U.S. markets closed

KVH Industries- Under the Radar Play on Driverless Cars

KVH Industries, Inc. (KVHI) operates in two main segments, each with a different focus. The bulk of the company’s revenue comes from its maritime internet connectivity business, explains Jason Stutman, growth stock expert and editor of Technology & Opportunity.

That’s pretty much exactly what it sounds like: internet for boats and ships. That being said, maritime isn’t really why we’re interested in KVH. The real growth story for us is in the company’s fiber-optic gyroscopes (FOGs), a kind of inertial measurement unit (IMU). 

FOGs are highly accurate electronic components that measure the orientation and movement of various pieces of hardware and machinery. Your smartphone, for instance, has a gyroscope so it knows which way you’re holding it. This is how it knows whether to orient a video or photo vertically or horizontally.

See also: Disney: A Media "Marvel"

An FOG has the same function as the gyroscope in your phone. But it uses fiber optics for a more accurate reading. This makes FOGs ideal for machinery applications that are more robust, such as industrial robotics, drones, and automated vehicles.

Lidar is essentially laser-powered radar that’s capable of mapping the surroundings of a driverless vehicle. Virtually all driverless vehicles today use lidar. The undisputed leader in lidar is a company by the name of Velodyne LiDAR. Unfortunately for investors, the company remains private.

But that doesn’t mean there isn’t an opportunity to ride that technology for profits. You see, lidar is useless without a gyroscope to orient it. For instance, if a driverless car is on unlevel ground, the lidar system needs to know. Otherwise, it would be feeding a tilted version of the world to the driverless car’s software.

That’s why most driverless cars on the road today have KVH’s technology inside them. KVH has produced hundreds of thousands of gyros, both as standalone systems and as part of its own high-performance IMUs and navigation systems.

These systems play a vital role in a range of applications. This includes robotics, mapping and surveying, and a host of other emerging unmanned and autonomous technologies.

See also: GE: "So Bad, It's Good"

Simply put, KVH makes the best FOGs in the business. This is shown by its market share and the use of its products in highly advanced projects, such as the Defense Advanced Research Projects Agency’s (DARPA’s) advanced robotics program.

Although FOGs make up a small part of KVH’s top line, our thesis is that this segment will overtake its maritime business down the line. The company has strong leverage moving forward because its technology is almost essential for driverless applications. KVH Industries is a “Buy” under $12.

More From MoneyShow.com: