When Kiplinger Magazine asked some outstanding money managers to list a few of their favorite picks, Israeli business software & services darling Amdocs, was one of their select few.
Thornburg Core Growth manager, Alex Motola, (whose 3-year batting average has shown more than twice the performance of the benchmark Russell 3000 Growth Index (IWZ)), says that he searches for, “highly sustainable, growing franchises that are selling at reasonable prices and that are not subject to constant technological innovation or price competition.”
According to Kiplingers,
His largest position is in Amdocs (DOX), a billing-software and customer-care provider for the telecommunications industry. Clients such as Sprint Nextel and Bell Canada hire Amdocs to install software and operate billing and customer-care applications. Between Amdocs’ rising profit margins and recovering stock values in the telecom sector, Motola still sees good upside in the shares, which trade at 17 times estimated profits.
Amdocs recently announced a deal with the largest multi-play provider in Romania to further differentiate with innovative satellite TV, next-generation broadband Internet, and number portability offerings. And, a week before that, Kazakhstan’s largest telelecom operator selected Amdocs to support its delivery of Next-Generation Services. Amdocs’ Billing and Mediation Solutions will enable Kazakhtelecom to offer innovative IP-based services.
Amdocs had revenues of $2.48 billion in fiscal 2006, and has over 16,000 employees. It serves customers in more than 50 countries around the world. Although it might be considered expensive compared to some of its competitors (It has a P/E (ttm) of about 25 compared to some of the cheaper plays who have ratios in the 15 to 20 range), when looked at against the industry with an average P/E of over 30, the stock seems to have potential. And moreover, its year over year revenue growth is beating the industry (17.5% vs. 16.4%). If Amdocs can keep signing new deals, then maybe Alex Motola will be proven right in his bullish outlook for the stock.
Disclosure: Author’s fund is long DOX as of June 12, 2007.
DOX 1-yr chart
Douglas Goldstein is the Managing Director of America Israel Investment Associates, LLC.