Great Call on Cisco! What's Next?

The sinking stock market has been an equal opportunity tormentor. While troubled companies like Citigroup have understandably taken a dive, high-quality companies like Cisco (Nasdaq: CSCO  ) , which aren't involved in the credit firestorm, have also seen their share prices shaved. The problem is that as conditions worsen, companies across the board -- Cisco included -- will face a broad spending slowdown.

Support from investors in the Motley Fool CAPS community has kept Cisco's rating at a relatively high four out of five stars. But with more than 6,400 players weighing in on Cisco, none has read Cisco better than MFRB101. MFRB101 gave Cisco a thumbs-up back in August 2006 and held it until August of last year, riding it for nearly 46% and jumping off before it fell.

MFRB101 -- who is a member of the CAPs All-Star team of players with ratings of 80 or greater -- has managed a stock-picking accuracy of more than 70% while racking up 230 points. Cisco hasn't been this investor's only great call. Here's a look at a few other prescient picks:

Company

Date Picked

Call

Points

CAPS Rating

Activision (NASDAQ:ATVI)

8/28/06

Outperform

108

*****

Wal-Mart (NYSE:WMT)

8/15/07

Outperform

30

***

TASER (NASDAQ:TASR)

8/28/06

Outperform

23

***

Data from CAPS.

So what is this investor looking at these days? Here are a few recent calls on CAPS:

Company

Date Picked

Call

CAPS Rating

Patni Computer Systems (NYSE:PTI)

3/27/08

Outperform

*****

Sterlite Industries India (NYSE:SLT)

3/25/08

Outperform

*****

VASCO Data Security International (NASDAQ:VDSI)

2/25/08

Outperform

*****

Data from CAPS.

While not all of these picks may pan out, they could be a good place to start further research. I decided to take a closer look at Patni Computer Systems.

Looking beyond the U.S.
In an interesting twist, VASCO Data is the only one of these three businesses that's based in the United States, but it derived just 8% of its 2007 revenue from the U.S. Meanwhile, Patni Computer Systems, which is based in Mumbai, had more than 80% of its 2006 revenue come from U.S. sources. So with the U.S. economy in full-on slowdown mode, is Patni still a good bet?

There are certainly reasons to think not. In 2006, Patni's work for insurance and financial services companies made up almost 40% of its total revenue. Since much of the turmoil in the U.S. has fallen on the world of finance, there will likely be a fair amount of belt-tightening from these top customer groups. And, of course, that's on top of the general slowdown across the board, which has the potential to slow down work in its other top industry areas of manufacturing and telecommunications.

The flip side to this, however, is that while overall IT spending in the U.S. could slow down, there may be even more U.S. companies looking for highly capable overseas IT firms that can help them cut costs. In commenting on the stock, MFRB101 pointed out that Patni will benefit from the fact that "offshore advantages are not going away anytime soon."

We can't neglect to consider Patni's stock price in this discussion, either. Though analysts have projected that earnings per share will fall nearly 22% in 2008, the stock has fallen 60% from its high point for the year. This leaves Patni's stock trading at nine times its projected 2008 earnings and just seven times its 2007 earnings.

So what's your take on Patni? Get in the action by clicking over to CAPS. CAPS is absolutely free and already has more than 94,000 stock pickers chipping in to find the best stocks out there.

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