Cisco is the most recent addition to our portfolio, and by far the largest of our holdings with a market cap of $151 billion. For that reason it is difficult to trade CSCO, since it enjoys extensive coverage from Wall Street and is owned by just about every institutional investor in the world making it difficult for the company to surprise the market.  

Also making it difficult to evaluate CSCO on a comparative basis are its gaudy numbers. Cisco holds more than $70 billion in cash, accounting for almost half of its $30 share price. And it pays a dividend yield of 3.4%, one of the highest in the tech sector thanks to a 26% operating margin that provides plenty of cash flow to share with its stockholders.

That said, we think Cisco will be one of the big winners in Trump’s infrastructure spending plan that should be unveiled shortly after he takes office this month. Those massive projects will require extensive networking and cloud support, and few companies have the resources to compete with Cisco for that business. That may take a little while to become apparent, so we put our maximum target hold period – 6 months – on this trade to give it time to work out.