fbpx

Cisco for the Long Term?

Dear Mr. Berko: What are your thoughts on Cisco Systems? I’ve bought 1,000 or more shares of Cisco at least 10 times in the past 10 years, sold them and made money each time. I am an insurance actuary and know enough to make trading decisions based on charts and trading volumes of some tech stocks I occasionally trade. Last month, one of my colleagues, who used to trade Cisco as I did, told me her son thinks it’s a very good long-term investment. Her son is a systems engineer and told her the stock could trade in the $50s or $60s in a couple of years. He claims that management is changing its business model so that Cisco can double earnings in the near future. She can’t explain this to me, and she doesn’t want me to talk to her son. I am in a quandary here and seek your advice. Should I keep trading the stock, or should I buy 1,000 shares for the long term? — NK, Rochester, Minn.

Dear NK: Your colleague can’t explain Cisco to you. You can’t talk to her son. You’re in a quandary. Perhaps you ought to write to Ann Landers. However, the smart money suggests that Cisco may have some long-term appeal, so read on.

Cisco Systems (CSCO-$27), a $49 billion-revenue company, is a worldwide provider of internet protocol-based networking products, as well as service for the transmission of voice, data and video across local, metropolitan and wide area networks. CSCO’s Ethernet switches and routers are considered the gold standard by network and systems managers. CSCO’s carrier routers, used by cable and telecom companies to move data over long distances, are considered the best and most efficient in the market. And CSCO generates 50 percent more revenue per port than Hewlett-Packard, its largest competitor. These switches and routers account for 65 percent of revenues, while the remaining 35 percent of CSCO’s revenues derive from its fast-growing contiguous markets, such as security, unified communications, data center products and wireless. These sectors should grow by about 5 to 6 percent annually during the coming five years.

Perhaps one of the reasons for the son’s $60-a-share enthusiasm is CSCO’s intent to increase its service capabilities through product integration and software revenue. Service revenues grow faster and are less volatile and more dependable than product sales. CSCO’s impressive service margins exceed 65 percent. And because of Cisco Application Centric Infrastructure and the company’s intercloud initiatives, management’s decision to transition the company from a product and hardware seller to a software and solutions provider makes brilliant sense. This may also be the reason that Vanguard, Wellington Management, Dodge & Cox, BlackRock, State Street, Invesco and others recently reported owing hundreds of millions of shares. Gross margins of 65 percent, on growing revenues, are darn attractive on any income statement and could propel CSCO’s revenues, earnings and dividend growth.

Revenues for 2016 may come in at $50 billion, up a small billion from last year, while net income should be up 5 percent, to the $2.30/$2.35 level. And the all-important $1.04 dividend, which has enjoyed good growth and yields a swell 3.8 percent, could be raised annually as CSCO’s revenues and earnings improve this year and next. I don’t have to tell you that CSCO has an impressive $12 in cash per share, as well as a $12 book value. The company’s 20.8 percent profit margins and its 17.4 percent return on equity are equally impressive, as is its $61 billion of cash in the bank. Therefore, Citigroup, Jefferies, SunTrust, Merrill Lynch, Oppenheimer, Raymond James and Wells Fargo have “strong buy” recommendations on CSCO at the current price.

I’d also favor CSCO. In addition to liking the growing revenues and income, I’m high on the increasing dividend. During the past 40-plus years, I’ve always strongly emphasized dividend-yielding issues because dividends act as an investor’s cushions in a declining market. Heck, I don’t mind earning a 4 percent dividend for a couple of years while waiting for CSCO to reach its projected price. However, recognizing the volatility of the stock market, I’d place an open stop-loss order to buy CSCO at $24.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

COPYRIGHT 2016 CREATORS.COM

You May Also Like
96-Year-Old Boca Helping Hands Volunteer Brings Happiness to Many

The nonprofit organization provides food, medical support and financial assistance to empower local individuals and families.

Read More
Art Polacheck
Upcoming JA Career Exploration Fair Seeks Vendors to Exhibit

It will take place from 10:30 a.m. to 12 p.m. on Friday.

Read More
JA Career
Neighbors 4 Neighbors Hosts Endless Summer Splash Event

The nonprofit organization is located in Doral.

Read More
Neighbors 4 Neighbors
Transworld M&A Brokers Sale of PCMA to Intelvio

Peter Berg (pictured), Managing Director, and Leanne Erwin (pictured). Vice President, advised on the transaction.

Read More
Transworld M&A
Other Posts
NAMI Broward County Hosts “NAMIWalks” Event at Nova Southeastern University

The annual fundraising event on Oct. 5 promotes mental health and wellness.

Read More
NamiWalks
Broward MPO’s “Let’s Talk Transportation” Podcast Series

The MPO shapes transportation policy and allocates federal funding to vital projects.

Read More
Broward MPO
Fort Lauderdale Economy Boosted by Panthers’ Stanley Cup Victory

The team will host a victory parade on Sunday.

Read More
Fort Lauderdale Economy
Editor’s Letter: Growth Mode at Nicklaus Children’s Health System

The top-flight healthcare provider features 500 pediatric subspecialists.

Read More
Nicklaus Children’s Health System

Drew Limsky

Drew Limsky

Editor-in-Chief

BIOGRAPHY

Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.