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TheStreet Open House

Outwit the S&P in 2013 With 5 Hated Stocks


Infosys (INFY) has built a lucrative business providing firms in the West with outsourced IT services from its home base in Bangalore, India. Infosys was one of the first major offshoring contractors to pop up in India in the 1980s, and that first-to-market status counts for INFY's operations today. A skilled workforce of low-cost Indian programmers and consultants gives the firm pricing that competitors at home can't match alongside expertise that's not easily recreated by other Indian firms.

Infosys' bread and butter is application development and maintenance -- or more specifically, helping its customers trim some of the costs associated with hiring high-salary IT programmers and developers. But in recent years, Infosys has been making other IT services a bigger chunk of its revenue pie. That, in turn, has helped to hike the firm's net margins significantly.

A couple of macro headwinds have been challenging INFY more recently, however. The firm's pursuit of premium pricing has some clients reconsidering their needs as high unemployment here at home makes "onshoring" more economically viable again. That said, the firm has plenty of time to figure out its next move -- revenues continue to climb at a stair-step pace, and a debt-free balance sheet with $4 billion in cash give it plenty of wherewithal.

A short interest ratio of 15.5 makes Infosys a strong candidate for a short squeeze...

Intuitive Surgical

$21 billion surgical equipment firm Intuitive Surgical (ISRG) is having a strong year in 2012 -- shares have rallied almost 16% since the first trading day in January. By now, that's got to be wearing on short sellers who've been putting money on a material drop in ISRG's share price. Right now, the firm's short interest ratio of 12.2 indicates that it would take more than two weeks of buying pressure for shorts to cover at current volume levels.

Intuitive develops and sells robotic surgical systems for hospitals that want to be able to perform less-invasive surgeries than would be possible if done by a surgeon's hand. The firm's da Vinci system is currently deployed in more than 2,000 hospitals around the globe. Robotic surgery isn't just a fad -- it offers patients truly significant benefits like quicker recovery times and fewer complications. As a growing number of surgeons get trained on the da Vinci system, switching costs of adopting a new platform start to get quite high, giving ISRG a sticky customer base and a big competitive advantage. The firm is also able to earn large recurring revenues by servicing machines and selling surgical instruments.

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