Who else besides Gary B. Smith could pen the following dripping-with-sarcasm observation, just moments before Tuesday's Cisco (CSCO:Nasdaq - news - boards) conference call?

For the CSCO call, I really think the thing to watch for is the fabric of Chambers' shirts. You see, he is an ex-IBMer, and if he's wearing a pinpoint oxford, well, you know what that means. However, if he's wearing a broadcloth, well, then look out!! I'll keep you posted ...

-- Gary B. Smith
2/6/01 4:18 PM ET

While it passed practically unnoticed in the Columnist Conversation on RealMoney.com, it epitomizes an important part of the fundy/technical debate.

And it brings me to a significant point, made so drolly by Gary: For most shareholders, listening in on conference calls is a colossal waste of time. Disagree? Then drop me an email at ritholtz@yahoo.com !

I mean that literally. Your time is better spent doing something else. Unless, of course, you believe that you -- and the 10,000 other people on the call -- are going to hear something you can trade on in a timely fashion.

Conference Call Blues

Ask yourself this: Why do you remotely even care about such a hugely staged event as a Cisco conference call? What is it about a CEO telling you what happened last quarter that's of particular value to you as an investor? Are you interested in his best guess of what might happen nine months from now?

Any other surprises revealed you didn't already know about? Telecom spending is slowing? Go figure! The economy has cooled? Who knew?!

Here, let me save you two hours: Cisco missed by a penny, came in a half-billion light on revenue and offered no visibility going forward.

If you feel compelled to be "in the know," to get more details, then read Adam Lashinsky's and Jim Seymour's wrap-up in Cisco Calling. It's a great piece of background info. But let me throw this out: Much of what you needed to know about Cisco's conference call could have been told from a quick read of the charts.

Before you dismiss this as the ranting of just another chart junkie, understand I have a holistic approach to the market. I use everything from macroeconomic trends, monetary policy, investor psychology and fundamentals, in addition to technical analysis.

And yet this is one of those instances where the chart told you as much as anything you could have heard on the subsequent call.

The Sloping Trend of Cisco

Since peaking at 69 5/8 on Sept. 1, 2000, Cisco has been in a downtrend. I say this to the brokers in my office no less than three times a day: Don't buy stocks in a downtrend. Not InfoSpace, not CMGI -- and not Cisco. If you get nothing else out of technical analysis, learn that one simple principle. It's the single most important trading rule there is, and it will save you money, time and again.

Why is it important? Because a downtrend means that institutions are distributing the stock. When smart money is selling, you don't want to be buying. Despite all of the information handed to individual investors -- via the Web, Reg FD, etc. -- the big boys often know things earlier than we do, and they have a bigger impact on a stock's activity. Stay out of their way when they are dumping shares.

Let's stick with Cisco as an example. Institutions hold more than half of its stock (56%). These big boys have the time, money, staff and, most important, access to suppliers, customers and consultants to scope out the entire capital-expenditure food chain.

Reg FD has reduced the tilt of the playing field when it comes to a company talking about itself, of course. But a smart analyst still gets to talk to all of these players about a stretching-out of Cisco's orders or about the sort of vendor financing that Cisco is offering to customers. Is it adding personnel? Expanding? Is it making timely payments to suppliers? Offering outrageous terms to move product? The big boys can do more and better-quality due diligence than individuals can.

Yet -- here's the beauty part -- the results of that due diligence are available for all to see in the charts, which suggest that Cisco has been under distribution for some time.

Left Behind in the Rally

This is true even as much of the tech sector has snapped back smartly since Dec. 20, when the American Association of Individual Investors' investment sentiment grew so negative as to give a contrary buy signal. Compare Cisco's chart with that of other tech bellwethers: EMC (EMCC:Nasdaq - news - boards), IBM (IBM:NYSE - news - boards), Microsoft (MSFT:Nasdaq - news - boards), Micron (MU:NYSE - news - boards) and Qualcomm (QCOM:Nasdaq - news - boards). Beaten-up Internet bellwethers like AOL and eBay had rallied smartly, and Internet software makers Micromuse and Check Point also have participated in the rally since late December.

So, from Dec. 20 through Tuesday, the Nasdaq rose 300 points, while Cisco was up a mere fraction. I traded Cisco successfully over that time -- and still hold a smidgen -- but it remained clear to me that the stock had not broken its downtrends. At best, this suggests that fresh money was not working its way toward the networking giant.

Of course, conference calls are not completely without merit. You can learn a lot about a company at inflection points, like when they shift their business model. Any time a firm adds a new CEO, COO or CFO, it doesn't hurt to get a handle on them via the call.