Sniffing Out Bombs

Looking for a big-cap company that makes money--and is also an anti-terrorism play? Stake out Thermo Electron (TMO ), a maker of biomedical equipment, analytical instruments, and processing machinery for the paper and recycling industries.

Catching investors' attention in particular are its devices that sniff out explosives. The only sizable buyers of such gizmos prior to September 11 were Israel and Britain. In the U.S., the big airports had them, but funds were not forthcoming to equip every terminal. Now, all that has changed. Demand for the bomb detectors has shot up: Last year's sales of $15 million are expected to balloon to $75 million next year, figures Dennison Veru of Palisades Capital Management, which has snapped up Thermo, now at 21 a share. "We have a rolling target for the stock because of the terrorism factor," says Veru, who sees the price rising to 29 in a year.

If other anti-terrorism products from Thermo catch on, he says, the stock could shoot higher still. For example, its life sciences unit produces a detection kit for anthrax. The business is still quite small but, adds Veru, "it could grow rapidly with the war against bioterrorism." Management, he adds, is keeping silent about the details--as requested by Uncle Sam. Of Thermo's $2.2 billion revenues, $900 million comes from the unit that makes explosives-detection gear, $800 million from life sciences, and $500 million from the electro-optical unit, which makes laser systems. Veru thinks that, based on its current operations, Thermo should earn 90 cents a share in 2001 and $1.07 in 2002.

By Gene G. Marcial

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