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For all of the criticism that I receive for my somewhat bearish views of certain equities, I feel the need to explain that that one of the primary drivers of my sometimes perceived negative outlook has to do with one word - "valuation," a term that many investors continue to take for granted. Although I am a bull on the long term potential on both the market as well as our economy, I can't help but notice the fact that certain stocks often approach certain valuation levels that they have no business reaching.

You are probably wondering, "Cameron, who are you to say something like this? Let the market do its thing." Fair enough, but my response is, what is investing without appreciating the inherent uncertainty? I want to argue that it should no longer be called investing at that point, but a gamble. And no, they are not the same thing because first, it does not require due diligence to roll dice and get a pair of 7's, it just requires luck and chance. Investing requires only information and valuation. When valuations are attractive, we buy and the information serves to determine our holding period and the likelihood that the stocks that we chose to buy will produce satisfactory results during that holding span.

There are several companies that continue to fit that mold of having attractive valuations and will continue to produce satisfactory results well into the future - even more importantly, these pay handsome dividends which almost eliminate the "betting" component. These are my surefire investment plays for the rest of the decade.

Company

Dividend

Market Cap

Price

Cisco (NASDAQ:CSCO)

1.60%

$106.6B

$19.81

Microsoft (NASDAQ:MSFT)

3.10%

$2673B

$32.00

AT&T, Inc. (NYSE:T)

5.8%

$179.3B

$30.36

Oracle (NYSE:ORCL)

0.8%

$147.8B

$29.65

Intel (NASDAQ:INTC)

3.1%

$134B

$26.94

Apple (NASDAQ:AAPL)

N/A

$503B

$544.10

Cisco

Cisco continues to have its share of critics on Wall Street. There are many who remain unimpressed by what the company has been able to do of late - a feat that includes three consecutive earnings beats. But nevertheless, as the stock currently sits right at its 52-week high, the major question for analysts continues to be, where is the value? This of course goes against my prediction that the stock is now heading to $30 - clearly from my vantage point there is $10 worth of equity to be had. But the challenge for Cisco is convincing the market that it can get there.

In its latest quarter, which ended January 28, Cisco reported net income that climbed 44% and arrived at $2.2 billion, or 40 cents per share. This compares with earnings of $1.5 billion, or 27 cents per share year-over-year. If you factor out that the costs associated with stock-based compensation as well as some acquisition-related amortization, the company actually earned 47 cents per share - 4 cents per share above analysts' expectations based on polls by FactSet. Revenue was $11.5 billion, up 11% from $10.4 billion a year ago and compares favorably to the $11.2 that was projected. Its results clearly demonstrate the company is keen in improving its margins as the metric improved a full point from the previous year while also exceeding analyst estimates.

It is a good time to be a Cisco investor. As disappointing as the past couple of years have been, there are certainly plenty of reasons to suspect that the worst is behind the company and it deserves a tremendous amount of credit for what it has been able to accomplish in a relatively short period of time. There are still challenges that lie ahead, but I now have several reasons to expect a continued rise not only in the company's execution but also in its share price.

Microsoft

Mr. Softy has been on quite a resurgence recently and it has started to make me wonder if we are back in the 90s. It goes without saying that the fact that Microsoft is starting to matter once again in the tech space bodes extremely well for its investors, but it has to be a welcomed sight for consumers as well. Currently the stock is trading over $32 and sitting at its 52-week high. The question is, how much more leg does it have? I think investors should be pleased that its momentum has not slowed down and there are clear signs that it is heading to $40.

The company has plenty of positives to inspire an entry at current levels - not the least of which has to do with its raved reviews for the anticipated release of its Windows8 OS. Growth has always been my primary investment motivation and something that Microsoft has failed to produce over the past several years. But regardless of how one feels about the company and its prospect of competing with Apple and Google, the fact remains that Microsoft still has a business with very good returns on capital and excellent cash flow. And it also helps that it pays an excellent dividend.

The company will most likely never grow again in a way that resembles the mid- to late-90s, but that does not mean it does not have life. It has been considered the sleeping giant and remains only one good idea away from being awakened. And when it does, $40 will be a realistic destination.

AT&T

Perhaps one of the best reasons to own AT&T is for its strong dividend yields, which currently is at 5.8%. AT&T has been considered a safe haven of sorts for a number of years because of its solid market beating performances and yet the future is even brighter from the standpoint of the demand that it will generate for its network. The company not only features one of the better 3G and 4G networks, but also has a wide selection of wireless products highlighted by Apple's iPhone and devices on Google's Android platform.

The company is in a great position to add to its customer base. In fact, subscriber growth increased faster last quarter (1.3 million new wireless customers) than the previous two and a half years, thanks primarily to the iPhone. Consolidated revenues grew a solid 6.3% year-over-year to $27.5 billion during the quarter. As the competition sorts itself out, the company's management is doing an excellent job of focusing on adding shareholder value. The iPhone deal has proven to be the game-changer that it needed to propel the stock going forward. That hefty dividend also makes it an appealing stock to hold regardless of what might be ailing the market.

