Q. What’s your opinion of Cisco Systems Inc. stock?
P.G., via the Internet
A. The world’s leading supplier of data networking equipment and software has been playing “let’s make a deal” this year.
The cash-rich company paid $2.9 billion for Starent Networks and its hardware and software for broadband wireless devices and another $44 million for the set-top box business of DVN Holdings of Hong Kong to gain a foothold in the Chinese cable market.
It spent $183 million for ScanSafe Inc., whose products filter Web pages for security, and $105 million for Tidal Software, whose software is used in virtualized computing.
Cisco Chief Executive John Chambers has said the firm aims to gain market share in a tech recovery.
Boosted by those moves and the cautiously upbeat outlook, shares of Cisco Systems (CSCO) were up 47 percent this year through Wednesday following last year’s 40 percent decline.
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Cisco expects revenue to grow 1 to 4 percent on increased demand in its second fiscal quarter ending in January. That would be its first quarterly revenue growth in a year.
The consensus recommendation on Cisco stock is “buy,” according to Thomson Reuters, consisting of 16 “strong buys,” 10 “buys,” 13 “holds,” one “underperform” and one “sell.”
Earnings for the fiscal year ending next July are expected to rise 4 percent and the following year, 13 percent.
Q. Can MFS New Discovery Fund continue to do as well as it has?
L.C., via the Internet
A. Its philosophy of finding fast-growing, quality firms with good earnings, while limiting its sector bets versus the Russell 2000 Growth Index, has paid off in the last 12 months.
Through Wednesday, the $642 million MFS New Discovery Fund “A” (MNDAX) had a return of 82 percent in that period to rank in the top percentile of small-growth funds. Its three-year annualized decline of 2 percent puts it in the top 10 percent.
Thomas Wetherald, part of the management team since mid-2004, became portfolio manager in early 2005. He splits his portfolio among solid grower, emerging grower and out-of-favor stocks. He has more than $1 million of his own money in the fund.
“Before the current manager, there wasn’t much to recommend about this fund, but he’s doing the right things,” said Bridget Hughes, analyst with Morningstar Inc. “However, it won’t be a slow and steady ride and you can’t expect these kinds of returns all the time.”
This 5.75 percent “load” (sales charge) fund requires a $1,000 minimum investment and has a 1.51 percent annual expense ratio.
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E-mail Andrew Leckey at your [email protected].