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Strategies & Market Trends : Value Investing

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To: John Koligman who wrote (50127)	11/21/2012 1:24:22 PM
From: E_K_S	Read Replies (2) of 78748

Hi John - CSCO is one I have been watching and have a standing order to buy below $15.00/share. My biggest problem w/ CSCO is they are not that shareholder friendly in the past. So many stock options have been issued during their go-go days w/o the consideration of the shareholder(s). Just recently did they start their dividend and that is not as attractive as INTC. Technology wise they are a leader but they have also had their hick ups with sour acquisitions, products and the like. So my strategy was to buy a few shares on any significant sell off. CSCO has a BV of $9.49/share but a TBV of only $5.43/share (representing all the goodwill they paid for companies they bought). EPS are positive for last 10 years. The company has increased their BV every year for the past five years too. So, if you calculate the Graham No. using BV of $9.94/share and the current year EPS of $1.71/share you get a fair value of $19.56/share or about 5.5% undervalued. However when you exclude Goodwill from that calculation and use Tangible Book Value of $5.43/share, the GN fair value drops to $14.45/share or about 28% over valued. Therefore, I do not see a screaming value buy in this name even w/ all that cash on their balance sheet. The stock did sell down to $15.12/share in July and that for me was/is a good entry point from a value perspective. FWIW, a few of these Tech names to me begin to look attractive from a dividend yiled view (as an income investor). They include MSFT, INTC, CSCO and AMAT. Of those three, INTC is the only one I hold now with an average cost basis of $19.78/share. EKS

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