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Tuesday July 03, 2012
Avery Dennison: Bargain bet on RFID
by John Persinos, editor of Personal Finance The use of RFID makes organizations more efficient, by allowing managers to locate any item, pallet or person with pinpoint accuracy. Think of them as barcodes on steroids. Avery Dennison (AVY) sold more than a quarter of all RFID tags in 2011, making it the clear market leader. Wal-Mart mandates that all of its 15,000 suppliers attach RFID tags to their pallets, to help Wal-Mart with inventory control. And each item sold to the US military ia marked with an RFID tag. In addition, the FDA has approved RFID tags for implantation within the human body, paving the way for their use in medical treatment and pharmaceutical testing In 2004, Avery Dennison -- and old-line, but farsighted compan -- anticipated the rapid growth of RFID applications and created a special division dedicated to the design, manufacturing and marketing of them. The RFID division is now the fastest rising at Avery Dennison, more than tripling in revenue from $50 million in 2010 to over $150 million in 2011. Although it’s still a small portion of the company’s $6.3 billion in annual sales, the potential upside is huge, given the company’s foothold in superior RFID technology, combined with its longtime supply chain expertise. Management views RFID as Avery Dennison’s single largest long-term growth opportunity and expects RFID revenue to reach at least $500 million by the end of 2012. Importantly, the company’s RFID technology is superior to that of its competitors, largely because its RFID tags can read at any angle to produce better read capture rates. Now priced at a bargain, AVY is poised to reap the benefits of inexorably rising demand for RFID. Coupled with its growth prospects, the stock also sports a healthy dividend yield of 3.7 percent. Buy up to 34. Learn more about this financial newsletter at John Persinos' Personal Finance. Related articles: 
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