– Digested from The Primary Trend, Arnold Investment Counsel, Inc., 3960 Hillside Dr., Delafield, WI 53018, (800)-443-6544, $45 US for six issues, $80 for 12 issues. www.primarytrendfunds.com
Although communications and information technology firm Cisco Systems, Inc. (CSCO-NASDAQ, $22.43) reported 2014 fiscal first-quarter earnings-per-share of $0.37 US and revenue of $12.1 billion–both more or less in line with expectations–management is warning of a possible revenue decline in the current quarter.
The drop (of about eight to 10 per cent) is being blamed on low demand in emerging markets. It didn’t take long for Cisco stock to head south on the news, dropping 12 per cent from $24 to $21. According to editor Barry S. Arnold, two thorns in the side for CSCO were the NSA (the U.S. National Security Agency) surveillance scandal and the company’s longstanding rivalry with Chinese domestic producer Huawei Technologies Co.
The latter situation appears to be at a stalemate, with prospects for both companies on each other’s home turf something of a question mark. But Mr. Arnold believes that if investors are able to “ignore some short-term clouds” on CSCO’s horizon, they can take advantage of a stock trading at the kind of undervalued levels “that historically have rewarded shareholders.”
And with a 3.2 per cent dividend yield, CSCO rewards investors for the patience. Cisco Systems common stock is a “buy” at current prices.
Also rewarding for Mr. Arnold are the energy names in his portfolio, with both Encana Corp. (ECA-TSX, $19.18) and Royal Dutch Shell plc (ADR) (RDS.A-NYSE, $71.27) earning “buy” recommendations at their current prices.
Meanwhile, “hold” Apache Corp. (APA-NYSE, $85.94) and Schlumberger Ltd. (SLB-NYSE, $90.11) for additional appreciation.