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Bernie's Contrarian Bets In Tech

 January 28, 2013 10:17 AM
 


by Bernie Schaeffer, editor Schaeffer's Investment ResearchOur stock picks are based on a strategy known as "expectational analysis" which combines fundamental, technical and contrarian-based sentiment metrics.

Based on this approach, I initiated a long position in two technology sector stocks: semiconductor equipment maker Lam Research (LRCX) and Infosys Ltd. (INFY), which is involved in systems integration, enterprise solutions and outsourcing services.

[Related -Lam Research Corporation (LRCX) Has A Legit Chance To Hit BOA's $61 Target]

LRCX has been an outperformer lately, and is up 10 percent so far in 2013. Additionally, the shares are up 18 percent in the past 3 months.

Short interest, as a percentage of the stock's float, is currently at 4.50 percent. Should the equity continue to climb, we could see a short-covering rally.

Skepticism remains prevalent toward the equity, as the Schaeffer's put to call open interest, which measures open interest on the front three months of an optionable equity, currently stands at 1.51.

This also ranks in the 91st percentile of all ratios in the past 52-weeks. An unwinding of these bearish bets could act as a tailwind toward the equity.

Price action for INFY has been strong so far over the past year as the shares are up over 20 percent. INFY gapped up on better-than-expected earnings and is trading around the $50 level. This round number level could act as short-term support for the equity.

[Related -Intel Corporation (INTC): Heavy Volume In Options As Shares Rally]

Short interest, as a percentage of the stock's float, is nearly 6 percent. This number has increased over the past 2 weeks, and could lead to a short-covering rally.

Analysts remain skeptical toward the equity, as there are currently 2 buys, 12 holds, and 2 sell ratings. Any upgrades in the future could help to drive the shares higher.

Finally, the mean price target from analysts is around $42. After gapping up higher on a strong earnings report, we could see revisions in the future, which could also act as a tailwind toward the equity.

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