We've often said that the obvious can't help you in the stock market, but it can when others refuse to see it. I took a bit of "Oh yeah," following my last look at Ceradyne (NASDAQ:CRDN), in which I noted that despite the firm's strong recent performance, it was on track to continue to excel. Of course, the stock flopped, but who cares?
I look at the Street's fits about this stock -- and it does have fits -- as buying opportunities, not cause for ulcers.
Today, Ceradyne announced yet another $60.1 million order, part of the $462 million indefinite delivery/indefinite quantity contract it received last year. Today's contract news sent the stock up, then down, and, well, who knows where it will land? The stock's hyperactivity isn't much of a surprise, but neither are the orders.
During the conference call, CEO Joel Moskowitz detailed the firm's strong guidance for the coming years, noting that some of the contracts that underpinned those numbers would be appearing within days. And so they have: one for $18 million from the Air Force on Oct. 31, and a Marine Corps contract worth $6 million a week later.
Defense is not Ceradyne's only gig, but it is providing a lot of the recent growth. Despite worries to the contrary, this growth looks likely to continue for the foreseeable future. And unlike the complex, billion-dollar war-fighting systems made by big defense contractors such as Lockheed Martin (NYSE:LMT), Boeing (NYSE:BA), or Raytheon (NYSE:RTN), Ceradyne's technical armor is a simple, effective solution that's got a lot of public mindshare. It's not the kind of thing that can be easily ignored.
Moreover, as Ceradyne increases its capacity, it increases the odds that it will win more of these contracts, since Uncle Sam tends to give the business to those best equipped to provide. That's why I encourage Fools to give the latest conference call another listen and take a look at what Ceradyne's doing. There's a lot that's obvious here, which has yet to be fully appreciated by the outside.
Related Foolishness:
- Ceradyne's Wild Ride
- What's Ceradyne Up To?
- Check out Ceradyne by the numbers.
- Know your chickens.
If you're interested in other small, Ceradyne-like performers that the Street has yet to fully appreciate, take a free trial of Motley Fool Hidden Gems .
At the time of publication, Seth Jayson had shares of Ceradyne, but no positions in any other company mentioned here. View his stock holdings and Fool profile here. Fool disclosure rules are here.
