significant downside risk is potentially there even though having some small gains; this is not a thread just for some long-term cisco owners; there are investors looking to go into the mkt and certain stocks, and people that might be thinking of selling their csco and moving to others; if one wants to hold on that's their decision too.
Now for those who wants to get in a certain price; imo, the analysis based on potential negative donwside earnings this qtr or warning next qtr can hit csco for 20-25% and if mkt is really bad then it can be 30-35% downside; that's why the WSJ SMARTMONEY magazine has a buy target of 46$ in bad mkt condition, and that was what was said in earlier posts also (51-55$ for normal mkt, and 45-50& for bad mkt).
Now, for those who owns csco in significant amount, the question is - Is it worth the risk to hold knowing the fact that there is a potential of significant downside?; what are the possible contributing factors, they were posted in some of the previous posts, and to summarize here;
asia mkt share has dropped significantly since the turmoil in asia, and by adding a substantial number of new employees in asia there is a compounded negative contribution to the near term earnings;
Europe and latin america is very soft;
in america much more stiffer competition with price wars that can drop margin significantly; considering those, and knowing the probability of downside that can be up to 35%, IMO going into the S&P500 SPiDR "SPY" is a much safer alternative- let's put it this way, S&P will not drop 35% in a few days but if csco warns of earnings the possibility is there - S&P500 dropping 35% is like the DOW dropping almost 3000 points (to DOW 5000) in a few days which the chance of happening is virtually nil. SPY will track the mkt and if the S&P500 index moves up 10% in the next few months it will basically move up around 10% also. From looking at recent csco performance, it basically follows the overall mkt condition leaning more towards the Nasdaq index; in a tech oriented up turn in mkt csco can outperform the SPY by about 5%, imo. This 5%, imo is not worth the risk knowing that it has the potential to drop 35%. |
