Saturday, February 19, 2011

"Our search for growth takes us to the IT and Managerial services companies, Gartner, Accenture, Syntel, and NCI information services"

Dow Jones Industrial Average 12391.25  (UP) Week Ending 02-18-2011

 The snow is finally melting here in southern Pennsylvania and the winds are rolling in which means Spring is just around the corner. This year 2011 is well underway and I am searching for areas where there is Revenue growth as well as Earnings growth. One area that looks good is the IT and Managerial services sector. No matter what is going on in the economy, data keeps growing at a rapid rate and needs to be managed. The first company I want to look at is Gartner Inc. (Symbol IT, $38.33) who just reported sales and earnings and had a very nice increase in cash flow. Gartner is projecting earnings in 2011 of $1.40 per share and 2012 of $1.76. Long term earnings are growing at 20% per year. One year Total Return on the stock is 61% and 3 year is 102.7 %, not too shabby.

The next information technology company is Syntel , (Symbol SYNT, $54.15) which has a 5 year revenue growth of 17.99%. This NASDAQ stock is projecting 2011 earnings of $2.86 per share and 2012 earnings of $3.31 per share. This stock seems pretty reasonably priced with a PE ratio of 19. Syntel Q4 revenue of $144.9M, is up 23% from year-ago quarter as just reported by GLOBE NEWSWIRE.

Accenture PLC Class A , (Symbol ACN , $53.61) is probably the most well known out of these picks because of their massive ongoing TV advertising campaign. This management service company had impressive revenues of 23.8 Billion last year, which is a big company. Earnings for 2011 are looking like $3.16 per share and 2012 is projected at $3.51 per share. This company boasts a 63.9% Return on Equity (ROE) and the Total 12 month return on the stock is 36.2% and the 3 year total return is 58%. The stock price is up  10.56% so far this year so there is still room for you.

 Now we move from large cap to small cap. Most investors are underweight the small cap sector in their portfolios out of some fear of their volatility. You need to have them in your portfolio because they will add a needed high growth dimension to your portfolio if you diversify with the right ones. I feel that small cap and mid cap stocks should be around 35% of your portfolio. Most professionals  would think that is  too high a percentage. NCI A (Symbol NCIT, $22.16) is one to include in. NCI Information Systems , Inc. has a five year revenue growth rate of 26%. The price earnings ratio on the stock is a very reasonable PE 12. Earnings per share for 2011 are looking like $1.85 per share and for 2012 are $1.99 per share. The stock had had a nice run from October 2006 to June 2009 and then has been in technical chart trouble since then. Long term earnings growth is 15%. For the fourth quarter of 2010, NCI reported record revenue of $171 million compared to $125 million for the fourth quarter of 2009, with a revenue growth rate of approximately 37%, so maybe we have turned a corner here.

I put a portfolio up on website under the name FREEWILLY'S STOCKPICKER BLOG 2011, so I will add two of these names, ACN and NCIT, there as additions. You can also find a link to this page on the right side column in the Jim Cramer section of my page. It is a great community of ideas there with both pros and regular folk contributing.  Jim has taken what Lou Rukeyser started in investment TV and amplified it to the max. He does a lot of hard work.

Have a good weekend,


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