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Bull of the Day: Brooks Automation (BRKS)

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When it comes to high beta areas of the stock market investors often under-estimate the risks involved. They see the huge reward potential but don’t properly assess the risk. Today’s Bull of the Day is an idea that lets you participate in the upside of a high beta industry while mitigating some of the risks of the underlying business. Here the high beta area is semiconductors while the way to mitigate risk is by gaining exposure to stocks which serve the manufacturing needs of these companies.

Today’s Bull of the Day is Brooks Automation (BRKS - Free Report) . Brooks Automation, Inc. provides automation and cryogenic solutions for various applications and markets. It operates through two segments, Brooks Semiconductor Solutions Group and Brooks Life Science Systems. The Brooks Semiconductor Solutions Group segment offers critical automated transport, vacuum, and contamination controls solutions and services.  The Brooks Life Science Systems segment provides automated cold storage systems; consumables, including various formats of racks, tubes, caps, plates and foils; and instruments used for labeling, bar coding, capping, decapping, auditing, sealing, peeling, and piercing tubes and plates.

Brooks is part of our Electronics – Manufacturing Machinery industry which ranks in the Top 2% of our Zacks Industry. Brooks itself is a Zacks Rank #1 (Strong Buy). A big reason for the favorable Zacks Rank is three analysts have recently increased their earnings estimates for the current quarter, next quarter and current year. The bullish sentiment has increased our Zacks Consensus Estimate for the current quarter from 23 cents to 29 cents. Our Current Year Consensus number has gone from 96 cents to 1.07.

The company is coming off a string of earnings surprises to the upside. Last quarter’s 4 cent beat was a 16.67% upside surprise versus consensus estimates calling for 28 cents. The recent surprise has helped fuel BRKS stock price. Since the start of the year, BRKS is up a whopping 61.7%. The rest of the industry is no slouch either. The Electronics -Manufacturing Machinery industry is up 18.7% YTD.

The moves for BRKS come swiftly, met by extended periods of consolidation. From early February until hitting its 50-day moving average in mid-April, BRKS moved within a small consolidation range between $20 and $22. Then over the course of one week it rallied over $26 and has been bouncing within a new consolidation range ever since. Money flows remain positive and the bullish trend is still intact.

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