A Passage to High-Tech Profits in India

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

But focusing on the collapse ignores the progress that has been made in the sector during the past decade. In 2000, the Indian outsourcing business stood at a mere $5.7 billion. Today, the Indian software and outsourcing business has grown by about nine-fold, standing at more than $50 billion a year. And while the rest of the global economy came to a screeching halt in 2008, like the energizer bunny, the Indian outsourcing sector kept going and going.

This week’s Global Bull Market Alert pick, New Jersey-based Indian outsourcing play Cognizant Technology Solutions Corp. (CTSH), is a bet that this sector will continue to yield big profits for investors. Here’s why I think CTSH, already a strong performer since it bottomed a year ago, is set to continue performing well as the global economy recovers.

Reflect for a moment on Cognizant’s business model. CTSH provides data and software services to businesses, including financial services, health care, manufacturing and logistics, retail, telecommunications and the media. As global growth picks up, companies need to allocate more work to more people. At the same time, they are reluctant to hire new employees. Cognizant offers the perfect solution.

The numbers confirm this. “Great Recession” notwithstanding, the outsourcing sector in 2009 grew by more than 15% and is expected to grow at 20% to 25% over the next three years. While other companies struggle during the global economic slowdown, Cognizant’s revenues in Q4 of 2009 rose to $902.7 million, up 20% from the year-ago quarter. The company earned $144 million, or 47 cents per share, on the quarter, up 28% from $112.3 million, or 38 cents per share, a year earlier. As a result, Cognizant raised guidance for 2010 revenue growth to 20% — comfortably above Wall Street’s earlier estimates.

Exclusive  Emerging Market Exchange-Traded Fund Sets Up For Massive Breakout

Another of Cognizant’s secrets? It earns high margins thanks to low-cost software development centers and employees located in India — with a dash of Argentina, China and Hungary thrown in for good measure. Indian salaries are still only 25% of the starting-level base pay for a U.S. programmer.

All this makes Cognizant a true growth stock and one of the few in the global investment universe whose stock price has now surpassed that of its previous peak in February 2007.

So, buy Cognizant Technology Solutions Corp. (CTSH) at market today, and place your initial stop at $47.00. If you want to play the options, I recommend the July $52.50 calls, with a ticker of UPU100717C00055000.

You were stopped out of your position in the iShares MSCI Chile Investable Mkt Idx (ECH) on intraday trading on Friday at a slight loss. I’m still a big believer in Chile’s prospects moving ahead, so I may return to this pick as the market settles.

Portfolio Update

UltraShort Euro ProShares (EUO) jumped 3% this week, within striking distance of a record high as risk aversion returned to the markets. With your leveraged bet against the euro bouncing off of its 50-day moving average, and the long-term uptrend still intact, I am moving this position back to a BUY.

Mechel (MTL), your highly volatile bet on Russia, fell back slightly last week. Anticipating a strong growth in demand for steel, global steelmakers have taken steps to boost their production around the world this week. Mechel itself announced on Monday that it has just opened a representative office in China. MTL remains a BUY.

Exclusive  The Bulls Are Running In 2021: Don’t Get Left Out (But Don’t Get Trampled)

National Bank of Greece (NBG) fell back last week as the saga of Greece continues. In the latest news, European Commission President Jose Manuel Barroso urged Germany to back his plan for EU financial aid to Greece. In an interview published today, Barroso argued that it would not amount to a bailout. This pick will move sharply with the news of the day. In my view, when push comes to shove, the EU won’t allow Greece to go bankrupt. NBG remains a BUY.

China North East Petroleum Holdings Ltd (NEP) was flat this week. The company announced Wednesday that its oil production increased 6% to 236,774 barrels from the year-ago period. The company also said it drilled 30 new production wells for a total of 289 wells at the end of the year. That compared to 247 wells at the end of 2008, and was 20% more than the company originally forecast. Any sell-off is on very low volume, with investors holding on for the company’s earnings announcement on March 29. Update on March 26: If you bought NEP at our recommended price of $9.81, please stick to our stop-price discipline. And, if NEP hits its $7.50 stop price, sell immediately to minimize any loss. For new subscribers, we still believe the company is positioned well for growth and we expect an uptick in its price following the Q409 earnings report to be published Monday, March 29. The stock is a BUY.

P.S. Don’t miss out on the 22nd annual MoneyShow Las Vegas, May 10-13 2010 at Caesars Palace. This event will be your one-stop resource for the comprehensive education, efficient research, and valuable advice you need to make smart investment decisions in 2010 and beyond. Join me there and hear leading experts reveal where they see growth opportunities in stocks, bonds, ETFs, commodities, and options. Also learn about which overseas markets may outperform in the near term. Visit The MoneyShow Las Vegas to register FREE online, or call 800/970-4355 and mention priority code 017443 today!

Exclusive  My Special Christmas Message to You

P.P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy.

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE

previous article

Global markets spent this past week consolidating. Since bouncing sharply after the sell-off in January, you have been re-entering the market gradually. You now are almost fully invested and well-positioned to profit from further market rallies.


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details


Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details


Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details


Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details


Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details


Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details



Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.