CaptainJJack

Where Is the Competitive Advantage for IT Companies?

I just sold my ACN shares @$38.

I bought in at $30 primarily because I have a discipline that requires my to buy when my Stock/Bond ratios get too low. Things were spooky at the time, and ACN had a strong balance sheet.

While I agree with your analysis on competitive advantage, (I personally think that the relationships are the key source of profitable advantage because it keeps the customers you have) the issue for me has never been with the company as much as the stock.

How do you possibly value a company with a price to book greater 8 times? What kind of metrics, other than P/E, are meaningful?

I got out of ACN even though I have no issues with the company, per se. I just feel like I got what I wanted (downside protection), and I got a 20% gain to boot.

And I had no way to know whether it was still a good deal, or not.

I wish there were more info on Book-to-Bill ratios. The only hard guidance management seemed to give were sales numbers; there was not much concerning new orders.

So, I sold.

Accenture: Poised to Grow

I own Accenture, and I regard it as a very solid company.

However, I have a stop-loss at $38, and I tightened it substantially over the last few days. I expect I may be out of it over the next few weeks.

While I like the company, at the current prices, I don't love the stock, and I've learned the hard way over the years, that there is a big difference between a company and a stock.

What leads this company's stock performance is the book to bill ratio, especially in consulting, and that has deteriorated with the economy. While the stock has had a huge run, it is mostly in improving multiples and was justified by the incredible ROE, in my opinion.

But, it is currently trading at over 8 times book, so ratios such as ROE or ROI, which are based on book value, are now close to meaningless as far as the stock price goes.

From everything I can figure out, the growth rates will be flat, with risk to the downside, and the stock is trading at around a 15 P/E. I figure it is pretty much fully valued until its prospects improve.

So, I have had a great run. I started buying at 28, and most of my buy was at 30. It may go to 40, but it may fall back. I put the odds at 50/50.

In general, I am very cautious about the next few years. While I consider Bernanke and Paulson to be heros for saving us from a depression, there are going to be downsides: there isn't any area of economic activity that isn't currently backstopped in one form or another by the government, and this cannot end well.

SO I am happy the market has recovered, but as my stock/bond ratios get above my objectives, I am a seller, not a buyer.