PowerRatings Stock Spotlight: Jack Henry & Associates

• By David Goodboy
• On 12:34 pm EDT, Wednesday September 16, 2009

David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.

Over the last year I have noticed a preponderance of banks opening in my local area. It seems that there is a new bank on every corner now with new names popping up everywhere. This phenomenon seems to be unaffected or even fueled somehow by the banking crisis.

The whys of this massive growth in new banks and expansion of existing names would make good material for another article. Upon witnessing the bank branch growth curve, I started to think about ways one could profit from the expansion. My first thought went to infrastructure. What does every local bank have in common? Obviously, all banks need software and information processing solutions. Further research revealed this week's Long Term PowerRated stock spotlight company, Jack Henry & Associates (NasdaqGS:JKHY - News). They are specialists in providing community banks information processing solutions. Their software, equipment and services are used by over 8700 banks and corporations. The company has earned a 9 Long Term PowerRating. This is the second highest possible rank on our 1 to 10 scale.

For those of you unfamiliar with our PowerRating system, here is a brief overview: PowerRatings are a statistically based stock picking tool based on 14 years of extensive studies across most market conditions. Long term investors should seek to build portfolios made up of top rated stocks and avoid those with the low ranks of 1or 2. These low rated stocks have proven to simply be too volatile, therefore risky to be part of your prudent, conservative long term holdings. However, it is important to note, that PowerRatings are a dynamic metric. This refers to the fact that they can change on a daily basis and always reflect the stocks potential one year into the future.

Jack Henry & Associates was formed in 1976 by Jack Henry and Jerry Hall. Jack and Jerry had the reputation of being the only computer users in their small, Ozark mountain town. Jack was the data processing manager for a bank and Jerry worked as data processing manager for a shoe company. Jacks employer was taken over and his position eliminated which got the pair thinking about how to provide data services to banks. At the time, only the largest institutions had their own computer systems. The smaller banks sent their information to the larger ones for processing. The team of Jack and Jerry hit upon the idea to write software so that smaller banks could handle their business in house.

The first program was written in 1976 and the company launched. The initial year generated just over $9000.00 in revenues and required super hard work from the founders. They actually slept many nights on the floor in the computer room when getting the firm started. They have since expanded to be a company leader in the space. Their 2009 fiscal year just ended with a 5% increase in EPS, even revenue and a slight decrease in profits. Technically, shares have been in a strong uptrend since mid June and are above both the 50 and 200-day Simple Moving Averages. However, resistance may have been hit around the $24.50 area.

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Buzz up!