Investors are always seeking the best technology stocks to buy. The Nasdaq has outperformed the S&P 500 by 106% over the last 10 years.
The markets are back in record territory; however, uncertainty still swirls around global trade and political unrest. These factors make it hard to know what to buy in a very top-heavy market.
It’s called the Money Morning Stock VQScore™ system.
This proprietary system tracks thousands of profitable companies. By engaging a unique blend of quantitative analysis, the system assigns companies with a score ranging from 0 to 4.9.
From there, it gets even easier. If the stock has a VQScore above 3.0, you buy it and prepare for a rally. If the stock is between 2.0 and 2.9, you hold. 1.9 and below, you sell.
This week, we experienced a rare occurrence…
One of the world’s top technology companies emerged on our list of the top stocks to buy.
This stock’s recent pullback represents one of the best ways to lock in a rock-solid dividend and steep price upside.
Its 4.9 VQScore indicates the company is a “Strong Buy” now…
Buy This Tech Stock Before Its 30% Rise
Cisco Systems Inc. (NASDAQ: CSCO) shares have pulled back more than 18% over the last three months. The question is whether we have found the stock’s floor or if it will continue to decline.
Thanks to the VQScore™, I’m confident this is the floor for Cisco, and the stock is ready to break out now.
Cisco taps into some of the top emerging tech trends of 2020.
The combination of 5G networks, cloud infrastructure, and edge computing provides significant growth opportunities for the company.
Cisco is one of the industry’s largest networking firms that offers communications and IT infrastructure products and services.
To some, Cisco represents a contrarian investment play given economic conditions. The ongoing trade dispute between China and the United States, accelerating worries about global economic growth, and weakening enterprise spending cuts in China remain short-term challenges.
Those trends drove investors to sell off the stock after its most recent quarterly earnings report. Even though the firm reported strong gains for the quarter, investors raised steep concerns about its near-term guidance.
The short-termism of investor sentiment has many investors missing key statements from leadership. The firm’s CEO, Kelly Kramer, said that investors should be less concerned about the Q1 outlook and instead focus on the balance of 2020 when the firm scales up its operations.
The company has also hinted that it will use stock buybacks to generate investor value soon.
While the firm has about $14.4 billion in long-term debt, it has about $33.4 billion in cash and liquid assets on hand.
Cisco has been aggressively paying down debt. While the company navigates short-term challenges, it uses its cash flow to deliver higher returns to investors through buybacks and dividend hikes.
This might not be the most traditional way to boost prices – but it reflects management’s commitment to its shareholders.
In some estimates, the firm could easily unlock as much as 40% to 50% of its free cash flow next year and return it to investors.
Now Is the Time to Buy Cisco Systems
One of the nice things about Cisco is that its current valuation establishes a floor for investors.
While the competition trades at an average price to sales ratio of 15, Cisco generates far greater cash flow than its peers and trades for a mere 4.
Also, Cisco Systems has something that competitors like Gilat Satellite Networks Ltd. (NASDAQ: GILT) and Ituran Location and Control Ltd. (NASDAQ: ITRN) do not: a perfect VQScore of 4.9.
Cisco Systems currently has a solid 3% dividend. The company stands to benefit from the flow of institutional capital chasing its dividend in this era of low-interest rates.
Ignore the short-term jitters and focus instead on its strong cash flow ramping up in areas like 5G in 2020.
I project that Cisco Systems will have a floor of $60 per share in 2020 – with a real case for $80.
That figure represents a floor upside of at least 30% in the year ahead. But at $80, we’re looking at a 74% jump in 2020.
This is a rare opportunity.
Investors can tap into a leading technology company that has reached its floor for 2019, holds a solid dividend, and provides steep upside as the global economy works through its current hiccups.
— Garrett Baldwin
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Source: Money Morning