Coopetition in the Tech World: 3 Stocks to Buy

Strategic Insights -

As fierce rivals make peace, the lines between competition and cooperation are becoming increasingly blurred in the tech world. International Business Machines Corp. (IBM) and Apple Inc. (AAPL) have partnered to manufacture iPad and iPhone apps for IBM customers, demonstrating a business strategy known as "coopetition." This phenomenon involves collaboration between competitors to achieve mutually beneficial results. In this context, each firm leverages its unique advantage, with Apple seeking to enter the corporate market for PCs and IBM utilizing Macs and iPads with IBM software for its corporate clients.

TheStreet Quant Ratings, a proprietary tool developed by TheStreet, analyzes over 4,300 stocks using 32 major data points to predict return potential for the next year. Buying an S&P 500 stock rated a buy by TheStreet Ratings yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Similarly, buying a Russell 2000 stock rated a buy yielded a 9.5% return in 2014, outperforming the Russell 2000 index by 460 basis points.

According to TheStreet Ratings, the following three IT consulting stocks are strong investment contenders:

Key Takeaways:

  • **CGI Group Inc. (GIB)**: Buy, A Market Cap: $12 billion, Year-to-date return: -0.13% - Has demonstrated growth in earnings per share, increase in net income, attractive valuation levels, and a solid financial position with reasonable debt levels.
  • **Amdocs Limited (DOX)**: Buy, A+ Market Cap: $9.1 billion, Year-to-date return: 26.1% - Has shown revenue growth, solid stock price performance, reasonable valuation levels, good cash flow from operations, and growth in earnings per share.
  • **Accenture plc (ACN)**: Buy, A+ Market Cap: $65.2 billion, Year-to-date return: 17% - Has demonstrated revenue growth, largely solid financial position with reasonable debt levels, good cash flow from operations, and solid stock price performance.

Statistics:

  • TheStreet Ratings generated a 16.56% return for S&P 500 stocks rated a buy in 2014, outperforming the S&P 500 Total Return Index by 304 basis points.
  • A 9.5% return for Russell 2000 stocks rated a buy by TheStreet Ratings in 2014 outperformed the Russell 2000 index by 460 basis points.
  • GIB has shown growth in earnings per share (12.7%) and increase in net income (14.3%) over the same quarter last year.
  • DOX has demonstrated revenue growth (0.6%) and good cash flow from operations ($222.21 million or 11.77%).
  • ACN has shown revenue growth (0.4%) and good cash flow from operations ($1,413.36 million or 3.67%).

Sources:

  • TheStreet
  • Oxford Dictionaries
  • YCharts
  • TheStreet Quant Ratings
  • IBM
  • Apple Inc.