Oracle

Being dominant well into the future has always been Oracle's top priority. Oracle's CEO Larry Ellison has shown that he and his team are not only able to move Oracle in the right direction, but the company plans to sustain its growth ratios and increase profitability by focusing on the enterprise database market. The company's ability to be forward looking has caused them to set sights not only on virtualization, but also cloud computing technologies - which is (in my opinion) the future of computing services. With its industry experience and sound management team, are you ready to bet against them?

In its latest quarter, the company reported a profit of 54 cents per share while analysts were projecting profits of 57 cents. The bright side of the report was that new software sales rose slightly - 2% year-over-year to $2 billion. Management also added that it expects hard revenue declines of 5% and 15% while also projecting new software sales growth of flat to 10% - another disappointment as analysts were forecasting growth of 7%.

As a long time shareholder, I can tell you that the company has had better reports. But one thing that it also has is good sound management - and it seems that Wall Street continues to underestimate them. Analysts have overlooked the fact that Oracle had anticipated weakness in certain segments of its business preemptively positioned itself for the technological shift within the cloud that will allow it to remain dominant in the corporate enterprise sector. With the stock now trading right around $30 I can't help but see the tremendous value that still remains. Thought he dividend yield is not great, investors should anticipate the stock to move toward the $40 mark at some point this year.

Intel

It is hard for me to want to write off chip giant Intel at this point, even as sexier chip names like Qualcomm and Texas Instruments move to the forefront of the mobile race. But it is clear that the company is not yet ready to make it a foregone conclusion that the race is over. As with anything worth pursuing, for investors, patience is going to be required here before the company can show significant strides in its attempt to secure market share in the mobile market. But Intel has ample resources to devote to this market and establish its own standing and prove that it can be relevant. It also helps that the company pays a handsome dividend for those willing to wait to be proven right.

Recently, Intel reported a 6% increase in profits in its last quarter while analysts had expected the company to fall short of that mark. The remarkable feat is that it did this as hard-drive shortages held back PC sales, which were said to have hurt PC manufacturers such as Dell (NASDAQ:DELL) and Hewlett Packard (NYSE:HPQ). The latest results were at the high end of Intel's mid-quarter forecast range where its Q4 net income arrived at $3.36 billion, or 64 cents per share, up from $3.18 billion, or 56 cents per share, a year earlier.

As good as the numbers were, I did notice that revenue for the quarter was slightly down, 2% sequentially, but significantly better than the year ago period. Growth in the core PC business fell 4% sequentially, but as it reported, it was tough to not expect that the Thailand flood would have some adverse effects on its performance. But overall, its report was broadly better than what Wall Street had been expecting. On the positive side, the company saw an increase in its software and services business - to the tune of 7% growth in revenue. This has to be a welcome signal for investors that, although competitive threats abound, the company has other streams of revenue to offset any share losses in its chip business.

Apple

I cannot discuss stocks for the next decade and leave out Apple if I want to maintain any ounce of credibility. It is hard to talk about Apple and still expect to say something new as it is the most widely discussed stock on the market. Remarkably, with its value now at $500 billion and $545 per share, the stock continues to trade at a discount. Remarkably, someone recently happened to say something new that raised some eyebrows. On Thursday, Apple's co-founder Steve Wozniak said he believed the stock has the potential to reach $1,000 while noting that he expects Apple television product development, equipped with voice operation capabilities, to become a relatively near-term reality and drive further Apple growth.

John Burnham, five-star manager of Burnham Funds, thinks Apple agrees. In a recent article, he noted the following:

  • "Sure ($1,000 a share) is possible. Not tomorrow. But with a stock at 11 times earnings, it seems possible to me," said Burnham. He's referring to Apple's current valuation, which has stock investors paying 11 times the stock price for the company's future earnings growth.
  • "Right now, the stock's cheap. Really cheap," added Burnham. The valuation seems to have convinced investors. The stock hit another record on Thursday, surpassing $547 per share.

I happen to agree. But while $1,000 seems like a dream at this point, in the near term, reaching $650 to even $700 is not out of the question. If Apple can achieve roughly 12% to 15% annual revenue growth for the next couple of years, the company will be able to generate almost $180 billion in annual revenue. Just imagine what that means for a second. Assuming a declining ratio of free cash flow conversion, Apple could end 2015 with nearly $40 billion in free cash flow. Assuming 8% cash flow growth beyond that, a market-matching discount rate, and adding in the cash on the balance sheet, suggests a target upwards of $700. Is Apple still cheap? Absolutely.

Source: 5 Stocks To Buy Now For The Next Decade