IPGP (NasdaqGS)
Type: Open
Limit: Buy below $147

TRADE TARGETS
Holding Period: 3 months
Target Return: 10.2%
Annualized Return: 40.8%
Target Price: $162
Stop Loss Level: $122

COMPANY DESCRIPTION
IPG Photonics Corporation is a developer and manufacturer of a line of fiber lasers, fiber amplifiers, diode lasers, laser systems and optical accessories that are used in materials processing, communications, and medical applications. Its products are designed to be used as general-purpose energy or light sources. The Company sells its products globally to original equipment manufacturers (OEMs), system integrators and end users. Link to company website.

TRADE RATIONALE
I guess our Rapid Profits Matrix is feeling cocky after getting a 3% gain in CACC only two days after recommending it, so today it is targeting IPG Photonics as its next mid-cap sleeper pick. It’s not hard to see why; over the past five years IPGP has increased its annual revenue at an average rate of 15.8% while improving earnings at a 15.7% clip. That means the company’s management team is not resorting to accounting chicanery to improve its earnings results, further evidenced by its 38% jump in sales revenue during the past year.

This company is on a roll, using its financial muscle to acquire two companies over the past thirty days. Normally that type of activity would cause a company’s share price to drop temporarily until the financial benefits of those transactions start to kick in, but IPGP has held steady and remains near its all-time high as a result of reporting a 50% jump in YOY earnings growth and a 43% profit margin during its most recent quarter.

It appears the market for IPG’s laser products is about to get a whole lot bigger, thanks to the rapidly expanding array of AR/VR apps being used in the markets that it serves. Those apps consume a considerable amount of light and energy to run, both of which are enabled IPG’s lasers. I have put a three-month target holding period on this trade, but I wouldn’t be surprised if we hit our target gain shortly after the company’s next set of quarterly results (and forward guidance) are released at the end of July.

Note: Since IPGP has a high share price, buying deep-in-the-money call options may be a less expensive way to participate in this trade.