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Cisco - Keep It or Sweep It

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January 03, 2011 – Comments (9) | RELATED TICKERS: CSCO

Like many Fools, I hold Cisco to provide growth without a lot of risk. That hasn't been working out so well, but is the future looking brighter?

I took a look at Cisco's valuation, growth prospects and ran a quick comparison to some other large cap tech companies and decided to keep Cisco rather than sweep it from the portfolio. The deciding factor was the plan to start paying a dividend in 2011.  That's well known, but still has potential to move the stock as funds that are required to hold dividend paying stocks will be able to join the ranks of CSCO shareholders.

When I started the article, I was leaning towards a 'sweep it' call.  I changed to 'keep it' mainly because none of the peers I'd consider to replace it stood out as significantly better opportunities. 

Sidebar: The Dow 30 tech stocks were a pretty sorry place to be for 2010.  HPQ and CSCO brought up the rear of of the index.  IBM was the best of the DJIA techs, but only matched the market with about a 14% gain.  INTC was ahead for the year, but underperformed the market.

What's your call?  Am I making a mistake holding on to CSCO?  Will the DJIA tech team play catch up in 2011? Can we make The Fool pay its full pledge to Foolanthropy?

Fool on!

Russ

9 Comments – Post Your Own

#1) On January 03, 2011 at 10:14 PM, Option1307 (29.92) wrote:

Keep it!

 

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#2) On January 03, 2011 at 10:55 PM, checklist34 (99.72) wrote:

keep it

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#3) On January 03, 2011 at 11:08 PM, Momentum21 (84.91) wrote:

Good call Russ, I would keep it as well. 

CSCO is where the bond & gold money will move in 2011. : )  

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#4) On January 03, 2011 at 11:13 PM, rd80 (98.29) wrote:

Hmm, maybe a better question would be whether CSCO stock can recover to match the price of a spammer's NFL jersey. 

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#5) On January 03, 2011 at 11:43 PM, checklist34 (99.72) wrote:

alot of money is going to move into big cap companies with good business fundamentals in 2011 i think.  ...  i do, i do

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#6) On January 04, 2011 at 2:53 AM, awallejr (81.03) wrote:

I've been eying this company for a real life purchase.  Kicking myself for not buying it under $20.  I just don't want to chase it tho.  Will Probably just sell puts.

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#7) On January 04, 2011 at 12:22 PM, rd80 (98.29) wrote:

Thanks for the comments.

awallejr - Tim Beyers agrees with you on the puts in How to Play Cisco in 2011.

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#8) On January 05, 2011 at 2:51 PM, lemoneater (75.49) wrote:

Cisco recently acquired Tandberg which should greatly increase their presence in the video conferencing market. When he was working as a systems programmer, my husband preferred using Tandberg's technology to Polycom's. 

Seeking Alpha had a good article about Cisco's several billion dollar acquistion of Tandberg. I would like to post it here, but somehow I don't know how to cut and paste with Apple like I do with a regular PC.

 

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#9) On January 06, 2011 at 7:03 PM, rd80 (98.29) wrote:

a guy with a master's in statistics who likes looking at charts

That makes sense, a stock's price is a stochastic process.
Been a while since I used the word 'stochastic' - even longer since I've done any of the math - hope I spelled it right :)

Even tho' I opted to keep CSCO, it's not one of my high conviction holdings.  I agree on the behavior. The last earnings report is a good example.  The report was actually decent, the projections weren't what was expected, but I don't think it deserved the pounding it took.

Mostly it seemed like there wasn't a lot of downside risk left and it was worth hanging on a while longer to see if Chambers and co. can do something constructive with the monster cash cache.  Maybe they can turn the umi thing into an iTV.

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