Cisco Bounce Could Reward Stalwart Growth Funds

Trigger-happy growth fund managers usually jettison a stock when it falls through the floor. But they're still hanging on to Cisco (CSCO Quote).

The networking heavyweight, which surprised no one when it said Wednesday morning that second-quarter earnings would top analysts' lowered expectations, has been in the crosshairs of the economic slowdown and tech's nuclear winter. The company's shares have lost nearly three-quarters of their value since the Nasdaq Composite's peak almost two years ago.

But nearly seven in 10 big-cap growth funds still own Cisco, according to Chicago research house Morningstar. No doubt some portfolio managers are believers, but for many it's just too big a risk not to own the stock, given its presence in benchmark and peer portfolios.

Now, managers who've hung on might start to look savvy rather than just smitten. Observers say Cisco has widened its lead on competitors during the downturn. Moreover, its rosier-than-expected results might point to rising spending on tech and telecom equipment. ...