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Buy Intel, Yahoo! and Alcoa; Sell Infosys

Stocks in this article: AA INFY YHOO INTC

Yahoo! continues to be one of the most misunderstood companies on Wall Street. But the company understands itself and its goals. It appears to have a firm grasp of what is at stake in terms of its future. With the stock trading at $15.74, it is down by almost 15% from the average analyst target of $18.00. Though this also comes with a hold recommendation, I would consider buying Yahoo! at this level ahead of earnings to possibly capitalize on a quick spike upward.

Reason to Sell Infosys

One of last week's disappointment arrived at the hands of Infosys, which released earnings on Thursday and prompted analysts to ask, " will it survive?" For the quarter, though its revenue increased by almost 5%, the company reported earnings per share of 73 cents -- missing consensus estimates by a penny.

On the announcement, Needham & Company analysts reiterated their "hold" rating on the stock. The stock dropped as much as 14% after the report though it has since then rebounded slightly. I still see potential downside risk in the shares until the news completely wears off. I think the stock is yet expensive with a P/E of 13 and if you are a holder of the stock, you might consider selling at current levels with a possibility of entering back in at the $35 range -- saving an extra 10%.

Bottom Line

Earnings season can be both an exciting time as well as one that brings a lot of anxiety for companies as well as investors. It's called the reporting period for more than one reason as companies are essentially sharing their quarterly report cards -- where getting a passing or failing grade often depends on the expectations that were set.

In this article, there was Alcoa passed where Infosys fell short. Yahoo! and Intel have yet to report and their track records suggest buying ahead of the report may be a smart thing to do. Let's hope we're right.

In my next article, we're going to look at possible earnings plays in IBM (IBM), Qualcomm (QCOM) and Bank of America (BAC).

At the time of publication, the author held no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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