JASON TRENNERT
CHIEF INVESTMENT STRATEGIST
ISI GROUP

COMPANY: Cisco Systems
TICKER: CSCO (Nasdaq)
PRICE: $19.70 (as of 4 p.m. yesterday)
52-WEEK RANGE: $16.83-$20.25
MARKET CAPITALIZATION: $121.01 billion

Jason Trennert is a senior managing director and chief investment strategist with the ISI Group in New York. Cisco Systems is a manufacturer of networking and communications products worldwide. It’s a large-cap stock that hasn’t done much for the past few years, but Mr. Trennert tells David Dalley of The New York Sun that might all be about to change.

Why do you like Cisco right now?

I like it, basically, because I think there is going to be a resurgence in technology capital spending this year. Cisco is really a leader in the manufacture of telco equipment, and it’s the natural choice for those willing to increase capital spending on tech and telecom.

Where is the increased spending going to come from?

Corporations in general right now have tons of cash, and it’s likely in our view that economic and earnings growth will slow going forward. So companies won’t be able to just ride the wave anymore. In order to grow, and in order to boost earnings, they’ll have to spend some cash and somehow enhance productivity. Expenditure on new technology is one good way of doing that.

What are Cisco’s fundamentals like?

They just released earnings last week, and they beat the Street by a penny. And it looks like they’re poised to grow revenues by double digits this year. Their long-term strategy is working. The stock is trading at about 17 times earnings, the company has a lot of cash on its balance sheet, and it just made a big acquisition [of a video networking company, Scientific-Atlanta, for which it paid $6.9 billion last November]. The acquisition will allow them to have a greater presence in the consumer market as well as the corporate arena.

The stock hasn’t performed particularly well over the last few years. Why is now the time to buy?

The stock has flat lined for a while. Like a lot of other tech stocks, particularly the large-caps, it hasn’t provided much of a return. It hasn’t really hurt anyone, but it hasn’t enhanced anyone’s performance either. But that’s part of why I like it. Given the trend that I think will occur in corporate spending, I think now is a crucial and exciting time for this company. I definitely think it’s poised to break out of its long-term trading range.