Rady Assets

Inside Wall Street: Why biometrics maker Cogent measures up

Despite the rising threats of terrorism and identity fraud, investors have yet to gravitate strongly toward companies that specialize in biometrics.

That's the practice of verifying a person's identity through unique physiological characteristics, including fingerprints, palm prints or the eye's iris. The biometrics sector is likely "to grow at a compounded annual rate of over 25% for the foreseeable future," says Harry Rady, portfolio manager at Rady Asset Management and the top-ranked Rady Long/Short Contrarian Fund.

That's one reason why Rady is very bullish on companies that provide anti-terrorism and homeland security services to the U.S. government. He thinks biometrics will be a long-term growth industry, given the growing need to combat terrorism worldwide.

Rady, who invests in what he describes as "the best of breed" companies with profitable and sustainable business models, says his top choice in the sector is Cogent (COGT). It's a leading provider of automated fingerprint-identification systems and other biometric products to governments and law-enforcement agencies, and it continues to grow significantly, says Rady. At the end of 2009, Cogent had an order backlog of $205 million, up 22% from a year ago. Its solid balance sheet, he notes, has nearly $6 a share in cash.

With that kind of cash on hand and trading at just $10 a share, Cogent is certainly undervalued and financially sturdy, says Rady. His three- to six-month price target is $14 a share. Over the next 12 to 18 months, Rady expects the stock will hit $20.