Buy Cisco and Hewlett-Packard, Sell F5 and Riverbed

NEW YORK ( TheStreet) -- It seems networking giant Cisco ( CSCO) continues to move in the right direction. But it must still convince a market that rarely forgives and never forgets that it still deserves to be discussed as one that can deliver market-beating performance on a consistent basis.

On Wednesday, it will have another chance when it releases its fourth-quarter earnings results after the market close. Analysts are expecting net income of 41 cents per share on revenue of $11.62 billion, an increase from the 35 cents (or 17%) earned the previous year. For the fiscal year analysts are expecting $1.63 in earnings on $45.98 billion in revenue.

There aren't many companies outside of Apple ( AAPL) with the same string of recent performances as Cisco. In fact, over the past four quarters the company has demonstrated consistent revenue growth averaging over 6% while averaging 5% growth in net income during that span.

For these reasons, I would be a buyer of the stock ahead of its report and sell two of its rivals, F5 ( FFIV) and Riverbed ( RVBD).

When looking at F5, I see a company executing as well as it can, but the stock remains grossly expensive. From the standpoint of value and the fact that earlier this year the company climbed 23% on the year, it is hard to ignore the reality that investors might have already missed the boat.

What's more, after its most recent earnings report (where it produced decent numbers), management issued guidance suggesting headwinds will likely be more harsh than previously anticipated. In the meantime, competitors such as Cisco and Hewlett-Packard ( HPQ) are executing to perfection. It would seem this will only add increasing pressure to F5 to continue to perform.

I think for F5 this was the chief reason (among others) why the company issued less-than-favorable guidance, which resulted in a severe punishment of the stock to the extent that it dropped over 13%. (It has slightly recovered since then.)

My bearishness for Riverbed is for similar reasons. However, it is not executing as well as F5, which prompted me to call it one of the best shorts on the market as the stock was (then) trading at $20.

During that period, the stock dropped to as low as $13. Today, it is back at the $20 level with no fundamental improvements within the company. Even more disappointing is the fact that management does not appear to have a firm handle on how to fix its issues. From an investment standpoint, the stock sports a price-to-earnings ratio of 51 while both Cisco and HP offer better value with P/Es of 12 and 7, respectively.

For Riverbed to justify this level it has to show that it can consistently maintain its gross margins and product margins, which have been on a decline recently. I just don't see how it can do it.

Meanwhile it would seem that the market continues to ignore these challenges and yet expects more from Riverbed and F5 while Cisco and HP (although not as dynamic) present better value, while also offering some safety by providing decent dividends yields.

At the time of publication, the author was long AAPL and held no position in any of the other stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.