Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

3 IT Stocks to Buy in 2013: Cognizant Technology Solutions Corp (CTSH), Accenture Plc (ACN)

Page 1 of 2

2012 was a tough year for IT stocks with major cutbacks in IT spending. For this year, things seem to be settling down, with market optimism surrounding this industry as well as increased IT spending. Gartner recently revised the expected growth rate in IT spending from 3.8% to 4.2% for the year 2013. I see this increase as an opportunity to invest in IT stocks, which should see upside in the second half of 2013. Scouring the investment landscape, I have discussed three stocks from the industry that should be benefit the most.

Cognizant Technology Solutions Corp (NASDAQ:CTSH)

Because of tough macro conditions in the Europe, the increasing adoption of outsourcing to save costs has been a positive sign for most of the large-scale service providers in the region. Cognizant Technology Solutions Corp (NASDAQ:CTSH)’s European region that contributes about 16% to the total revenue grew by 9% – an acceleration from the third quarter as the company continues to gain momentum in the region. The growth appears sustainable and I remain upbeat about its long-term prospects in Europe. Moreover, the recent acquisition of six companies from the C1 Group, Germany, should contribute about $90 million to the region’s revenue base. These companies deal in financial services, manufacturing, and energy. The acquisition shows the company’s commitment towards Germany and the rest of Europe.

Another factor, on which I place my confidence, is Cognizant Technology Solutions Corp (NASDAQ:CTSH)’s Horizon initiatives in 2013. Horizon-2, which includes business process outsourcing, IT infrastructure services and business consulting, accounts for around 20% of its total revenue and its growth in sales is twice the average rate of the company. Horizon-3 initiatives, such as social, mobile, analytics, and cloud technologies have now reached around 60% of its top 100 customers and this exposure should further grow in 2013. The company’s top 16 clients contribute about one-third of its total revenue and these initiatives will further accelerate Cognizant Technology Solutions Corp (NASDAQ:CTSH)’s presence in them. The company is one of the handfuls of providers that can aggressively compete for these projects. I see both the Horizon initiatives booming in 2013.

Past performance of the company, along with the growing rather than stabilizing European region; and its initiatives like Horizon makes me bullish on this stock.

Accenture Plc (NYSE:ACN)

Accenture Plc (NYSE:ACN)’s existing customer base includes about 75% of the global 500 companies, and this includes 92 of the top 100. The company refers to any customer, who spends more than $100 million annually, as Diamond Clients. And, in the last three years, the number of such customers has increased by one-third of the total. Accenture Plc (NYSE:ACN) benefits a lot because of its strong reputation and brand name and this helps it in avoiding competition in a majority of its projects.

It has also increased its attention towards the emerging markets. The company’s priority emerging markets include the Association of Southeast Asian Nations (ASEAN), India, China, etc. Currently, in the ASEAN region, it is serving 19 out of the 37 global 2000 companies. Opportunities in the region are many, with about 8.8% of the world’s population located in the seven countries of ASEAN. To capture this, Accenture Plc (NYSE:ACN) acquired NewsPage Pte Ltd. It is a Singapore based IT company that develops mobile applications available in about 20 different countries. This acquisition aids its existing Consumer Goods and Service platform, making it compatible with different operating software.

In addition to this, Accenture Plc (NYSE:ACN) is quite a shareholder friendly stock. The company keeps about 75% of its operating cash flow for share repurchase and dividend payout. Since its listing, the company has reduced weighted average diluted shares by 28%. In 2013, it expects to return $3.3 billion through share repurchases and dividends to shareholders.

Its existing customer base, inclination towards the emerging markets and capital allocation plans should support the growth of the company in the future.

Page 1 of 2
Loading Comments...