Cisco (CSCO)

If you include the cash, this is quite a cheap stock. It is basically trading at about 16-17X earnings and the market cap is about $165 billion. People forget that there is $60 billion plus in cash sitting on the balance sheet. Even if you net out the debt of about $30 billion, you are taking the valuation down to about 13 or 14 times. Not including the debt, it is about 10 times. The growth profile is going to be low. The dividend is about 3% and there is a strong potential that you could see some special dividends, or an acquisition to drive growth. An attractive investment.

A matured technology company. Their heavy growth days are behind them, but they own the market. They have enough money to go out and develop new products. The problem is that they own this market, so there is not a lot of growth, so they are under the pressure of new technology coming on cheaper. At this price, it is probably fine and you won’t lose money. If it were below $28, he would buy this again.

There is going to continue to be a lot of spending in the IT space. This is one of those companies that is very innovative. They provide a lot of important things. The “Internet of things” they talk about is a really big deal. This has a good strong balance sheet and a decent yield and they keep buying back stock. He worries about competitive threats. China is getting into this business as well. There are potential trade wars looming. The stronger US$ is hurting sales. He would rather buy this on weakness, down around $28.

He is thematically focused, and tries to find themes where something is changing for the better, where investors can make returns and get a multiple expansion in the stocks they own. A key theme in this market are some of the large cap technology stocks that generate tons of cash, and return some to shareholders. This one generates a free cash flow yield of about 7%. Pays a 3.4% dividend, and has been growing it north of 15%, and likely will for the next 5 years. Generates a lot of cash and their commitment is to return 50% of that to shareholders. This is the supplier of gear that is connecting all the Cloud infrastructure together, and that is not slowing down anytime soon.

Thinks the dividend is safe. It has become a mature cash cow. They are reinventing themselves from the old router and switching company. If you look at what they have done over the last few years, it is similar to what a lot of old technology has done; trying to reinvent itself and basically treaded water. There are better opportunities in technology, newer and growthier ones, and he would probably gravitate towards them.

This has gone from a hardware company to software. They are trying desperately to do that quickly, being in the Cloud and providing artificial intelligence moving forward. The old hardware business is pretty much gone and they are trying to make a transformation. The jury is still out as to whether they are going to be hugely successful. He would avoid this.

He likes this company. It shows up on his radar as decent value. In the near term, it is probably a little overbought. He likes this particular space. Trading at about 14X with a 7%-10% growth rate. 3.4% dividend yield.

Not an expensive stock. On the switching side, they’ve not been able to get that to grow more aggressively which has really hurt them. They’ve augmented the slower growth by making acquisitions and buying assorted things. Now they are going to get squeezed on the margin side. The numbers are going to be OK numbers, but you can put your money in other places and do better. Over the next couple of years, you may get some margin compression, as their switching business is just not running on all cylinders.

Cisco Systems (CSCO-Q) or Intel (INTC-Q)? Both are old economy tech stocks, and both are excellent companies. If he had to choose, he would choose Intel, which has done more to turn the corner.

Technology tends to do well from October through to January, so we have just exited the period of seasonal strength where the stock gains about 25% on average. We are out of the period of seasonal strength, and currently are in a period of seasonal weakness, which runs through until about mid April. Technically, this has run up with the broad market, and all the indicators on his screen indicate that it is vastly overbought. Wait until it comes back down to some of the major moving averages, the 20 day at $32.89, the 50 day at $31.34. Start looking for your entry point at about mid-March through to mid-April.

He likes this a lot. It has had a nice run this year and is up close to 20% in the last 2 months. They make networking gear. Free cash flow yield of about 8%. A very profitable company. As long as people keep using smart phones and in general transferring data, this company is going to make a lot of money, and there are not a lot of competitors.

It has a 3.4% yield. He likes it. On a seasonal basis technology may take a breather here. As we connect more and more devices up to the cloud this one should benefit. Trump may focus on building out the digital infrastructure in the states. He thinks they will be well placed going forward as we move from the world of analogue to digital. They are executing so you won’t lose any sleep over it. (Analysts’ target: $35.00).

They are a big beneficiary of the Internet. He does not following it. He would not buy it here. But he does believe in the Internet and more and more smart devices.

It has had to transition from hardware into services. They have done a pretty decent job. They offer cloud services and security services. It has a decent dividend yield and is fairly defensive for the IT world. 3.4% dividend.

One of the old-school technology names and people are looking at the true obvious Cloud players. This company is going to be more and more important in Cloud infrastructure than what people are giving it credit for. From about 2000 to 2015, this made zero, and finally you are seeing some break out.