Forget the Ratings, Computer Sciences Is My Stock Pick This Week

My weekly stock pick this week comes from the information technology sector, and it’s a long position. I know I said a few picks back I would be posting more short picks these days, and I will continue to do so, but for this week I want to share this global IT investment.

My investment focus for the last ten years or more, and moving forward, is on companies that have their major operations and revenues in the growing and emerging regions of the world, especially the entire area of Asia which includes China, India, Australia, Russia, and the rest of Indo-China. Hopefully Japan will restructure itself to export to other parts of the world, not just the USA, so they too can benefit in this new growth and prosperity that’s happening in these regions of the world.

My stock pick for this week is Computer Sciences Corporation (CSC).

Computer Sciences Corporation is a provider of information technology IT and professional services. CSC offers an array of services to clients in the global commercial and government markets, and specializes in IT applications. Its service offerings include information technology and business process outsourcing, and IT and professional services. Outsourcing involves operating all or a portion of a customer’s technology infrastructure, including systems analysis, applications development, network operations, desktop computing and data center management. CSC also provides business process outsourcing, managing key functions for clients, such as procurement and supply chain, call centers and customer relationship management, credit services, claims processing and logistics. IT and professional services include systems integration, consulting and other professional services. In January 2008, it announced that it has completed its acquisition of First Consulting Group, Inc. CSC direct competitors are Accenture (ACN) and Electronic Data Systems (EDS).

CSC Trade Position Setup

Long Entry with a Buy-Stop $42.92
Stop-Loss at $40.10 or more if you like.

As a general rule I do not take any more than about 8% stop-loss.

Take Profit Areas $44.33 – $45.74, $46.90 – $48.20, $49.96 – $51.34, $56.39 – $57.94, $64.71 – $66.49. Adjust trailing stop-loss along the way to protect profit on position.

Computer Sciences' 3rd quarter net earnings increased, powered by global commercial revenue. CSC fiscal third-quarter net income climbed to $179 million, or $1.05 a share, from $113.5 million, or 65 cents a share, a year earlier, boosted in part by revenue growth in its global commercial sector. Excluding items, earnings were $1.11 a share for the quarter. Analysts, according to Thomson Financial, expected a profit of $1.00 a share for the quarter. Analysts' estimates generally exclude items. Revenue rose 14% to $4.16 billion in the period ended Dec. 28 from $3.64 billion. CSC sees fiscal fourth quarter revenue of $4.2 billion to $4.5 billion and earnings, excluding special items, of $1.33 to $1.43 a share. Computer Sciences' forecast for the fiscal year's revenue continues to be $16.2 billion to $16.5 billion, up about 9% to 11%.

CSC Basic Fundamental and Technical Data

Market Capitalization $6.53B.
PE 11.65.
EPS 3.53.
Institutionally Owned 93%.
Average Daily Volume 1.71M.
2007 Net Profit Margin 2.67%.
2007 Operating Margin 4.08%.
2007 EBITD Margin 13.04%.
2007 Return On Assets 2.98%.
2007 Return On Equity 6.77%.
Employees 89,000

Fitch ratings service on February 20th cut CSC debt rating to BBB+ from A-. After the S&P and Moody’s ratings of Ambac (ABK) and MBIA (MBI) bond insurers, I don’t give this any creditability or concern right now, though I will be looking to see how CSC manages its debt going forward. These days in this liquidity credit crisis, it’s very important to be investing in companies with not a lot of debt. I prefer 50% maximum debt to equity, so in the current market environment, the lower the better to survive and capitalize.

Disclosure: Long CSC

Comments

[steveballmer:]

In other words, buy MSFT!

2008 Mar 17 08:27 AM

[Michael Mic...:]

I'm still holding long on CSC. I will post here, if and when I close my position.

2008 May 28 09:22 AM