There are various clichés value investors fall back on in times like these. You know — buy when there is “blood in the streets,” how “when Wall Street can’t sell what it wants, it sells what it can.” And so on.
Whatever you think of these annoying slogans, you have to admit there’s a long history of sharp lurches down creating big opportunities for aggressive investors.
Notice I say “aggressive investors.” This is a risky proposition, to be sure, and is not for folks at or very near their retirement age. But if like me you are decades away from retirement, you can afford to miss the true bottom by a month or two. The idea is simply to buy into grossly oversold stocks during the mayhem and expect them to bounce back sometime in 12 to 18 months once the initial shock is long gone.
You might scoff at anyone taking on such risk. But nothing is ever a sure thing when it comes to investing. And in times like these — when even the creditworthiness of the Treasury has been called into question and so-called “high-yield” savings accounts barely keep up with the rate of inflation — it’s a bit naïve to think you can find any place that is truly risk-free.
In the depths of the brutal 2008-09 selloff, Cisco flopped from around $25 per share to briefly bottom out under $14. As of this writing, shares are currently hovering in the low $14 range.
According to 34 “experts” surveyed by Thomson/First Call, both the median and mean target on CSCO is $20. The most recent targets, admittedly, have been moving down — such as the new $16 target set by Auriga in its June 27 “hold” recommendation on Cisco — but frankly, I’ll take a stock that “only” has 15% upside from here.
Yes, investors have had good reason to sell off CSCO stock in recent months as Juniper Networks (NASDAQ:JNPR) has elbowed into the corporate marketplace, and bloated operations have stifled Cisco’s ability to adapt to the cloud computing revolution. But there are reasons to be optimistic CSCO is trying to right the ship. In the past year, there has been a big management shakeup, thousands of layoffs and production changes that include a shift away from consumer offerings of its DVR and Flip video camera manufacturing. The turnaround might come at the perfect time for investors who buy in during the current mayhem.
What’s more, Cisco began offering a decent dividend in March and currently boasts a yield of about 1.7% — something you couldn’t say back in 2009.
You could argue these moves are not enough, or you could argue the stock market has a long way left to fall. But with a forward P/E of about 8 and falling fast, I’d seriously consider adding Cisco at under $14 per share.