Bill Loomis (email@example.com) is a managing director at Stifel Nicolaus. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individual investors. For additional information and current disclosures for the companies discussed herein, go to the research page at www.stifel.com.
Even though the trends for federal information technology and professional services firms look solid during the next few years, government spending pressures and the trend toward insourcing are giving investors reason to worry.
The fiscal 2010 information technology budget request and the 60-day cybersecurity review reveal how the Obama administration regards information technology as a key factor in moving its agenda forward.
Areas for potential growth exist in the federal information technology and professional services sector despite a recent slowing of contract award activity.
Federal information technology and professional services companies are generally reporting good financial results and raising their future guidance.
A new administration and cybersecurity will spur growth for well-positioned federal information technology companies.
Despite facing tighter budgets, tougher competition, and heavier oversight and regulation burdens, the federal IT and professional services industry is a relatively bright spot on Wall Street.
Federal IT and professional services stocks have rallied over the past couple of months due to good second-quarter earnings reports and investors seeking less economically sensitive investments. And the federal IT group has almost broken even for the year.
With the changes in Congress and the presidency, and a tougher budget environment ahead, companies will have to be even more flexible and agile to maintain growth during the coming years.
The stocks of federal information technology and professionalservices companies are performing in line withthe S&P 500 this year. Both are down about 6 percent,while aerospace and defense companies' stocks are havinganother solid year and are up 7 percent.
One comment I often hear lately about the financialmarkets is that their volatility has increased. Theincreased volatility is an indicator of uncertainty, causinginvestors to react quickly to each piece of financial,economic or political news.