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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Eric L who wrote (50371)	2/14/2002 5:14:14 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 54805

CSCO buy-strategy: In 1999, I sold a LT position in CSCO, when it hit a PE of 100. I am now, finally, getting comfortable with gradually re-establishing a LT position in CSCO. The recent news about Juniper, is exactly what should be expected, given that Cisco is a Gorilla. I've seen numerous companies challenge Cisco in specific niches, with products and technology that are said to be superior. They do OK for a while, and then they all fade. Remember Bay Networks? The recent earnings report from CSCO, indicates their business is doing much better than their overall market, indicating they are growing market share. Last September/October, I had thought that Cisco's business wouldn't turn around until 2003 (or even 2004), so I would wait for a lower stock price. But the turning-point seems to be already happening, in spite of the fact that corporate IT budgets are overall flat (2001 to 2002), and telecom equip capex is likely down again in 2002. For the last 3 quarters, CSCO sales are up (4.3,4.4, 4.8B), and gross margins are up (52% to 54% to 57%). I considered buying the stock, or the longest-term calls (2004s now; 2005s available in May). I've decided on the 2004 calls, 17.5 strike price. At-the-money longest-term calls are a good proxy for the stock, but give me some leverage over the stock. Since I think the fundamentals and the stock price are past their trough, and the trend is now up, I feel comfortable holding LT options (as opposed to the stock). I'll be buying those options, with CSCO at 17, and every 1/2-point lower.