My First Long / Short Trade: Infosys and Cognizant

My first long short in my personal account: InfoSys long, Cognizant short. Lets see how it works. The portfolio right now:

a) Philip Morris (PM) - This is my favorite play on Emerging Market currencies.

b) Cinemark Holdings (CNK) - Bought when Swine Flu hit Mexico last month and the shares swooned. Is the content cycle in 2010 as good as the one this year? Probably time to exit after 2Q results, which are going to blow out consensus. I actually like this company - they seem to execute better than AMC and Regal.

c) Time Warner Cable (TWC) - 11% FCF yield ex the tax benefits. Cable video gross margins are going down, plus they need to market to compete against DTV. Unemployment is a concurrent indicator for cablecos and telcos. But if wireline telco companies can generate lots of cash when they lose 10% lines each year, I am sure cable can with 1%-2% sub loss.

d) VNV, UZG - debt securities of Viacom and US Cellular

e) Vanguard Emerging Market Fund (VWO). This is the beta.

It is an extremely defensive portfolio (55% cash) with hardly any cyclicals - too bad for me. Probably it is another 5 years before I figure out how to price commodities, and I am in no hurry.

Comments

[CitizenPat:]

I'm curious about your rationale for the CTSH vs. INFY trade? Is it strictly short-term? INFY has been hotter over the past 30 days, but CTSH clearly has the better long-term record. They're very closely correlated, though, which would seem to imply that momentum may be ready to shift back to CTSH on at least a short-term basis. I'm no expert on these kinds of trades, but I just don't see a compelling or obvious long-short play with these two companies. Don't you want to do something like that when one stock is clearly stronger than the other; for example, the way Cisco was relative to 3Com back in the day?

Cheers!

Jun 01 07:03 PM