Investor's Business Daily, August 23rd, 2007
With most market winners, there's a hugely successful product or service that propelled them to fame.
Intel INTC created the brains for the majority of PCs. Starbucks SBUX grew into a ubiquitous brand as America developed a love affair with espresso. Apple's AAPL iPod revolutionized music listening.
In the shadow of those success stories were key suppliers, some which saw their own stocks climb in parallel form as their customers'. A number of those suppliers became market winners in their own right.
For example, makers of satellite-based navigation devices needed a company like Navteq NVT to make the mapping software. Navteq is one of the highest-rated wireless-services stocks.
Nvidia NVDA is sharing in the sales of Sony's SNE PlayStation 3 as a provider of graphics chips.
Apple turned to Synaptics SYNA to manufacture a touch wheel for the original iPod.
These are examples of what's known as cousin stocks. If you notice a company that has a blockbuster product or service, research it and look for suppliers piggybacking on that success.
How do you find cousin stocks?
This is where your stock research really pays off. You won't know about Navteq's role unless you read an article about it, or check out its Web site.
The most compelling stories are chronicled in IBD, particularly in The New America and the coverage of IBD 100 companies. The Internet & Technology section also highlights companies with important roles in the sector.
Hittite Microwave HITT can be considered a cousin to cell phone, broadband, fiber-optic and other stocks.
The company designs integrated circuits, modules and subsystems used to help high-frequency communications equipment send and receive signals. Its products are used in the infrastructure for mobile-phone services, high-speed Internet access and military radars. All those are growth sectors.
Hittite went public in July 2005 and broke out of its first base Oct. 28 of that year (point 1). It rose 133% to a peak a year later.
Of course, a cousin stock should have strong financial growth. Before its breakout, Hittite had posted quarterly EPS gains of 45% and 62%. Sales growth was 26% and 33%, and it already had strong annual EPS gains.
