|New Threads Only:|
|New Threads & Replies:|
Forum List » Guru News and Commentaries|
Guru News, Stock picks and commentaries
David Einhorn Comments on Computer Sciences Corp
Posted by: Holly LaFon (IP Logged)
Date: January 23, 2013 04:09PM
Computer Sciences Corp. (CSC) is an IT consulting and outsourcing business. In 2011, the stock declined more than 50% due to deteriorating profitability, missed estimates, and controversy relating to the company's large contract with the U.K. National Health Service.We began purchasing shares in February 2012, after the company announced a change in management. We continued purchasing shares throughout the year and established a position at an average price of $27.78 per share. We view CSC as a fundamentally sound business that has had margins well below that of its peers as a result of organizational inefficiencies, historical mismanagement, and various non-recurring charges that obscured underlying earnings. In addition, the company owned several valuable assets, including its high-margin Equifax credit services affiliate that we believed could be monetized at an attractive multiple.
We believe that CSC has earnings power in excess of $4.00 per share and that the new management team is capable of turning the company around to achieve those earnings, and possibly more. The early results have been promising, as CSC has reported two quarters of above-consensus earnings, monetized its Equifax affiliate and initiated a share repurchase program. CSC shares closed the year at $40.05 each. While the stock has appreciated in response to management’s progress to date, we continue to believe that the company has significant opportunities for margin improvement, free cash flow conversion and capital deployment under the leadership of its well incentivized and shareholder-friendly management team.
From David Einhorn's fourth quarter letter.
Guru Discussed: David Einhorn: Current Portfolio, Stock Picks
Stocks Discussed: CSC,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.