I haven't done a full-blown analysis of either LU or NT. I have
tried to keep up with CSCO, and consider it a core holding that
I will not sell, because they are at the center of the "paradigm
shift" (I hate that phrase!-)). I've owned it for a couple of
years now.
I will say that any comparison based on sales is almost irrelevant
to the investment decision here. LU and NT revenues are still
largely driven by legacy technologies. I will note that Value
Line estimates results of the three companies to grow as follows
1998 to 2003:
(Per Share) Revenues Cash Flow EPS
CSCO +166% +162% +165%
LU +60% +100% +102%
NT +87% +88% +115%
A premium is now deserved for position in the IP markets. They are
the driving force in growth, and CSCO is a purer play in this arena.
Also, the market has apparently decided--and held constant to this
view for as long as I've watched CSCO--that you can take a 5 to 7
year time horizon with CSCO. The market has not decided that with
either LU or NT. Whether you should for LU is an interesting
question; their history isn't that long as an independent company,
so it's hard, but it's worth further investigation.
Based on NT's missteps over the years, I don't think you can look
out 5 years. Their earnings were barely breakeven in 1993, and
only last year got back up to 1992 levels. There was apparently
a special charge last year. Can you tell us what that was for?
I will repeat: No one buys any of these companies for the dividend.
They are there for historical reasons (because they were being paid
when the companies were not growth companies). In fact, given
the potential growth of their markets, I can argue that the dividend
is a negative, because they are a waste of the companies' resources,
and sap their ability to invest in growth.
So, at this point, I'm perfectly happy to sit here with my CSCO
shares, confident that they will help fund my retirement home in
Florida.
Your assertions have gotten me to do some analysis I would not
otherwise have done, and reaffirmed the quality of the CSCO
investment in my eyes.
Best,
JS |
