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The Week Ahead: The Year's Biggest Biotech Conference, Host Of IPO Quiet Period Expirations, An

Related DGLY 36 Biggest Movers From Yesterday 30 Stocks Moving In Tuesday's Mid-Day Session

Below is a list of notable corporate events for the week beginning December 11. Note, this list is not comprehensive and all dates are subject to change.

Monday

Conferences

American Society of Hematology (ASH) Meeting Dec. 9 thru Dec. 12

Notable Earnings

Casey’s General Stores, Inc (NASDAQ: CASY) Q2 after hours

Secondary Offering Lockup Expirations

Athenex, Inc (NASDAQ: ATNX)

IPO Quiet Period Expirations

Altair Engineering Inc (NADAQ: ALTR)
Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE: LOMA)
SendGrid, Inc (NYSE: SEND)
Arsanis, Inc (NASDAQ: ASNS)

Analyst/Investor Days

Coupa Software Incorporated (NASDAQ: COUP)
Equifax Inc (NYSE: EFX) in New York

Annual Shareholder Meetings

1-800-Flowers.com, Inc (NASDAQ: FLWS)
Cicso Systems, Inc (NASDAQ: CSCO)

Tuesday

Economic Data

API U.S. Crude Oil Inventories released after market close

Notable Earnings

VeriFone Systems, Inc (NYSE: PAY) Q4 after hours

Secondary Offering Lockup Expirations

ADOMANI, Inc (NASDAQ: ADOM)

IPO Quiet Period Expirations

Funko, Inc (NASDAQ: FNKO)
Evoqua Water Technologies Corp (NYSE: AQUA)
Allena Pharmaceuticals, Inc (NASDAQ: ALNA)
Stitch Fix, Inc (NASDAQ: SFIX)
Bluegreen Vacations Corporation (NYSE: BXG)
SailPoint Technologies Holdings, Inc (NYSE: SAIL)
Level Brands, Inc (NYSE: LEVB)

Analyst/Investor Days

Equifax in Toronto
Arthur J. Gallagher & Co (NYSE: AJG)

Wednesday

Economic Data

EIA Crude Oil Inventories 10:30 a.m. ET

Notable Earnings

Pier 1 Imports, Inc (NYSE: PIR) Q3 after hours

Secondary Offering Lockup Expirations

Boston Omaha Corporation (NASDAQ: BOMN)

Analyst/Investor Days

Equifax In Montreal
LendingTree, Inc (NASDAQ: TREE)
Iovance Biotherapeutics, Inc (NASDAQ: IOVA)
The Charles Schwab Corporation (NYSE: SCHW) business update call

Annual Shareholder Meetings

United Natural Foods, Inc (NASDAQ: UNFI)
Fireside Chat with Dan Gilbert and Kynikos Associates’ Jim Chanos 2 p.m. ET in Detroit

IPOs

Adial Pharmaceuticals (ADIL)

Thursday
Economic Data

EIA Natural Gas Inventories 10:30 a.m. ET
FCC to hold Net Neutrality vote

Notable Earnings

Adobe Systems Incorporated (NASDAQ: ADBE) Q4 after hours
Costco Wholesale Corporation (NASDAQ: COST) Q1 after hours
Oracle Corporation (NYSE: ORCL) Q2 after hours

IPOs

Casa Systems (CASA)

Analyst/Investor Days

Finjan Holdings, Inc (NASDAQ: FNJN)
Danaher Corporation (NYSE: DHR)
Delta Air Lines, Inc (NYSE: DAL)
Deckers Outdoor Corporation (NYSE: DECK) annual shareholder meeting, to vote on Marcato Capital board nominees

Legal

Axon Enterprise, Inc (NASDAQ: AAXN) and Digital Ally, Inc (NASDAQ: DGLY) to meet in court to discuss patent trial schedule
AOL Instant Messenger to be decommissioned
Friday

Economic Data

U.S. Credit Card delinquencies
Baker Hughes Oil Rig Counts expected 1pm ET

Analyst/Investor Days

MetLife, Inc (NYSE: MET) business update call

IPOs

Newmark Group (NMRK)

M&A

QUALCOMM Incorporated (NASDAQ: QCOM) tender offer for NXPSemiconductors (NASDAQ: NXPI) expires 5 p.m. ET

VMware: Stay Long

VMware (NYSE:VMW), the company best known for its invention of so-called “virtual machines,” or the ability to use software to allocate operating system resources from a remote server to a third-party client, deserves a lot more love than it’s getting, in my opinion. The company posted a solid Q3 underlined by fantastic billings, a top-line beat, and a deluge of free cash flows. Still, despite the good news, VMware’s stock practically stayed flat after the earnings announcement.

