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5 Rocket Stocks You Should Buy as Stocks Drop

Cisco Systems

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Up first is Cisco Systems (CSCO), the $116 billion IP networking stock. Cisco is the world's biggest supplier of the equipment used to connect computer systems; the firm's products include routers, switches, virtual collaboration tools and network management software.

Cisco owns an attractive market position in an attractive market. As data needs propel demand for Cisco's customers, the firm's ability to capture bigger IT infrastructure spending should continue to grow. Cisco's inter-operable gear makes switching costs high for the firm's existing customer base; since integration costs can often come close to initial hardware costs for many customers, ease of integration matters a lot. And that means that customers are more likely to buy complementary Cisco hardware, even if it costs a little more. With the firm's eschewing of the consumer market (save for its Linksys line of networking hardware), it'll have more time to focus on its core business this year.

>>3 Tech Stocks to Trade (or Not)

Cisco has cash, and lots of it. The firm's balance sheet currently works out to a nearly $31 billion net cash position, or around $5.80 per share. That huge cash balance dramatically reduces the risks of owning this stock, particularly given management's commitment to keep its shareholder payout ratio at approximately half of free cash flow. As long as management can avoid the temptation of overpaying for an acquisition opportunity, this stock offers an impressive risk/reward tradeoff.

Stock quotes in this article: CSCO, TAP, NLSN, LULU, BA 

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