Yesterday, we looked at 3 stocks that could surge further this week.
These were short-term plays – stocks with huge momentum, yet with underlying businesses that are far from profitability.
So today, and for the rest of the week, we’ll be looking at the complete opposite – undervalued stocks that you may want to hold in your portfolio for longer periods.
I’m talking about companies with price-to-earnings ratios below their peers – yet with multiple credible reasons for why they should be trading at higher prices.
Plus, there may also be nearer-term catalysts that could deliver returns in much shorter timeframes.
With that out of the way, let’s look at today’s pick.
It’s a name that will most likely be familiar to you – as it is a mega company worth over $200 billion.
Yet, I’m betting you haven’t heard its name mentioned in the financial news for a while.
That could work in your favor, as the next time you see this company’s name on the headlines, its stock could be taking off – and you’ll already have it in your portfolio.
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Cisco Systems, Inc. (CSCO)
Having been around since the 80s, Cisco would be a familiar name to most Americans. At the height of the dot-com bubble, it also held the crown of the most valuable company in the world, with a market cap exceeding $500 billion.
Today, while its market cap is “only” about $200 billion, the company remains a titan in the networking hardware and software business. It’s consistently posted earnings in excess of $11 billion for the past few years, and now sits at a P/E ratio of just over 18x – below the current Nasdaq average of 21x.
The stock has been hurt by worries that demand for its networking hardware may be falling (though it’s still up 6% this year), with the company reporting a nearly 25% drop in product orders in its recent quarter. Despite this, Cisco’s earnings crushed analyst estimates, with double-digit revenue growth and increased full-year guidance.
This alone could be reason enough to consider this stock. Combine this with the fact that Cisco could also benefit from AI tailwinds and the fact it has $23 billion in cash to finance potentially AI-related acquisitions (how Cisco has traditionally grown), and you have additional catalysts to help sway your decision further.
To your wealth,
Felix @ Ace of Investing