Top Picks for 2010: Amdocs (DOX)

The advisor continues, "Amdocs is the talk of the town -- and well it should be. Amdocs keeps phone companies and their customers talking to each other in more than 60 countries around the world.

"Its software helps telecom giants like AT&T Mobility and Sprint-Nextel with customer relationship management (CRM), billing, and sales.

"A couple of months ago, DOX broke out of a major downtrend line drawn from mid-2007 at the $40 dollar level. When combined with an uptrend line constructed from the 2009 bottom near $15, it can be seen that DOX has broken out of a large ascending triangle.

"The upleg of the ascending triangle is the uptrend line drawn from the January 2009 low. DOX is now in a strong uptrend, well above the 30-week moving average which is sloping steadily higher.

"Even during the recent consolidation the shares have stayed mainly above the 10-week moving average, another sign of technical strength. The consolidation has also relieved the stock's short-term overbought condition in RSI.

"According to the 'measuring principle,' DOX should have a minimum price target of $33 -- more than 20% above current trading levels. Often stocks in strong uptrends exceed their minimum targets.

"In 2009, DOX earned $1.57 a share. In 2010, the 15 analysts who follow the stock project EPS of $2.20 a share, a 40% increase.

"The current trailing P/E of the stock is 17. The PEG ratio takes the Price Earnings Ratio and divides it by the earnings growth rate.

"If you calculate a one-year 'PEG' ratio, the shares are a great value -- the PEG ratio is .425 (17/40). Anything below one typically represents good value and DOX is trading at less half that amount.

"Analysts who follow the stock have caught on. In December 4, Standpoint Research raised their price target from $30 to $34. A number of other analysts think DOX can trade back to the $40s by 2011.

"In the New Year, I believe DOX has a good chance to break above $28 resistance and move toward $34. My target is $33.95."