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Cisco Systems Stock

Buy, Sell, or Hold? The Tech Sector's Ultimate Bellwether

Written by Steve Christ
Posted May 21, 2009 at 3:46PM

As a longtime watcher of Cisco Systems, I have always known the tech giant was a bellwether company in more ways than one.

When the internet exploded onto the scene in the 90s, Cisco was literally at ground zero of what became Web 1.0. As Cisco went, so went the tech sector.

After all, its switches and routers made it all possible. And in the run-up to the tech bubble that ultimately collapsed, Cisco's share price went hyperbolic, as did numerous others'.

But sales figures and inventory numbers weren't what made Cisco a market indicator for me for me back then — not as much as its name.

That's because, in the hands of my sister, Cisco's name proved to be the greatest bellwether of them all.

It happened in the spring of 2000 at a typical family gathering. You know the kind: spiral ham, potato salad, a Jell-O mold, and some lukewarm beer.

I was making the usual small talk with my pop when my sister — God bless her — appeared out of nowhere and began talking about how we should look into a stock she was thinking about buying.

She said — and I'll never forget this as long as I live — "You guys need to buy some shares of Cisco Systems stock. I think it could easily double." Cisco, as you may remember, was trading over $100 at the time.

Now, knowing her as I did, my reply was quite simple. "What makes you think that?" I asked her, trying not to chuckle.

"Well," she said, "everyone I know thinks so. And besides, I see their trucks all over the place."

With that, I could barely hold onto my warm beer and Jell-O because I was laughing so hard.

I realized my sister didn't know the difference between Sysco Foods and Cisco Systems, and she was about to buy the high flier at its peak.

Of course, once I finally got control of myself, I tried talking her into a nice mutual fund.

But driving home that night, it struck me: my sister was really no different than that stock-picking shoeshine boy before Black Monday in 1929. And suddenly, all that talk about bubbles began making perfect sense to me.

Cisco, of course, never did double again. In fact, it soon tanked along with the rest of the high fliers.

Tech's Ultimate Bellwether: Cisco Systems Stock 

But unlike those other companies, Cisco just kept chugging along — growing and capturing market share. Its share price may have gone virtually flat, but the company managed to hold onto its bellwether status.

A bellwether, by the way, is loosely defined as anything that tends to create, influence, or set trends.

It comes from the Middle English word bellewether and actually has nothing to do with the "weather" as we know it. It refers to the practice of putting a bell around the neck of a castrated ram (a wether) so it may lead its flock of sheep.

Of course, the October 2007 comments from Cisco CEO John Chambers spooked the markets and basically marked the top of the tech market. (Who said the bell doesn't ring at the top?)

Back then, Chambers was merely warning about the outlook for flat U.S. sales — and the Nasdaq has been down ever since. Today, of course, it has turned into something else entirely: a global slowdown.

That has given the company a certain layer of doubt, leaving investors to worry how Cisco's sales will measure up, since it's always about winning the expectations game on the Street.

And in a free, new six-page report, The Wealth Advisory research team has broken down the tech giant, answering the question on every investor's mind these days. . .

Is Cisco Systems Inc. (CSCO) a Buy, Sell, or Hold?

In this free report, Wealth Daily subscribers will receive:

  • The results from The Wealth Advisory's proprietary scoring model

  • A buy, sell, or hold recommendation

  • A 12-month Price Target along with a current Stop/Loss

  • A technical and fundamental analysis of the company's share price

  • And much more. . .

To receive a free download of this report and our Buy, Sell, or Hold recommendation for Cisco Systems Inc., click here

I hope you enjoy your free Cisco Sytems stock report. I'll be publishing many more of these in the weeks to come. . .

Your bargain-hunting analyst,

steve sig

Steve Christ, Investment Director

The Wealth Advisory

P.S. As my Wealth Advisory subscribers are happy to report, making money in a bear market is easier than the so-called experts would have you believe. In fact, The Wealth Advisory portfolio is now 25-8 in its closed postions over the last 12 months, delivering net gains of 554%. And we're doing it in what's being called "the worst market since The Great Depression." To learn how Wealth Advisory members are earning reliable gains week after week, click here.

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