After nearly quadrupling from $11.85 to $44.25 since the start of 2007, Vasco Data Security International (VDSI - commentary - Cramer's Take), a software company specializing in authentication products, has dropped 18% to $36 in four trading sessions. Is this the beginning of the end of a magnificent run, or simply a buying opportunity? The answer: You have to take chances to get ahead. Put more simply, buy this stock ahead of Thursday's earnings!
That's right, go on and step up to the plate -- the market has lobbed you a huge softball so you better take advantage of it. Why am I so sure? Well, to start, this stock was hitting all-time highs just a few days ago before recession talk tanked the overall market and an analyst downgrade got people even more scared about Vasco in particular.
Potentially frightening stuff, I agree, so it's a good thing that while 85% of Vasco's business comes from the banking sector, only 10% comes from the U.S. That's right -- let the U.S. markets tank, foreigners will buy in at discount prices, the world economy will remain strong and Vasco's core business will benefit. Maybe a little oversimplification there, but my point is that you have to think of Vasco as a play on the international economy, not the domestic one.
And this latest analyst downgrade -- hogwash! The guy even raised his price target from $38 to $42. Not that I've ever been one to listen to analysts, but Vasco has endured several downgrades during its run-up, mostly due to valuation concerns. These analysts have tried to pick Vasco's top so they can brag at cocktail parties, "I picked the top. I'm very special. I deserve a higher salary." Well guys, you're not special -- you thought the top was 25% ago. You were wrong.
Software In-Line Results From Red Hat 9/26/2007 8:31 AM EDT The company had an OK quarter with an OK outlook and no signs of any macro-related softness.
Software Hope That SAP Is Copying Oracle 10/11/2007 5:51 AM EDT With its acquisition of Business Objects, perhaps it's figured out the best strategy -- its opponent's.
At the time of publication, Sykes had no positions in the stocks mentioned, although positions may change at any time.Timothy Sykes trades for his own account. He managed the Cilantro Fund, starred in the reality show Wall Street Warriors, and authored An American Hedge Fund. Currently he also writes the blog timothysykes.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Sykes appreciates your feedback; click here to send him an email.
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