Intevac: Cheap Hard Disk Stock

NEW YORK (TheStreet) -- The amount of data we are flooded with each year seems to grow at a jaw dropping pace. Both the disks we use to store dramatically more information each year and the number of electronic devices that require storage are growing as well. This fundamental demand is behind the huge gains in stocks of the players in the disk drive industry.

Industry leaders Seagate(STX), Western Digital(WDC) and Sandisk(SNDK) have all seen their shares rise dramatically since the March lows of last year when orders dried up during the financial crisis. All three stocks are relatively cheap and are well positioned for the future. All three are well covered by Wall Street and publicized by the press. In the middle of fierce industry competition and staggering technology advancements, one industry small stock story seems to have been missed even though its stock has also performed well.

Industry player and suspension assembly provider Hutchinson Technology(HTCH) reported Tuesday a loss of 67 cents versus estimates of a loss of 11 cents and the stock was off 22% in the after hours. While HTCH's difficulties seem to be contained within the suspension assembly market, sympathy selling is providing a good buying opportunity for other stocks in the industry in the short term. We are not recommending HTCH at this time but suggest instead investors move up the value proposition food chain.

Intevac(IVAC) is the leading supplier of magnetic media processing (also called sputtering) equipment to the hard disk industry with a 60% share. Cannon's(CAJ) Annelva subsidiary is the other sputtering equipment provider and also a cheap stock well positioned for the future. Intevac also has a small but rapidly growing photonics business that sells night vision products to the U.S. military and one NATO customer.

Intevac's $4.5 million - $5 million sputtering tools are used by hard disk manufacturers like Seagate and Western Digital to produce hard disk drives. The company's stated charter is to use "lean thinking" to continually develop new technology processes into tools that help manufacturers be more efficient. Intevac has announced orders for 28 tools to be shipped in 2010 and its backlog has swelled as customers aggressively bring on needed capacity to keep up with the demand for storage.