Planning to Accumulate Cognizant Technology Even As It Fights To Hold 2-Year Lows

(This is an excerpt from an article I originally published on Seeking Alpha on July 25, 2012. Click here to read the entire piece.)

Cognizant Technology (CTSH) has been one of those rare stocks over the decade that investors could just buy and hold. So when CTSH lost a nasty 19% on May 7th after reporting earnings, I naturally took notice and wondered whether the market was offering a golden opportunity to buy the stock. {snip}

With the S&P 500 and NASDAQ now in slow, grinding recoveries from June lows, I am surprised to see CTSH still struggling to stay above two-year lows. The constant churn action has been great for range-based trading, but I was expecting CTSH to make some progress by now closing May’s gap. {snip}


CTSH fails to make any progress closing its post-earnings gap down
CTSH fails to make any progress closing its post-earnings gap down


CTSH also struggles to hold two-year lows
CTSH also struggles to hold two-year lows

{snip}

In the meantime, CTSH is likely purchasing additional shares under its repurchase authorization. {snip} With a trailing P/E of 19, CTSH is much cheaper than it has been over the last 10 years excluding 2009. {snip}

{snip} For any plan to accumulate shares here, I think it makes sense to assume the worst case scenario downside risk is capped at the worst levels in CTSH’s history (70% and 76%). I highly doubt such a scenario will unfold and would consider such a collapse a true gift. {snip}


CTSH has been a relatively consistent performer over the years
CTSH has been a relatively consistent performer over the years

Source for charts: FreeStockCharts.com

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on July 25, 2012. Click here to read the entire piece.)

Full disclosure: long CTSH calls

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