Dykstra: Discipline Key in Facing Life's Curveballs

The Whip Comes Down

As I predicted last week, Cisco (CSCO) beat the number and had a strong forecast, but the stock went down.

Therefore, as I stated last week, we must now take a serious look at John Chambers, Cisco's CEO and president. David Montgomery, the managing partner of the Philadelphia Phillies, was recently faced with a similar situation. Despite a new stadium, a team that was in playoff contention until the last pitch of the regular season, and tremendous fans in a great sports town, the Phillies managed to draw approximately 600,000 fewer fans than the previous year, with a resultant loss of at least $20 million in revenue. Montgomery made the business decision he needed to make; he recognized that the team was no longer appealing to its fan base, so he rectified the situation by bringing in a new leader.

It is time for the board of directors of Cisco to respond to its shareholders, of which I am one, and recognize that despite being a flat-out, awesome money-making machine, Chambers is not putting people in the seats. For whatever reason, he does not engender excitement on the Street; therefore, the fans are not buying Cisco's stock. Hence, it is time to follow the lead of Montgomery. Albeit tough, Cisco's board or activist shareholders need to make the right business decision: Mr. John Chambers has to go!

Another stock I mentioned last week, International Paper (IP), is up sharply today on news Koch Industries is buying Georgia Pacific (GP). Remember, I spent $7,300 to control 1,000 shares of this high-quality company's stock and based on those 10 options contracts, made $1,100 in a week as my "good 'til canceled" sell order was filled this morning at the open at $8.40.

That's another example of the leverage of options, if they're used intelligently, and "good 'til canceled" (or GTC) orders are another aspect of the discipline I use to maximize trading success.

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