By Panos Mourdoukoutas
The end of the quarter is usually the time when investors take a close look at their portfolio and see which stocks to drop and which ones to add.
One of the stocks I have been looking to add is Cisco Systems (CSCO). The stock is down 13 percent for the quarter, compared to 0.4 for the S&P 500, bottoming at around $15. Does it mean that the stock is a buy?
Probably, yes, for the short-term, as the technicians see an upward trading opportunity. Probably not, for the long-term, as fundamentalists would like to see some of the factors that led into Cisco's fall reverse themselves.
As I wrote in a previous piece, Cisco's fall from grace was caused by four factors: A momentum shift away from internet and networking companies in the aftermath of the high-tech bubble of the late 1990s; the transition of the Cisco from and emerging to a mature company; growing competition from Alcatel-Lucent (ALU), Hewlett-Packard (HPQ), Juniper Networks (JNPR), Huawei Technologies Co.; and inability to keep up with competition.
These factors cannot change and go overnight, not at least under the current leadership and management structure. So here are four things that will make me buy Cisco:
- A new leadership that will re-define the vision of the company, set business priorities right; and create an efficient and effective corporate structure that will unleash the company's potential, as Louis V. Gerstner, Jr. did with IBM (IBM) in the 1990s.
- A shift in the company's culture, from being pro-management to being pro-stockholder.
- A commitment of corporate insiders to buying rather than selling shares — going with, rather than against, the company's on-going share buyback program.
- A shift in corporate focus from engineering to economics. In a highly competitive environment, customers, not corporate engineers, determine which products will succeed and which they will fail.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.