Cisco Systems: Change Of Heart

Cisco Systems is now more appealing than originally thought at lower levels.

The catalyst from the shift to software is still taking a long time backing the original bearish thesis.

The ability to boost the net payout yield via massive stock buybacks has changed the equation.

The stock offers a near 11% yield.

My view on Cisco Systems (CSCO) was rather harsh as the networking giant saw the stock surge in the last year, but the actual quarterly results didn't improve significantly. The aggressive use of cash repatriated from foreign locations combined with solid execution on recent earnings reports has my view turning more bullish now.

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Disclosure: No position. Please review the disclaimer page for more details. 

NXP Semi.: Gushing Cash

NXP Semi slumped last week following a confluence of negative events.

The company has plans to improve operating margins in the range of 500 basis points.

The CFO forecasts aggressive stock buybacks with the stock trading in the $90s after already repurchasing 12% of the company.

Last week, NXP Semiconductors (NXPI) slumped to yearly lows around $85 following weakness in the semiconductor segment, fears over China and possibly some disappointment surrounding the Analyst Day on September 11. The solid bounce again confirms my investment thesis of owning this semiconductor on these dips to $90 as the company itself snaps up billions worth of shares.

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Disclosure: Long QCOM. Please review the disclaimer page for more details. 

 

Fitbit: Apple Watch Is No Threat

The biggest takeaway from the Apple event this week were the medical features on the Series 4 watches.

Fitbit has plenty of work in the process on FDA clearance for medical monitoring functions.

The stock dip back below $5.50 provides enormous value for a stock with an EV below $1 billion.

At the Apple (AAPL) event on September 12, the tech giant unveiled the new Watch Series 4 along several new iPhones. In response, Fitbit (FIT) dipped nearly 7% to the $5.50 range providing the long awaited opportunity to buy fear induced weakness on the smartwatch and fitness tracker stock. The catalyst to the story is that Apple ushered in the era of the smartwatch as a med-tech device that will ultimately boost the struggling Fitbit.

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Disclosure: Long FIT, AAPL. Please review the disclaimer page for more details. 

 

American Airlines: Beaten To A Pulp

American Airlines has been beaten down this last year as investors incorrectly focus on net debt levels.

Reduced capital expenditures and pension payments will free up around $3 billion in additional cash flows.

The stock trades at half the P/S multiple of Delta Air Lines.

The airline is in the middle of a $4.2 billion initiative to improve revenues and lower costs.

The amazing decline in American Airlines Group (AAL) has left the stock at such a discount to the sector that a major Wall Street analyst actually called the stock undervalued due to the simple P/S multiple. The airline has a lot more going on to support owning the stock, but an easy bull case always helps.

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Disclosure: Long AAL, UAL. Please review the disclaimer page for more details. 

AMD: Just Let It Run

AMD has the capacity to surpass forecasted weak sales growth in Q3 and beyond.

The chip company appears poised to make the jump to 40%-plus gross margins due to higher margins from EPYC.

Look for the long-term EPS target to get hiked above the $0.75 estimate.

After a stunning rally to $30, investors might be shocked to find out that Advanced Micro Devices (AMD) already is at the end of the growth phase, according to forecasts. As per my previous research, the cyclical nature of the business should haunt the stock at these levels, but the business trends remain far too bullish to dump AMD and run away here.

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Disclosure: No position mentioned. Please review the disclaimer page for more details.