Last Friday, I kicked off the holiday weekend by appearing on the MoneyLife show, where I explained some of my methodology of picking stocks.
Basically, the goal, as opposed to narrowly focusing on two or three metrics, is to combine a variety of factors that indicate healthy companies and form the right ingredients for an investment.
One company that looks promising when you look at the big picture, as I noted during last week’s show, is Luxoft Holding Inc (NASDAQ:LXFT).
Shares of LXFT are up 50% so far this year. Strong earnings have been propelling shares higher, as Luxoft beat analyst expectations in each of the past four quarters. In fact, the company beat Wall Street’s target by a double-digit percentage three out of its last four reports, including blowing away expectations by as much as 30%.
For some background, Luxoft Holding is a provider of software development services and information technology. More specifically, the company is perhaps best summed up as the Cognizant (NASDAQ:CTSH) of Russia.
Cognizant, for those who don’t know, does outsourced Indian IT consulting, including building custom IT and handling its functions. Luxoft does the same thing, but is incorporated in Switzerland and outsources to Russia, instead.
LXFT Stock Will Succeed in Any Market
Outsourced IT is a great trend to bet on right now. Regardless of whether we have a recessionary environment, Luxoft should still do well. If companies are forced to cut back on IT spending due to slower economic growth — which may be the case considering last week’s job report and the slower-than-we-thought recovery — they will begin to outsource, which plays right into Luxoft’s hands.
But outsourcing is often an option even if the market continues to recover, as IT is an easy way for companies to maximize efficiency and cut costs. LXFT stock could continue to chug higher regardless of the macro economy — something that isn’t true for most industries and stock picks.
No wonder LXFT has a beta of 0.32, which means it is 70% less volatile than the broader market. For the cherry on top, it’s also slated to post earnings of 54 cents per share for the current quarter and tally earnings of $2.73 per share for the full year — good for growth of 20% in each instance.
And despite the stock’s monster run this year, shares are trading for just 18.4 times forward earnings, which puts the price right on par with the current growth rate.
All in all, Luxoft Holding, Inc. is a perfect example of the investment strategy I explained on the show last week. There’s not just one indicator that makes the stock look promising — there’s a whole basket full of them. That’s the sign of a true game-changing pick.
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