Top 10 Takeaways:Too Early To Tell How June Will End Up Data Points for Your Investment Mosaic – Market Analysis
KEY POINTS:
1. Barron’s article “The New Death of Equities” cites among other things a Financial Times story discussing the death of equities as being a potential contrary indicator (5/26/12). Let’s hope they are right.
2. Virtusa confident regarding business prospects (5/30/12). Takeaways: pipeline is healthy and converting, starting new and delayed projects, demand is stable in larger relationships, and margin expansion is expected even at the lower end of guidance. VRTU’s current positive growth inflection point could work in its favor and support results through a downturn.
3. CIO.com article “Getting More Business Value Out of Vendors” discusses how CIOs can get more out of outsourcing vendors (5/30/12). Methods include requesting a overarching relationship manager to discuss your company’s culture/mission & properly documenting and tracking objectives.
4. Syntel focused on growth in accounts 6 to 20 (5/31/12). Takeaways: the company is incentivized to drive growth in account 6 to 20, high level of keep the lights on type work (2/3 of business), and exposure to Europe minimal (6%). SYNT greatest assets is its margin leverage and ability to protect earnings especially if revenue growth slows.
5. Questions surrounding the Spanish bank bailout’s weigh on markets (5/31/12). Given the fragmented European approach to the issue, resolution to Europe’s financial woes should take awhile. The biggest impact to our coverage could come from customers who receive less revenue from their business in Europe deciding to hold back spending.
6. Still a little too early to tell how the June quarter will end up (5/31/12). June is a crucial quarter from a spending perspective because outperformance would take pressure off the second half of the year results.
7. Demand environment is a mixed bag with pockets of strengths (retail & manufacturing) and weaknesses (capital markets) (5/31/12). No one is immune from a macro slow down. We suggest investors focus on the quality of the business model.
8. Just sitting here wondering: how much of the bad news out of Europe and potentially weakness in the second half of 2012 is built into present stock prices.
9. CGI group (Canadian IT & business process services company) buys Logica (U.K.) for $2.65 bn in cash giving it a European presence(5/31/12) . The acquisition could be a start of an M&A trends as vendors supplement slowing growth. Europe’s current woes could open the continent to outsourcing further down the road.
10. Celtics waste a great performance from Rondo in Game 2. Wade and James getting a fair share of foul calls.
For more information, please contact:
Joseph D. Foresi
617-557-2972
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