One of the biggest tech companies on the planet could pay an
Right now, this company holds more than $48 billion in cash on
its books. To put this into perspective, that's enough money to pay
every person in America $153.
Or look at this way...
With a current share price of $17, this company has enough cash
to pay investors a one-time dividend equal to a 55%
I'll admit, it's highly unlikely this company would shell out
all its cash for a
. But it does help prove just how successful this company is.
Yet most investors ignore this stock...
It's not exciting enough for them. They'll dismiss it as another
"boring" blue-chip with no potential for future growth.
That couldn't be further from the truth...
The stock I'm talking about is
, one of the
's best-known stocks. It's a Dow component with a $90 billion
For most investors, the company's sheer size is a red flag,
because it's too big. They believe you need to go "where the action
is" to make money in the stock market. They say they have to invest
in small, unproven companies to make significant returns.
To me, that's a huge mistake...
See, I've been actively investing for nearly two decades. And
during this time, I've found that the best way to get wealthy in
the stock market is by owning companies that dominate their
markets, are essential to our way of life, and that continually
reward their shareholders with cash dividends and share
Cisco is a perfect example of one of these companies.
With a 67% share of the market for specialized networking
equipment, Cisco is by far the largest player in its industry....
chances are, the computer you're reading this article on is
connected to a Cisco router.
This market dominance gives Cisco a huge competitive advantage.
It's what Warren Buffett wouldcall a wide "
." Any competitor that tries to compete with Cisco is going to find
it difficult to grab
thanks to Cisco's entrenched position.
Meanwhile, Cisco is literally giving billions of dollars back to
Since 2001, the company has bought back more than 3.6 billion
of its own stock -- reducing the
by more than 25%.
And just last year, Cisco announced it would be paying investors
a dividend. Right now, this dividend stands at $0.32 a year, for a
of 1.9%. But the company just increased its dividend 33% a few
months ago. And with more than $48 billion in its cash on its
books, Cisco has plenty of room for more dividend increases for
years to come.
All of these moves are making each share of the stock more
valuable, but the price hasn't followed suit...
Right now the shares trade at $17. That's the same level they
traded at back in late 2005. But take a look at how much more
valuable each share of Cisco is compared with back then:
As you can see, Cisco's
per share have grown 78%, and the company has increased its cash by
a staggering 720%. But despite a clear increase in the
company's underlying value, the stock trades at the same price it
did seven years ago.
Action to Take -->
This disconnect between Cisco's share price and its recent
financial performance can't last forever. Eventually, the
investing community will see just how valuable this company really
is. And when they do, investors who buy today could make a lot of
How high do I think the stock could go in the coming year or
Well... given Cisco's dominant market position and strong
profitability, I think the stock should be trading at an
ratio of at least 10. That would put the share price at about
$33... or nearly 100% higher than today's levels.
Cisco shares all the traits of what I like tocall
. These are stocks that I think you can buy today and hold for the
rest of your life. You can view my research on "Forever" stocks
here. I've even included the names and ticker symbols of some of my
" ideas -- including one stock that holds more than $150 per share
in cash on its books (and it's not Apple).
Click here to watch
-- Paul Tracy
Paul Tracy does not personally hold positions in any securities
mentioned in this article. StreetAuthority LLC owns shares of CSCO
in one or more if its "real money" portfolios.
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