Bill Gunderson's Radio Play of the Day: My Favorite Drone Stock

Tickers in this article: TDG
NEW YORK ( TheStreet) -- I am getting really paranoid these days. I listened to part of Sen. Rand Paul's filibuster the other day. It would seem that my government can now take me out with a drone strike without due process. Bin-Laden's son gets a trial by jury, but I have drones buzzing over my head that are ready to strike.

What is wrong with this picture?

There is nothing wrong with the following picture. This is a one-year chart of TransDigm Group (TDG) , a leading maker of drone parts.

Somehow drone parts sound like something that are a part of my Chinese McNuggets, not ears and eyeballs in the sky spying on our every move.

Oh well, if you can't beat them, you may as well join them. Let's invest in these drone parts as they seem to be everywhere and they are not going away anytime soon.

While like most of you I enjoy a good stock chart just as much as the next guy, I have two other very important requirements before I buy a stock.

If you would also like to hear the audio analysis of TransDigm from my daily radio show, click here .

When I find a good chart that I like, I next look at the performance of the stock over the years.

Data from Best Stocks Now App

As you can see, TransDigm has handily outperformed the market over the last five, three, and one years. It has also outperformed the market over the last three- and one-month periods of time. The stock even beat the market during that fateful year of 2008.

With this kind of stock performance, there must be something to my drone paranoia. This stock has been quietly racking up big returns while I am going to work every day. I am going to start looking up in the sky more often!

Although I love strong stock charts and superior performance, I also worry about valuation. I have had valuation paranoia ever since the dot.com bubble. What do I have to pay for this maker of drone parts?

Data from Best Stocks Now App

With a forward PE ratio of 18.8 and an estimated five-year growth rate of 15% per year, I am currently paying a slight premium to the growth rate. The PEG ratio comes in at 1.25. It's hard to ignore that chart and performance, however.

When I calculate a five-year earnings estimate and apply a reasonable multiple, I come up with a target price that is about 75% higher than where the stock trades today. Not bad, but I like 80%-100% upside potential.

It is hard to argue with that chart and performance, however.

Transidgm is a mid-cap stock that is headquartered in the drone capital of the world, Cleveland, Ohio. I wonder if the Patriots will have any drones flying over the Browns' football practices this coming year?