Will Cisco (NASDAQ:CSCO), beat its earnings forecast when it reports in August? The answer is, I do not know, however, more often than not, when a large cap stock is disliked by "experts" and is going through a rough patch, over time, they give the best returns. The company is cash rich and can afford the best R &D in all its segments and is still the backbone of the internet.
More than anything the company needs to change its image and maybe get a better public relations firm. Also, the company can improve its image by John Chambers taking a back seat and allow someone else in the company to talk to the media on conferences calls.
Two quarters ago, Cisco reported great numbers in all its segments. The stock rallied from around $22.00 - $24.00 in after hours trading. Then Mr. Chambers held his conference call and declared; "It does not get any better than this"
The next day the media had a field day with the comment and the stock sold off. Since then the stock has spiraled down to $15.00 and in the short term could go lower by statements from analysts who are late to the discrediting party?
As the old saying goes; "As a man thinketh so shall it be" holds true in all points of life. Had he said; it is getting better all the time and if we hit a few bumps in the road we will use the opportunity to go from strength to strength, maybe the stock would have climbed to $28.00.
In the next quarters results the stock also rallied in after hours trading as Cisco beat earnings forecasts, but sunk once again on Mr. Chambers perceived doom and gloom comments.
Stocks are bought and sold on perceptions, so it makes sense to project the best image while telling the true facts. Many times it is not what is said, rather it is the way it is said and then percieved.
Cisco is not being recommend here as a buy, rather, the article asks the reader if Cisco is value at $15.00 value? Cost averaging down in sectors or stocks that are out of favor with the "mavens" can produce great returns if the investor is willing to do due diligences and research the stock in which they are interested
One of the best ways to invest/trade and stock is drip-drop investing method. Take a small core position when a stock is deemed to be good value and disliked by most analysts. Hold until the stock becomes overvalued and is being touted by most analysts as the best thing since sliced bread ... it may take many years before it is overvalued, so trade around the position and (drip) buy the stock on down days and (drop) sell it on up days.
With this type of strategy it does not matter what the Bulls or Bears say. When prices fall the value gets better. When prices go up take small profits.
Over the years, the core position will cost zero.
The most important thing to remember is to always have enough cash on hand to average down, never use money you will need in the next five years and never go on margin to buy stocks.
Also make sure you pick a stock that has no debt, pays a dividend, has a low PE, and will be here in 10 years.
Investing and trading in stocks should always be a fun game and if it ceases to be fun then don’t do it, find a better game.
Disclosure: I am long CSCO.