INFY (Infosys Technologies)

INFY is an offshore service company based in India. I came across the name while looking at SAY a competitor. After comparing the two I decided that INFY had better prospects as their growth trajectory appeared stronger and they had better relative strength. The chart appeared much stronger as well with a 2ndary offering bringing the stock back just a bit but not having much of a dampening effect of the pattern. This does, however, explain the high volume down days as much of the syndicate stock was likely dumped on the markets.

The company has a strong background of sales and earnings. Even during the rough periods early this decade, the company continued to post increasing EPS numbers. They appear to be the leader in their field and are therefore trading at a higher multiple. The chart is an excellent pattern with the base count reset in June as the stock undercut a previous base and then began a nearly 90% run from a low of 32 to a high of 57.

I was able to buy after the 2ndary stock hit the market as the stock held its 50 day average. I then added more shares as the stock cleared its consolidation several weeks later. I have 2/3 of the stock hedged (some in the money and some at the money) as the premium is attractive and i want to lower some of my volatility. So far 6 weeks into the trade it is mildly profitable but I expect to increase those gains significantly.

The company reports earnings this week (EPS 1/10 BMO and C-call 1/11 at 8:30 AM). I expect this to knock the premium out of the calls once the uncertainty is out and I think all signs point to a positive release that will add to my profits in this name.

Jan 12, 2007

After the conference call this morning the stocked jumped up in strong volume. I haven't had time to listen to the conference call yet but the institutional investors obviously gave it their vote of confidence. I increased my position by 2,500 shares keeping in mind that i will now almost surely lose 5,000 shares next week when my calls are assigned. The December EPS figure was 50% above last year and the revenue figure was 48% above last year. This continues to support the higher multiple and should drive continued interest in the stock.

Feb 16, 2007

To update the post before options expiration today, I wanted to mention that I now have 5,000 shares and 25 Feb 55 calls that will be assigned today. This will leave me with a very small position (less than 1.5%). So at some point over the next week I need to decide whether to bring it up to a reasonable and worthwhile size or whether to kick it out. My concern is that the stock is a little extended so it doesn't seem the opportune time to add more, but at the same time I don't necessarily want to kick out the position that is trading well.

Feb 20, 2007

In looking closely at the stock after expiration I am a little concerned that the volume has not been very strong as the stock makes new highs. I have had a good run with this name but it seems overdue for a pullback, it is a bit expensive, and there are some technical red flags so I sold the remainder of my position to lock in a good gain.

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