2013 is panning out to be a stellar year for shares of Cisco Systems (CSCO). Shares of the $125 billion IP networking firm have rallied 20% since the calendar flipped over to January.
That shouldn't come as a huge surprise given Cisco's positioning in the networking market; the firm is the world's biggest supplier of equipment and software used to connect devices. With internet traffic still growing at a breakneck pace, demand for Cisco's mission-critical routers and switches remains strong for enterprise customers.>>3 Tech Stocks Spiking on Big Volume Cisco has a size advantage in the networking equipment business that translates to high switching costs for customers. Because Cisco's gear is designed to plug-and-play with other Cisco components, IT departments that buy Cisco products can often see much lower integration and ongoing technical support costs. That gives Cisco an important economic moat right now, even if competition is trying to move in on its business. From a financial standpoint, Cisco is in superb shape. The firm carries approximately $6 in cash -- and that's arguably one of CSCO's biggest execution risks right now. If management can't earn meaningful rates of return on the company's cash position, that cash needs to get returned to shareholders. Cisco is a high-margin business with a defensible moat and big organic growth opportunities. Investors could do worse right now.
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