10 Questions With T. Rowe Price Growth Stock's Robert W. Smith

Why buy it today? Because, as we discussed with Tyco, the market is an anticipator. The market will anticipate the turn before Cisco turns.

So my view is that Cisco, which is now in the $12-$13 range, has the ability to earn 70-80 cents a share a couple years out. It's a company that should be able to do low double-digit growth, great free cash flow. It has $20 billion cash on the balance sheet. I think the stock can get back up to the $17-$18 range. It could over the course of months, but it also can all happen over the course of a week. That's a lot of upside.

Another thing with Cisco: If you have a portfolio, it's a bit like having a baseball team. You want to have different talents. You have stocks that you feel comfortable on the short term, and some that will work on the long term. You have a mix. The ones that are short term might already be discounted; you just don't always know. And the ones that are long term, you don't know when it's going to be put in the price. Very few people are good at figuring the timing of when everything works.

6. Yahoo! (YHOO Quote) is a recent addition to your fund. Why are you buying it now, and are you afraid you missed the run-up?

We've made recent purchases in Yahoo!. I think that in general Internet content is a name we've nibbled up more recently.

There are a few reasons we like Yahoo! -- and the first one is a thematic reason. The Internet bubble burst, competition knocked out many players. But reality is that the whole time, the demand for the Internet continued to grow. The key was: Who could really monetize their assets?

What they've done with Overture Services(OVER Quote) [Yahoo! has an affiliation with the pay-per-view Internet search engine] is a good thing. They've found a way to monetize the search.

They've brought in new management that is more focused on profitability. They generate better cash. And they've begun to grow outside of advertising. So they have some good growth drivers that aren't ad-driven.

I think the advertising market has bottomed. For AOL Time Warner(AOL Quote) it will take longer, because AOL had a lot of bigger deals to unwind. But the Internet's real. The search is a real service that they monetize over time.

If I try to model through where they can take cash flow levels, I think in several years, they can have $400 million to $500 million in free cash flow. I think that's a reasonable price to pay for assuming that they can do it.