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Sitel Corp. (SWW) provides outsourced customer support services worldwide.

There are many reasons why I chose to buy Sitel. The company is strong financially and has a good management team who know where they are going. The company has a lower margin than the industry, but should improve that in the upcoming quarters and years. Sitel has been slow to offshore call centers in regions where the costs are lower. They are moving more call centers offshore and will be able to increase their margins in the mid to long term. The new offshore call centers and the strong growth in revenue will help Sitel with earnings growth in the mid to long term.

The short-term valuation is cheap based on my estimate and model at current price the PE for 2006 is between 11.5 to 16 and 8.5 to 10 for 2007. The industry is in the low 20s. Based on valuation for the short and mid term, the stock should be in the range of 4.00 to 5.00$.

But that is not all. Based on my proprietary model, I think there is a good chance (+60%) that Sitel will be a target of a take over bid by either a competitor or by private equity. The more probable scenario is a private equity firm.

As you will discover in the future as you read more of my posts, I’m always looking at the big picture. In my opinion, a slow down or worse even, a recession, will probably occur in the short term. If it happens, it should be good for the industry, as many a company will try to reduce costs and outsource more.

Here are my goals with my shares of Sitel:

FUND : Long
POSITION SIZE : 1 / 3
DATE OF TRADE : August 31 and Sept. 1
BUY PRICE : 3.00$
FIRST TARGET : 4.00$
MAIN TARGET : 6.00$
STOP : 2.40$

SWW 1-yr chart:

SWW 1-yr

Source: The Long Case for Smallcap Sitel Corp.