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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
Insider Monkey) --
Goldman Sachs published a report entitled "Americas: Technology: IT Services" on Jan. 11. The report isn't publicly available but we will discuss its main points. In their report, Julio C. Quinteros Jr., Vincent Lin, Roman Leal and Geo John are defensive for the IT services sector in the year 2012.
Goldman Sachs(GS) is concerned about the "current macro backdrop, with expectations for a slower global growth clouding visibility as we head onto 2012." They have concentrated on stocks that are U.S.-based, mentioning a number of buy- and sell-rated stocks. Here are Goldman Sachs' sell-rated stocks.
Computer Sciences(CSC - Get Report) provides information technology and professional services to both the government and commercial enterprises. Goldman Sachs has given the company a sell rating and remains cautious on its valuation. Computer Sciences has significant exposure to the Department of Defense, which is looking to cut its budget in 2012. Also, Goldman Sachs is of the opinion that due to Computer Sciences' sluggish booking and a potential loss of the NHS contract, its shares are going to be impacted negatively. Shares of the company are currently trading at $24.9 per share and are expected to go south of $22 by the end of 2012.
Glenview Capital sold its entire $42 million position in CSC during the third quarter.
CSG Systems International(CSGS - Get Report) provides outsourced customer care and billing solutions for North America. It has been given a sell rating by Goldman Sachs due to its exposure to the U.S. cable/satellite vertical services. CSG Systems also has a long sales cycle of transformation software deals that are resulting in headwinds. With a lower expected demand for ancillary services in the company's core processing business, its valuation will most likely be negatively impacted. Shares of the company are currently trading at $15.7 per share and are expected to go south of $13. Currently, it has a price-to-earnings ratio of 18.
Intrepid Capital Management had $26 million in CSGS at the end of September.
Convergys(CVG - Get Report) provides relationship management solutions on a global basis and operates in both the customer management and information management sectors. Goldman Sachs has given the company a sell rating because it believes that Convergys is a low growth company with lower returns to scale. Goldman Sachs recently increased its expected target price due to a higher implied CY2012 price-to-earnings ratio of 12 vs. the earlier estimate of 10.9. This is based on an improvement in the company's growth prospects with regards to volume. Convergys also recently announced that it is going to buy back shares. Its shares are currently trading at $12.8 per share and are expected to fall to a price target of $11. Barry Rosenstein sold 41% of his stake in CVG during the third quarter.