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

To: ed who wrote (22085)	2/6/1999 11:48:00 AM
From: Dennis Eckert	Respond to of 77400

Ed, Good point you made, and I agree. I think Wm O'Neill's major point about P/E vs earnings is that earnings growth or slowdown was seen in his analysis to be more powerful of a 'price driver' than P/E. EPS thus looks to be more forward-looking while P/E seems to be just a snapshot. For some folks, high P/E will serve only as a cautionary signal to perhaps tighten stops while for others high P/E stocks will be avoided like a dead skunk in the road. As for what's driving price volatility in CSCO, I'm always interested in trying to better understand the short-term dynamics. An article Friday on TheStreet.com has some new information from NASDAQ about retail investors vs institutional investors for CSCO. "In the past year Cisco has become a favorite of individual investors, whose penchant for quick trades contrasts with the lock-and-hold strategy that large money managers use with the company. Last month 78% of Cisco's shares were traded in blocks smaller than 10,000 shares, according to Nasdaq, up from 72% one year earlier. Average daily volume has increased slightly, from 16 million to 18.7 million shares. "An overall surge in online trading contributes to this trend. Piper Jaffray estimates that retail investors made 27% of their trades online last year, up from 17% in 1997. "Some online retail investors were plenty upset that Cisco did not split its stock. While it doesn't alter a company's valuation, a stock split is seen as a bullish move because it makes the stock cheaper to purchase. On the Yahoo! Finance message board, one participant wrote yesterday: "SHORTS RIGHT; CHAMBERS IN ERROR FOR NOT SPLITTING." "Equity analysts continue to urge institutional clients to invest in the stock. "Across the board, [Cisco's earnings result] was solid," says Duran. "There really wasn't much to complain about." "But as more online players exert influence, solid earnings may not be enough." Net Rush is a weekly feature about how the online revolution is changing the way that Wall Street works, especially for retail investors. I suspect that the majority of the retail folks who bought in on the split expectation now feel 'burned' that it didn't occur. Their losses will probably keep them out of CSCO for some time. As an options player, I'd certainly welcome some reduced volatility on CSCO because it reduces the premium I pay for the options.

To: ed who wrote (22085)	2/6/1999 6:15:00 PM
From: Mike Gordon	Read Replies (2) \| Respond to of 77400

Ed; True 'The reason a stock's PE is high is because the investors want to pay whatever price to own the shares of that stock.' Carrying this one step further, the reason people want to own this issue is because CSCO is the cement, which paves the new communication interstate highway. Until this project is complete, CSCO along with other contributors, (MSFT, INTC, LU, DELL AMZN, and AOL) will continue to reap revenue, earnings and profits that are greater and more ambitious than the Chevrons', Dominion Resources, etc. These issues may be the last hope for the baby boomers that failed to save for their retirement in their earlier years. Additionally, a consistent purchase of these equities for anyone just starting in the work force could make up for the potential loss of social security. Mike Gordon