CACI International: InfoTech With US Government Offers Stock Capital Gains (NYSE:CACI)

Investing Thesis

Think back to the changes your grandparents lived through from their childhood: atomic power, radio displaced by television, discovery of DNA biology, evolution of the internet, wireless computerized telephones…

Technological progress hasn’t slowed down, instead it appears to be increasing and we are chasing to keep current. As investors, our progress is even more dependent on anticipating coming technology and human behavior evolutions, in the midst of increasingly complex surroundings.

The forecasters who can help us are the pros who everyday “fry the fish” we want to “eat” in our investment portfolios. They have to deal with the huge and irregular anticipation appetites of “institutions” with multi-billion-$ portfolios demanding transactions to adjust for their today’s anticipation of technology. Expectations likely to soon appear to we ten-or 100-share investors maintaining the continual open-interest demands seen in exchange bid and offer quotes.

Those pros employ the well-educated and continuously-informed profit-anticipating researchers and information-gatherers active world-wide (on a 24x7x365 basis) needed to do their essential market-making-transaction jobs.

But they don’t want us in front of them in the buying and selling appetite-lines they intend to profit from by their disruptions. It’s what pays their rents and retirements and those of their employed staffers. So, efficient market transactions have to be quick and clean.

What makes them that way are stock-price-change “insurance” speculators willing to hedge-protect the Market-Makers during the temporary risks that must be taken in the periods of brief disruption. The costs of that protection reveal the coming-price expectations of that community, on both sides of each trade.

For those derived price forecasts we keep score on how the active markets subsequently reward or punish the expectations of prior experiences. That is this article’s job of presenting alternative investing choices for a not-certain near future of the next 3-5 months.

Description of the Primary Investment Candidate

Today’s article is about CACI International Inc (NYSE:NYSE:CACI):

“CACI International Inc, together with its subsidiaries, provides expertise and technology to enterprise and mission customers in support of national security missions and government modernization/transformation in the intelligence, defense, and federal civilian sectors. It operates in two segments, Domestic Operations and International Operations. The company designs, implements, protects, and manages secure enterprise IT solutions. In addition, the company provides enterprise cloud solutions for classified and unclassified networks; and intelligence support that ensures continuous advances in collection, analysis, and dissemination to optimize decision-making. CACI International Inc was founded in 1962 and is headquartered in Reston, Virginia.”

Source: Yahoo Finance

Present Reward & Risk Prospects of Alternative Investments

Figure 1

(Used with permission.)

Expected rewards for these securities are the greatest gains from current closing market price seen worth protecting short positions. Their measure is on the horizontal green scale.

The risk dimension is of actual price drawdowns at their most extreme point while being held in previous pursuit of upside rewards similar to the ones currently being seen. They are measured on the red vertical scale.

Both scales are of percent change from zero to 25%. Any stock or ETF whose present risk exposure exceeds its reward prospect will be above the dotted diagonal line. Capital-gain attractive to-buy issues are in the directions down and to the right.

Our principal interest is there in CACI at location [3]. A “market index” norm of reward~risk tradeoffs is offered by SPY at [4]. The most appealing (to own) by this Figure 1 view is CACI at location [3].

Most of these investing alternatives take on CACI’s preoccupation of concern with domestic and international intelligence support work. The outlook of the investment industry in current reactions of quite modest upside prospects (particularly in SPY) while still rejecting prospects of price-drawdown risk exposure on the vertical Risk scale is worth thinking about in terms of capital allocation. The reason for having cash available for timely reinvestment may best be at hand now, while others get prepared to join the reinvestment line.

Comparing features of Alternative Investment Stocks

The Figure 1 map provides a good visual comparison of the two most important aspects of every equity investment in the short term. There are other aspects of comparison which this map sometimes does not communicate well, particularly when general market perspectives like those of SPY are involved. Where questions of “how likely’ are present other comparative tables, like Figure 2, may be useful.

Yellow highlighting of the table’s cells emphasize factors important to securities valuations and the security CACI, most promising of near capital gain as ranked in column [R]. Pink cell fills indicate inadequate proportions of essential performance competitive requirements, as in [H], [L-N] and [T].

Figure 2

The price ranges implied by the day’s transactions activity are in columns [B] and [C], typically surrounding the day’s closing price [D]. They produce a measure of risk and reward we label the Range Index [G], the percentage of the B to C forecast range which lays between D and C.

Today’s Gs are used for each stock’s past 5-years of daily forecast history [M] to count and average prior [L] experiences. Fewer than 20 of Gs or a shorter history of Ms are regarded as statistically inadequate.

[H] tells what percentage of the L positions were completed profitably, either at range-top prices or by market close above day after forecast close price entry costs. The Net realization of all Ls is shown in [ I ].

[ I ] fractions get weighted by H and 100-H in [O,P, & Q] appropriately conditioned by [J] to provide investment ranking [R] in CAGR units of basis points per day.

The pink cell highlighting provides fatal investment evaluation conditions for several candidates, occasionally including the market-index ETF SPY. Additional market perspective is provided by the 3,000+ securities for which price range forecasts are available. They currently suggest that while market recovery is under way, it is still far from generally attractive.

On the other hand, R column scores for CACI and the top 20 forecast population support the primary candidate’s competitive capability and notes the presence of several other demonstrated prospects.

Recent Trends of Price Range Forecasts for CACI

Figure 3

(Used with permission.)

This IS NOT a typical “technical analysis chart” of simple historical (only) observations. Instead it pictures the daily updated Market-Maker price range forecasts implied by live real-capital commitments in real time. Its communicative value is present here by visual comparisons at each forecast date of the proportions of upside and downside price change expectations by the market-making community, as influenced by the actions of an interested and involved big-$ institutional investing community.

Those forecasts are typically resolved in time horizons of less than a half year, and often in two months or shorter. This one states that of the 20 prior forecasts like today’s, most were completed in 43 market-days (9 weeks) profitably at average +16% profits, a CAGR rate of +102%. No promises, just fun with history.

Investor Takeaway

Comparison of the performances of near-term Market-Maker forecasts for CACI International Inc with similar forecasts of other technologically-active securities pursued by investor referencing, it seems clear that this stock can be an attractive investment choice for investors pursuing near-term capital gain strategies.