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High-speed networking is a hot topic these days. It's also a very investable trend. A basket of popular stocks in the optical networking subsector would have brought you a market-crushing 48% return over the past 12 months, thanks to stellar performances by Emcore (Nasdaq: EMKR ) and JDS Uniphase (Nasdaq: JDSU ) that easily overcame Oclaro's (Nasdaq: OCLR ) disappointing 30% drop.
So what's new and investment-worthy in this exciting sector?
Just the numbers, please
We've seen three big optical names reporting earnings in the past month.
- Components builder Opnext (Nasdaq: OPXT ) missed Street estimates on both the top and bottom lines, though next-quarter sales guidance was right in line with analyst expectations. The bad news isn't all Opnext's fault: The disasters in Japan put a 10-day kibosh on operations in one of the company's factories. The market took a generous view of it all, sending the stock up by 31% the next day -- but Opnext still trades about 30% below where it was before the tsunami and quakes.
- Fellow components maker Oplink Communications (Nasdaq: OPLK ) felt no impact from the Japanese calamity. The company beat estimates but then issued downright pessimistic guidance. Oplink shares fell more than 10% the following day and have been trading sideways ever since.
- All-around optical giant JDS Uniphase, on the other hand, delivered on all its promises to unlock a cool 10% overnight jump. While the competition complained about bloated customer inventories, JDSU simply executed and came out looking great.
In other news
Besides the earnings chatter, the big sector news recently comes on a macro level. Google (Nasdaq: GOOG ) has not only picked a site for its initial ultrafast optical consumer network in Kansas City, Kan., but has also expanded it to the much larger neighboring community of Kansas City, Mo.
Pulling fiber to the curb of every household and public building in the twin Kansas Cities will require a great deal of digging and installing fresh equipment. We don't know exactly who stands to benefit from this suddenly huge project, but it's a fair bet that the usual suspects will show up: It's hard to build a large-scale optical network without involving Opnext, Finisar (Nasdaq: FNSR ) , and JDS Uniphase in the process.
Short of putting real money into networking stocks, the best way to keep track of what's happening in the sector is to add a few strategic tickers to your Foolish watchlist. Get started here with all the optical specialists mentioned in this story. To dig a bit deeper into the networking world, you should check out this free report that details a small but rising star in the industry. It's the Fool's pick for the best stock of 2011, and the report is available right now at no cost to you.