Cisco (CSCO)

This one has been a laggard. Large Cap tech is a big theme of his. Recently came out with earnings that were very, very good. His model price is $35.58, a 46% upside. Yield of 2.77%.

(Top Pick Feb 20’13, Up 16.62%)

Got into it last summer. Story has played out as he had hoped. 70% market share in core business. Really well managed company.

Cisco ranks well in their ranking system. If you don't own it, don't buy it's too high right now. Tech sector is one of the more undervalued sectors now.

Predominant name. Growth hasn't been that strong. Management team is strong, balance sheet is pristine. It's generally positive, but you will not see it breakout.

Has about $35 billion of cash, net of all debt, so there is zero risk to dividends. They generate probably in excess of $5 billion per year of cash. Buying back shares. Still growing their top line at 6%-7% range and growing their earnings at 10% plus. Phenomenal long-term value.

Has 70% market share and about 40% of its revenue is recurring in service contracts. They committed to giving half their free cash flow back each quarter in the form of dividends or Buy Backs.

Still has fairly good growth and is the best-of-breed company in the network equipment sector. Also has attractive valuation as well as a high yield, which you never used to see in the IT companies. Good risk/reward. (See Top Picks.)

Was a real darling until the 2000 timeframe and then the networking market fell on its back and has gotten tougher and tougher. From a macro point the increasing penetration of smart phones is going to lead to higher and higher levels of network requirements, more fibre and we are starting to see companies that are in those areas start to move. Unfortunately this company’s big competitor is Quaway (?) out of China where they want to get more Chinese exposure. Getting slow growth out of Europe because of the recession. Because they are a global player, they are dealing with the US government. Near-term growth outlook is challenging. Dividend and balance sheet are very attractive but we need to see it at a lower level.

(Top Pick Feb 21/13, Down 0.60%) Likes it a lot. Huge cash generation. Investing in growth areas and give back 50% of their cash flow to investors.

Carrying the legacy of a growth company in a new era. That new era is that it’s really a mature technology company in the likes of Microsoft or Hewlett-Packard. Earnings are growing at about 5%-7% so it shouldn’t command as high a multiple as it did. Have some headwinds in terms of the piece of its business that is allocated to government spending. Also, heavily linked to housing market and housing formation, which has been a bit of a headwind as well as an opportunity. Better places in the technology area to be.

Yield of 2.7% and trades at 10X earnings. Great balance sheet. Expect you will see better operating costs on their side and are coming out with new products that will really help the company. Expect margins will go higher over the next several quarters. Not expensive.

Different company than it was years ago. They are now in single digits in terms of earnings growth and revenues. Household formations have hurt them as they are involved with routers, etc. Also, do a lot of business with governments, which have been cutting back. Doesn’t think this is overpriced but doesn’t see any catalyst with this company. 2.6% yield.

(A Top Pick Feb 21/12. Up 3.23%.) Big cash pile and a growing dividend. Sees demand for bandwidth growing at an exponential rate. Tablet penetration is only 15% so there is huge growth in tablets. 2.7% yield.

(Top Pick Jan 11/13, Up 2.20%) Good balance between legacy systems and current. Acquisitions have been in the right space and they have been growing their service revenues.