One result of Cisco's dominant position in the IP networking business is a mountain of cash -- around $30 billion after all of its debt is accounted for. Cash comes with some concerns for big tech companies, namely the propensity to overpay for acquisition opportunities. And even though Cisco's latest targets haven't come cheap, they've been small enough to not dilute shareholder vale enough to matter. That said, Cisco's management needs to return more value to shareholders in the form of dividends or buybacks in this market -- holding $30 billion in cash in a low rate, [comparatively] high inflation environment isn't viable for long.
The need to return cash to shareholders isn't exactly a secret, so when that value return happens, expect CSCO's share price to jump in kind...
Last up on this week's Rocket Stocks list is SandRidge Energy (SD), a mid-cap oil and gas company that's just starting to show signs of strength after what's been a pretty painful 2012. SandRidge is an independent E&P, but it also owns an oil field services unit and midstream operations. The integrated nature of that business is attractive, as long as SD can continue to wear all of those hats well.SandRidge overleveraged itself back in 2008, having piled up tons of debt just as the credit markets seized and liquidity became hard to come by again. Since then, the firm has been working on shoring up its finances, and its pared down its energy projects to unload less attractive exposure. While the decline of natural gas prices to record lows has been a big headwind for the firm, their long awaited rebound should bring with it a huge spike in profitability. In the last few years, SD has increased its exposure to oil, picking up attractive conventional oil properties at the same time that crude prices have hovered around historic inflation-adjusted highs. As SandRidge comes off a bottom in the final quarter of 2012, investors look like they could have an opportunity to pick up shares at a bargain price. Meanwhile, rising analyst sentiment and performance is popping SandRidge on our list this week...
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