All eyes are on tech companies that are either using or developing AI.

But not all of those companies meet my strict investment criteria.

So with all the attention on AI stocks, I’ve got an overlooked player for you this week.

It’s a nanotech company involved in manufacturing automation and innovation. It’s a leader in precision engineering… an area that’s out of vogue right now.

But this solid dividend payer has huge margins, an impressive CROCI score and low volatility… plus plenty of room to run up.

Get all the details on the stock – including the ticker – in this week’s video.

Click on the image below to watch it.

Transcript

How to Find Winning Stocks With CROCI

Hi, Manward family. Alpesh Patel here, CEO of an asset management company, and I want to share my Stock of the Week with you.

I really wanted to pick an AI stock. I’ve picked a few for my subscribers to my GVI Investor newsletter, but it’s testimony to the amount of hype around AI that actually, when you dig deeper, there are very few companies that you can select. And that’s why, in the end, I thought, you know what? It’s better giving you a Stock of the Week which doesn’t happen to be in AI but is more interesting than just picking something which claims to be in AI and then is just not going to deliver the goods.

So the company I’ve chosen this week, NVE Corp. (NVEC), is involved in spintronics – I’ll explain what that is in a second – and nanotechnology as well.

The company produces sensors and couplers that are used to acquire and transmit data, particularly for medical sensors, and medical devices as well.

This is a company which is in, obviously, precision engineering in many ways. And that’s an area which is often overlooked. So is the fact that a tech company like this is part of the automation and innovation of the Internet of Things and the innovation of manufacturing as well.

It’s got high-quality earnings… growing 4.3% per year over the past five years. Obviously, I’d like that number to be bigger.

It’s a dividend payer, which is good. It’s got a great return on equity and good margins as well. Margins are almost hitting 60%.

On my Growth-Value-Income rating, it scores a 7. This is my algorithm which measures companies based on their valuation, their growth, their income, and gives them a score out of 10. Anything with a 7 or higher meets my minimum criteria, which this company indeed does.

It’s got a cash return on capital invested of 27.4%. That cash return on capital invested is a very important formula that was invented by Deutsche Bank and is used by Goldman Sachs Wealth Management. You can read more about it at the links around this video.

The stock price has been doing well over the last six months.

Its Sortino meets my minimum threshold as well. This is a measure of average return versus the risk of missing it.

Volatility being below 20% makes me happy, and it’s been outperforming the market more broadly of late as well.

Turnover’s gone in the right direction recently. Profits have as well. So have pretax profits.

The sort of downside is that there isn’t a ton of data. It’s one of those companies which isn’t widely monitored, isn’t widely examined, and so we’ve got to do it ourselves.

But what impressed me about it is its return on capital employed, its return on equity and its cash return on capital invested. Those kind of quality numbers are right up there.

Not only that, the share price has gone from about $44 to $88, so it’s had a 100% rise in the past year. You might think, “If it’s gone up 100% in the year, what more is there left?” Well, actually, if that trend continues, which we anticipate to happen, there’s still more gas in the tank as it were to the upside with this one.

The P/E ratio is below what the semiconductor industry average is, and that again makes it somewhat attractive because it’s got room for upside there. And earnings have grown 56% over the past year. So good rise in profits, big spike in profits, and hence it’s paying a healthy dividend.

On a discounted cash flow basis, it’s arguably overvalued, though remember discounted cash flows can sometimes be wrong.

In terms of the share price movement… the return histogram of what could happen in the future… yes, there is some downside volatility, so it’s not risk-free by any means. But overall, given it’s in the semiconductor industry, given that it’s in a specialist area, improving automation, some of the areas which have sort of gone slightly out of vogue but are incredibly important, I feel it’s a good Stock of the Week.

Thank you.