Top Stocks for 2013: #1 OSIS

OSI Systems provides the screening equipment for baggage, parcels, people and trucks to airports, docks and truck stops across the world. As travel and dangerous technology becomes more available to the world, there will need to be many more places incorporating screening equipment such as schools, stadiums, malls and so on.

The stock has recently sold off from around $80 to $50 due to an accusation of malfeasance made to the TSA about machine performance. The safety performance is not the issue (3:00 mark), it was the privacy software that turned the full body scan images into stick figures. During the hearing, the TSA agent says that he suspects OSIS manipulated the operational test but confirms that there were independent studies conducted that verified OSIS claims (2:10 mark). Even if TSA does eventually find proof, both Oppenheimer and Benchmark believe the impact on OSIS would be minimal.

OSIS has a FPE of 16, PEG of 1, little debt, and an EPS expected growth rate of over 25% for the next 5 years. With these fundamentals and being the leader in an industry I expect to grow significantly this year and the next several years, I think OSIS has potential to be a 10 bagger in the next decade from its current valuation of $1.3 billion. 2013 end of the year target is $120, an 85% rise from current levels. Stop beneath $60 then look to reenter.

Top Stocks for 2013: #3 SIRO and #2 ALGN

I love the dentist!  Not because it is an enjoyable experience (though it is vastly improving every year) or because it makes me healthier and more attractive. No, I love the dentist because the dental industry is an industry that is going to explode with the improvement in life quality for billions of people worldwide. As billions of Chinese and Indians join the middle class they are first going to try and improve their appearance and their health. The dental industry, and specifically SIRO and ALGN, are perfectly positioned from this boom.

Sirona Dental Systems, SIRO, provides the dental equipment, while Align Technology created Invisalign. Invisalign is the next generation of braces where they 3D scan your teeth and 3D print clear molds for your mouth to gradually straighten your teeth. Millions of teenagers world wide will owe ALGN their eternal love for saving them from mangled cheeks, excrutiating braces tightening at the dentist office, and walking around with half your lunch stuck between your braces.

SIRO has made a significant move this year, but with a FPE of 17 I think this stock can trade to $95 (FPE of 25). This would indicate an upside of 46%. I would place a partial stop beneath 60 and another full stop beneath 55, risking about 10% on the first half of your money and 15% on the 2nd.


ALGN missed earnings and sold from $40 to $25. I like buying in the $25-$28 range with a stop beneath $22, risking about 17%. With a FPE of 23, I think this stock can easily return to its high of $40 and even reach $50 by end of year for a return of 75% from current levels.


I see SIRO and ALGN as major long term positions (several years) and part of a major theme I want to be invested in long term. I think 2013 is the year to begin building positions in the dental industry and as of now these two stocks are my favorite.

Top Stocks for 2013: #4 FARO

FARO Technologies design, develop, and market portable, computerized measurement devices like measuring arms, laser scanner and laser tracker and software. FARO's products allow manufacturers to perform 3-D inspections of parts and assemblies on the shop floor.

FARO is in a high growth industry and seems fairly stable fundamentally with no long term debt and quick and current ratios above 4.5 and 5.5. It also has $8.50 in cash/share. The FPE of 22 and PEG of 1.25 indicate that his stock is fairly valued for its growth. However, with the inflated PE and PEG ratios the market has given other 3D printing plays, I expect to see this stock trade significantly higher from the current level of $35. The market cap is $600 million and I can see this being $1.5 billion within 2 years. 

My conservative price target for FARO at the end of 2013 is $45 a share, a 28.8% increase from current levels. Since the stock is still below 50 and 200 moving average I would not purchase at this time, as consolidation still needs to occur for a healthy break from the base with moving averages beneath. The 52 week low and double bottom is at $31.98 a share and where I would place my stop for this investment. I am a buyer in the $33-$35 range once the 50 day moving average flattens out, or I am a buyer on a break above the 50 day and a retest. 

Top Stocks for 2013: #5 OPEN

With a FPE of 25, a 33% short interest and no long term debt, my #5 pick for 2013 is OPEN. The nice thing about OPEN is the time to buy could be any day.  Trading above the 50 and 200 day moving average, the stock recently broke above resistance at $48 and is basing above it nicely. With a strong business model, and acquisition potential (GOOG would be killer), my price target for OPEN is $100 which is 17% below all time highs. I'd be comfortable buying here for a trade with a stop below $45 for a move to $65. I'm more comfortable buying this for a long term hold (will begin this position on Wednesday), buying a little here, adding on either above $50 or at $45 with a stop beneath $40 and profit target of $100.