Last, institutions now own 95% of Cognizant's float. Ideally, institutional ownership would be much lower, because then you would have all that latent buying pressure -- kind of like having the wind in your sail. Also, if the professionals start selling en masse, you will be trampled. (In contrast, insider ownership at SFBC International (SFFC - commentary - Cramer's Take), No. 3 on the Forbes list, is only 39% of the float. Also, insiders own 23% of the company.)

To date, 2003 looks like another banner year for Cognizant. For the nine months ended Sept. 30, total revenue increased 60% to $260.1 million, while net income rose 56% to $39.6 million. And in the number that matters most, the stock is up 88%.

Still, given Cognizant's growing investment rate in fixed capital, declining return on incremental investment, understated labor costs, low tax rate, aggressive insider selling, close ties with the outside auditor, no pent-up demand from institutions and rich valuation (the PEG ratio is 2.14), I'm content to do nothing for now. But I will revisit this company when its next 10-K is released in early 2004.

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