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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Ex-INTCfan who wrote (729)	9/12/2000 9:02:25 PM
From: Mannie	Read Replies (4) \| Respond to of 65232

The Bull Market Report issued a sell on CSCO tonight, for what that's worth... 1. "SOMEONE HAS TO SAY IT" DEPARTMENT Well, someone has to say it. Cisco is heading down and it may be time to get out. OK, there. We said it. Send those nasty cards and letters our way. But, that's what you pay for right? Our thoughts on the markets. So don't shoot the messenger. We think Cisco (CSCO), which closed at $59, down 2, ought to be a $100 stock too, but if the market is pushing it into the 50's then there ought to be some clarification here. Here are our thoughts: Cisco is a great company that is more profitable than about 99% of all firms across the globe. They do $40 million a day in business on the Internet. Without lifting a finger. This is very big and very profitable business. The problem is that Wall Street recognized this and investors bought shares and pushed the price of the stock to heights hardly ever seen before. Even today, with the stock down from its high of $82 set in late March, the company trades at a PE of 115 and a PS ratio of 21 (price-sales.) Historically, the PE should be 32, since this is the company's current earnings growth rate. But this is the new millennium, so a PEG (PE-growth) of 2 would be acceptable. But this would mean a PE of 64, or a price 44% lower than where it is now, or $33. And this assumes that the firm can keep this machine growing at 32% a year. A tall order. So, what is a long term investor to do? If you are a 1-2 year player, you might want to take some money off the table. Cisco could be "dead money" for the next two years. We've said the same thing about AOL ($56, unch.), JDS Uniphase (JDSU, $103, down 7), Yahoo (YHOO, $107, up 1), DoubleClick (DCLK, $37, up 4) and Phone.com (PHCM, $89, down 3) and would be saying it about Verisign (VRSN, $166, down 5, and down from its high of 258) but we don't own it in our portfolios. Hmmm. Maybe we should start a SHORT PORT! If you are a five-year investor, you should do OK. Cisco should be doing $70 billion in revenue in 2005 and should be 3.5 times as big as they are now. If the PE is a reasonable 50, the stock should be at least 50% higher than it is now. But, is 50% growth in 5 years good enough for you? These items are food for thought. Sometimes we can't see the forest for the trees, so we thought we would bring up these ugly concepts for all to see. We can't tell you the nasty emails we have received about JDS Uniphase after we said it could be dead money at $100 a share for three years, only to see it promptly go to $139. Where is it today, a month or two later? Did you have the fortitude and foresight to daytrade it and lock in your profits? Not many do. And the ultimate question, where will it be next year at this time? Our bet is that it won't be in triple digits.