Since I have some reservations about the near term performance of CSCO stock maybe I can be the new "Thread Moron"! I'll post arguments about my doubts for the near term, and all of you can tell me what an idiot I am. Let the games begin!
Actually, I've found people on this thread to be perfectly cordial in responding to defensible opinions stated clearly and non-repetitively. It was only the repetitive drivel, without added content, that launched the stupid flame wars.
For the record, I think you're right, in the short term, and that CSCO will move lower, along with the market in general. The S&P 500 has just rocketed up some 6% in the last week or so, mostly not on news, but on "Don't worry, be happy" sentiment. According to briefing.com, the trailing 52-week P/E on the S&P500 is now 34 (OT does anybody know a source for obtaining this figure on a regular basis?). That's way high, especially since the long bond yield just moved sharply higher, also. I think we're due for a pullback, possibly a pretty big one. Although any pullback would likely be set off by some sort of negative news, I would expect it to be mostly sentiment driven, and to feed on itself. I don't see anything in current market conditions that makes a trailing S&P500 P/E of 34 inherently more reasonable than one of 25. The latter figure would put the S&P500 at about 955, and the Dow at around 7200. A commensurate decline in CSCO would put it at 77, though of course CSCO might decline less -- or more -- than the general market. (Unlike the Dow and the S&P500, CSCO has already pulled back a bit from its all-time high.)
To make it clear: this has little or nothing to do with CSCO's prospects as a company. In the near term, the market is driven by sentiment, and sentiment is not predictable. Here is another example: I was looking at SUNW today (I have a little SUNW, with March 100 calls written against it, and was trying to decide whether to let the option be assigned, or whether to roll the options out to April.) SUNW traded in the 40-50 range pretty much all of last year until early October, then began a meteoric rise to 110 or so. Now, SUNW is a perfectly fine company; but I have not found any dramatic improvement in its fundamental prospects to justify the sudden more than doubling of its valuation. Maybe SUNW was way undervalued at 45, and 110 (or more) is the "right" valuation. Or maybe it was undervalued at 45, but overvalued at 110. Or maybe there is no "right" valuation, and it all depends on the mood of the market. In which case, SUNW could certainly hit 150 in the next 90 days. Or 50. (I decided to let it go. I'll get back in, if I can, by writing puts during a market downturn, for 90 or less.)
Back to CSCO. For long-term holders, none of this matters ... much. I believe that 5 years from now, CSCO will be way higher than it is now. On the other hand, for those looking to open or enlarge a position in CSCO, there is the nagging question of timing. Bad timing really can materially affect your return, even on an excellent investment.
As the Dow nears 10,000, I heard the following on the radio today: the Dow first broke 1,000 in 1965. It promptly dropped back, and didn't break 1,000 again until 1972. Then the 73-74 bear market hit, and it dropped back below 1,000, and didn't break 1,000 again until (I think) some time in the early 80s.
Tough calls to make; that's why we're all pulling in the big bucks, right :-)? Personally, right now, I've got lots of cash on the sidelines, waiting for lower prices. |
