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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (55628)	9/24/2001 10:30:13 PM
From: Stock Farmer	Read Replies (3) \| Respond to of 77400

My jaw hurts from the banging it got on the floor: So again, John, what I'm saying is that in the end playing with numbers too much is bullshit and will get you nowhere...<snip>... The way I overcome these forecasting fallacies is I look at the soft factors, like company's management, tornado markets, market position and share, technology leads, HR policies geared towards recruiting and retaining the best, cash flow management, no debt, etc. Cisco scores high in most of those categories. So for me they are a good investment (I just picked up some again recently and will pick up more over the next few weeks). The problem with this line of thinking is that it was quite equally valid when Cisco was trading at $70. You used equivalent arguments back then too. And in the 60's, and 50's and 40's. And in the 30's. And in the 20's. And now again in the teens. It appears you are inflicted with a learning disability. Like a stopped clock you will be right some day and be able to say "I told you so". I'll paraphrase your logic: "The way I overcome difficulties analyzing anything substantial is by assuming things about insubstantial things". As for dismissing logic and facts, well sure, it is all about assumptions. You or I can make up numbers all you like. If the assumptions behind them don't stand a test of reality, then you must throw them out. Like this: But you, in particular, take it to the extreme of saying, "My spreadsheet says this, and my assumptions are infallible, therefore I must be right and Cisco must be a bad investment." . Not correct. The reason I bother to state assumptions is so they can be challenged. Otherwise I would merely boldly assert conclusions. Like "Stock option dilution is a drop in the bucket..." for example. Stating one's assumptions, particularly on a thread where folks aren't shy, is begging for the faults to be found. Take your numbers for example. Let's just start with that little tidbit about a stock buyback. That one little assumption sends their free cash flow into the red. So you concocted a model which pretends to show that they are worth $12 ish, but doesn't cut it. Try again. Hint: It's the net present value of PROFITS that matter, not EARNINGS. Real money spent doing something is subtracted from profits. Real money that the something generates is added to profits. Noncash charges have impact on earnings but not on profit. Just like using cash to buy back shares impact's profit but not earnings. And we both know it's free cash flow (a good proxy for profit) that matters. It's actually harder than it looks to come up with a model that justifies $12.00 as a stock price. Mostly because finding assumptions that hold water is difficult to the point of nearly impossible. But please keep on trying. Because otherwise all you have to look at is the fluff. Like a drunk looking for his keys under a lamp-post because that's where the light is. Be my guest. Its folks thinking this way that would buy Cisco at $70. Or 60. Or 50... and so on. You are entitled to think anyway you like. I can only suggest alternatives less hazardous to your wealth. That being said, it is also quite true that the stock made it all the way to $70 despite these very facts. So it seems that the greater fool theory has (or at least had) very long legs. Which I have over and over and over again admitted. One can gamble on the greater fool theory. One should invest based on fundamentals. Which brings us to the subject of your bet. $16.50... hmmm. I too think it could get there, yes. Geez, with no change in information wasn't it there like only a few weeks ago? But I think that in an even longer time it will be more profitable to buy 12,500 in 30 year bonds than buy a thousand shares of Cisco and hold it for 30 years. Sadly, I'm not sure either of us has the stomach for a 30 year bet. CSCO can be a good investment for a trade. I think 16.50 is a good speculative play from here. The upside to $12.00 is much larger than the downside. But that's a short term gamble betting on J6E trying yet one more time to drive the stock price against gravity. Rockets go up this way. But in the end Gravity wins. John.