After seeing multiple investor friends pick up Cisco (CSCO) lately, I had to check it out. So these are the insights I looked into and ultimately factored into my first purchase of Cisco.
Why am I sharing my latest stock purchase?
Each month I try different ways to make extra money and share how much I make in my Income Reports. Every month I use this money to buy more stocks and other investments to build a $10,000,000 investment portfolio. It may take a while, but it’s done with one investment at a time.
This month I bought 9 shares of Cisco.
What is Cisco
Cisco (Stock Ticker CSCO) is a hardware and software company that designs, manufactures, and sells Internet Protocol (IP) based networking and other products related to the communications and information technology industry worldwide.
I basically just like to think of Cisco as the infrastructure of the internet. All of the highways that connect websites and databases and funny cat videos of the internet are primary run on Cisco products.
If you want to know what a company does look at their revenue. In 2016 this is where their money came from:
- Switching (30% of revenue) – Switches connect computers, printers, and servers within a building or campus. These allow everything to talk to each other. Switches create a network of devices.
- Routers (15% of revenue) – If a switch is a network, routers connect networks. A router links computers to the internet.
- Collaboration (9% of revenue) – This is a general term to describe their immersive video conference software, IP telephones, software to connect the devices to talk to each other. This includes Jabber, Cisco WebEx and Spark. For example, my office uses Cisco WebEx to coordinate all of our in/out video conferences.
- Data Centers (7% of revenue) – Data Centers allow large scale flexible computing. This can be from storage to computing power.
- Wireless Infrastructure (5% of revenue) – These are the base stations and infrastructure for Wi-Fi. Think of hotels, casinos, grocery stores, airports and any building that provides Wi-Fi. Most of these devices are Cisco related.
- Security (4% of revenue) – These are the firewalls that block out Russian hackers and malware from accessing their infrastructure and their client’s servers/computers/Internet of Things.
- Services (24% of revenue) – These are the people that run these services, train clients how to use them, manage networks, operate systems and support their wide variety of products.
We can say that the other 6% is “Other”, but you get the idea they do a lot with the internet. Combined all these products and services generated $49,247,000,000 in total revenue in 2016.
Why did I buy Cisco?
When looking over Cisco, they really hit some of the key factors that I look for when buying a stock.
1. Dividend (good)- They have a 3.69% dividend that they’ve had since 2012. That 3.69% is really nice considering this is a tech stock that traditionally has lower dividends.
2. Historical Performance (good)- They say that past performance doesn’t indicate future performance, but I like the graph of the stock price over the last 5 years. It has its dips, but overall it has a progressive climb. That is a plus for me.
3. Strong History (good) – I’m not a big fan of crazy risk, so I like to invest in proven companies. Cisco has a market cap of 161.702 Billion, they’ve been around since 1984 building the internet. I want to make sure that the company has been tested long enough that they know how to manage market downturns.
4. Reoccurring Revenue (getting there) – Cisco has traditionally been a hardware company, but they are transitioning into more of a software company and one that wants to focus on a subscription model. Their CEO, Chuck Robbins even mentioned in their 2016 Annual Report that they are “working to move more of our revenue to a software-based and subscription-based model”. I am a huge fan of reoccuring revenue, so when I see a company of this size transitioning to that business model, I can get on board.
Since I liked what I saw, I bought 9 shares at $31.89 per share for a total of $279.09.
Why did I buy now?
In honesty, I probably rushed into buying Cisco because I wanted to buy their stock before their earnings call on August 16th (yesterday). I thought the stock would increase after the earning call, but it dropped a bit after coming short on revenue. F*&K.
The stock price has dipped about a dollar since then. I failed.
I will continue to hold Cisco because I think they are in the right direction, but it just sucks that I bought it right before the dip. This will probably teach me not to rush into anything when looking at future stocks.
I like Cisco and look forward to following them, but will be hesitant into rushing into any future buying just because a earnings report is coming up and everyone else is bullish on a stock.
If Cisco continues to invest more into their subscription-based business model, I’ll likely add more to this position.