We have seen a good amount of M&A activity all through the second and third quarter, so the tech stocks are back in demand. Cisco systems recently announced that they are experiencing a slowdown in business and investors simply dumped the stock. Now the question is should you invest in Cisco at current levels and refrain from what the crowd is doing?
Well a tried and tested strategy in the stock market is to place your money where there is value and avoid chasing others. Cisco, without doubt is a strong contender in the technology space, and when you look at company’s integrals, it is surely a long term buy. However, many analysts have secluded this company from their investment radar for 2011, so now let’s take a deeper look into the business and see if it makes any sense to invest in it.
On top of everything else, Cisco’s main strength lies in the huge cash reserve it hold in such economic times. Currently topping $39 billion, its cash reserves can help in initiating any sort of new initiatives or simply cushion the business if the slowdown continues longer than expected. The most unusual activity from the company’s management was the recent announcement of a dividend, which will be their first since inception. The company management surely displayed their belief in the business by announcing their enormous stock buy back plan. All these initiatives may not convince short term players to invest in the stock, but long term investors and value buyers will surely revaluate the stock going into 2011.
Prospering under the leadership of CEO John Chambers, Cisco rarely disappoints its investors; rather, they are known for their long history of better than expected surprises. This time around they took a knock down, but then it happens to every company. However, strong companies like Cisco always remerge stronger than ever and so seems the case for the near future.