Whenever I find a company that I might like as an investment, I always try to find anything and everything that might give me pause. I like to figure out what the worst things about a company are, then decide if the positives outweigh the negatives or if the negatives are overblown. There are times when the good news makes the current bad situation a temporal issue. Conversely, you can have a company like Cisco Systems (CSCO) that is in a great position from years of success, but past success is not a guarantee of future success. There are reasons to be positive about Cisco, but there are always potential pitfalls.
I think Cisco has a good management team that takes a stable and pragmatic view of things. For example, management was conservative in their projections at the end of Cisco’s Q3, despite other companies having more upbeat guidance. I remember reading message board posts very angry with management. When earnings next came out the company beat the conservative outlook everyone was cheering the beat and the raised guidance for the next quarter. After lowering guidance before it is likely that the net increase in guidance was minimal. The market has a short attention span, but through its history Cisco has done well focusing on the long view. It is actually one of the reasons I am a fan of the company, because it has made drastic changes in the past to address serious issue. Examples include not dissolving after its supply chain disaster in 2001.
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