Chasing & Understanding Volatility: Sify’s Wild Move (SIFY)

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Securities that rise more than 10% in a day, like shares of Sify Technologies Limited (NASDAQ: SIFY) did Friday and have done today, can easily fall more than 10% in a day.  Such was the downside story for Sify on May, 16th, June 6th and July 21st.

It doesn’t take a market guru to figure out that the right companies in India a will be great holds over the long haul.  The trick is to buy them when they aren’t the runaway-of-the-day.

The Indian provider of business and consumer Internet services, rocketed upward on Friday after releasing favorable second-quarter results.  Revenues rose 31% from a year ago to $50.7 million.  Its EBITDA net soared to $2.8 million versus $510,000 a year earlier. The company reduced its net loss to $1.91 million from $4.05 million for the prior year.  Impressive.  Nonetheless, one buys these shares on their story, once one has made the effort to learn their story, not on their valuation.

Even if Sify is one of the better companies in India (we wouldn’t argue that it is not) it is still in the stage of development where it is not posting profits.  It is narrowing losses.

The 9.6% gain to $5.37 today compares to a 52-week range of $1.19 to $8.54.  Shares were challenging $4.00 just last Thursday, but this ADR was also north of $6.00 as recently as July 20 and this was trading at $10.00 back at the end of 2006.  Just keep in mind that the shares also have been bouncing around in a $4.00 to $6.00 range since mid-May.

Jim Berdou

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