The index hit its previous high of 9,817.18 on February 19th, 2020.
Then fell in Mid-March when the market crashed to its recent low of 6,861 due to the coronavirus. This is a fall of 30.1% in a month.
Since that point, the index is now up 46% from its recent low to its new all-time high of 10,131 as of this writing on June 23rd, 2020.
The NASDAQ is even positive for the year now. As of today, it’s up 10.3% for the entirety of 2020.
This is quite the rollercoaster ride, as you can see in the image below.
Why is this?
Because the NASDAQ is a tech heavy index… Meaning many of the companies that list on the NASDAQ are tech companies.
The index fell in March due to the concerns of the coronavirus as it began to sweep the world. But recovered fast after companies in this index – namely the tech giants mentioned above – showed stellar earnings in recent weeks.
Why do these companies have great earnings? Most of the rest of the companies in the world fall into 3 categories right now with this coronavirus crisis ongoing…
Because people are relying more than ever on technology to survive and work during these crazy coronavirus times.
This is why the NASDAQ just hit its all-time high a couple days ago… These companies are doing great despite what we’re dealing with.
But you can still find stocks in this index that are selling at good to cheap values that will perform well in the coming years and decades.
A couple weeks ago, I showed you Stock #1 that you should look at buying from the NASDAQ index… Even with the market at its all-time high.
Today, I tell you about stock #2.
Let’s get to it…
Disclaimer – The stocks below we believe in enough to tell you about but the 3 stocks below ARE NOT official recommendations. Due to potential legal issues we can’t officially recommend them to you. But these should be a good place to begin your search.
Cisco Systems (CSCO)
Unlike yesterday stock that you’ve heard of… Unless you’re in the IT space you likely haven’t used and may not have heard of Cisco Systems (CSCO).
Cisco “engages in the design, manufacture, and sale of Internet Protocol based networking products and services related to communications and information technology industry.”
In other words, Cisco and its products and services help run the internet and help you stay connected.
The company was founded in December 1984 at the dawning of the Internet Age.
While not as outright dominant in their market as stock #1 yesterday, Cisco still owns much of its market.
According to its own estimates, Cisco owns approximately 16.2% market share of Garner SD-WAN Enterprise Network Equipment market as of the 2nd quarter 2019. And is the largest revenue producer in this arena.
Gartner SD-Wan is networking equipment that allows you to get on the internet.
Cisco helps some of the largest companies in the world with their IT and networking infrastructure as you can see in the graphic below.
Cisco is #1 in this arena and has been for years due to its competitive advantages.
Namely its trust ability, distribution network, and economies of scale. These advantages allow Cisco to keep competitors at bay. And allow the company to earn huge profits and cash flow which I’ll talk about more later.
Specifically when it comes to trust, if your entire company runs on the internet – like most businesses do today – you need to have trust that the network is going to remain working and stable so you can stay in business.
Cisco’s built up that trust as the largest and best network hardware company in the world over the last several decades.
And like with yesterday’s stock, with more and more people working from home or anywhere in the world that has internet, you need reliable internet.
Cisco runs much of the internet now and will continue doing so in the future due to its competitive advantages mentioned above.
Plus, also like Stock #1 yesterday, with the rise of the Internet of Things (IoT) soon almost everything we use daily will have semiconductors and sensors in them.
From the shoes you wear showing you how to run better… To chips in your body showing you when you need to go to the doctor… To smart traffic lights around cities minimizing rush hour traffic.
In the coming years and decades almost everything we use will have semiconductors and sensors in them showing you data on how to avoid things. Or how to do them better and faster.
With Cisco’s dominance in this arena, its well positioned to continue dominating now and well into the future.
Plus, its enormously profitable now too…
Over the last decade Cisco’s produced an average 23.8% operating margin every year over the last 10 years. I look for any company to produce above 10% margins on a consistent basis to consider a stock for investment.
Operating profit is the amount of profit a company produces from its operations… And is after subtracting costs to do business and research and development… Which Cisco invests in enormously.
It also produces a ton of cash too…
Its FCF/Sales margin averaged 24.4% per year every year for the last decade… I look for anything above 5% on a consistent basis to consider an investment.
Free cash flow or FCF is the amount of money that’s left over after all costs to run the company now and to grow it. This number is also after paying taxes too.
Think of FCF as the ultimate profitability of a company. Because its money the company makes after paying all its bills.
Cisco meets and surpasses my threshold on both important metrics… These are important because they show Cisco produces profits and cash to continue funding operations and growth.
These enormous profits also make Cisco a super safe investment as well.
And on top of all this, Cisco also pays a 3% dividend currently.
With all this you figured Cisco stock would be expensive right now… But it’s not.
As of this writing, its selling at a P/E of 18.7 and a P/FCF of 13.
I look for potential investments to sell below 20 on both metrics. And Cisco is well under these.
Cisco will be around for decades to come – no matter what the economic situation becomes.
And it will make you money both today and well into the future because of the things outlined above.
If you’re investing now, look at adding Cisco to your research pile.