It’s been a tough week for the technology sector. The NASDAQ suffered a sharp reversal on the second-to-last trading day of November as tech stocks sold off and investors piled into beaten-down value names in the retail sector. The beginnings of a trend are clear: as we head into 2018 and the S&P 500 continues to shatter records daily (the most recent rally being fueled by supportive Fed commentary), value stocks (and stock selection itself) are top-of-mind topics.

VMware has proven itself as a unique value play – not words commonly used to describe a stock trading at ~24x P/E (though as I mention in a prior article, VMware generates much more free cash flow than GAAP earnings, and its free cash flow valuation is more in line with a cheap 18x multiple – a bargain, especially after this quarter’s cash flow results). Like industrial value names, VMware is a company that’s had to reinvent itself. Back when cloud computing was just a research project, VMware reigned king as client-server computing was the bedrock of enterprise IT, with each company maintaining its own servers and using VMware’s vSphere hypervisor to partition computing resources to “thin clients” – a fancy name for the desktop terminals that fill office desks, but with no computing guts themselves. These days, however, more and more workloads are being shifted to the public cloud, primarily into Amazon’s AWS (NASDAQ:AMZN), and out of corporate-owned “on-premise” data centers.

But to keep itself from becoming irrelevant, VMware has initiated a partnership with AWS to offer VMware Cloud on AWS, which eases the burden on CIOs who want to retain their existing VMware infrastructure while migrating into a public cloud environment. Having rebranded itself as a cloud-friendly vendor that can support “hybrid cloud” environments, VMware is experiencing a renaissance, with revenues growing at double digits for the second sequential quarter – which is fairly uncommon for a large-cap legacy IT company with ~$8 billion in revenues that is dealing with revenue declines in its out-of-vogue products. While Oracle (NYSE:ORCL) isn’t a perfect comp because it’s 4x the size of VMware, Oracle is also a company that is trying to shift from its on-prem legacy to a cloud environment – and Oracle grew only 3% y/y in its last quarter. VMware, by contrast, has really gotten into the swing of things with 21% growth in billings.

The key point to note: VMware is a value name with tremendous valuation support in its free cash flow; but unlike a traditional industrial value play, its new found strength in cloud is supporting double-digit revenue growth and massive (50%-plus) cash flow growth. Tech investors are starting to pay more and more attention to value-oriented growth names, and VMware fits the bill perfectly. The fact that the stock reacted so calmly to a great quarter is indicative of an opportunity to buy. I’ve been long on this name for years, sticking with it through the Dell-EMC tracking stock drama and am retaining a price target of $147 (20x EV/FCF) on the company. Even if (really, when) the company hits that mark sometime in the next year, I’m still holding my shares for the long haul, as VMware’s dominance in the enterprise datacenter (and now its newfound prominence in cloud-based datacenters) merit it a market capitalization in excess of $100 billion (more akin to Oracle and Cisco (NASDAQ:CSCO), other datacenter juggernauts), whereas its valuation now only sits at a polite $49 billion.

Q3 download: remarkable performance across all metrics, especially free cash flow

VMware posted $1.98 billion in revenue (+11% y/y) in Q3, beating out analyst expectations of $1.96 billion. License revenues grew 14% y/y to $785 million, while the remaining bulk of the revenue was derived from maintenance and support services. It’s important to note that this is VMware’s second consecutive quarter of double-digit revenue growth – in Q2, VMware posted 12% growth, while Q1’s growth rate was only 9%. It’s clear that beginning in Q2, VMware began picking up additional steam on the back of its new product offerings.

Figure 1. VMware revenue results
Source: VMware earnings release

As highlighted by the title of this article, however, it’s billings that stole the show (at least in terms of top-line metrics; cash flow growth is VMware’s true prize jewel). As a refresher, like most software companies, VMware’s long-term and subscription deals are booked into deferred revenues and recognized as revenue ratably over time. The sum of revenue plus the change in deferred revenue is referred to as “billings” in the quarter. Billings, rather than revenue, is a clearer picture of the volume of deals closed in a quarter – and in Q3, VMware had a fantastic billings quarter, with total billings of $2.1 billion growing 21% y/, as shown in the chart below:

Figure 2. VMware billings results

Analysts had only called for $2.0 billion in billings (+14% y/y). Given the fact that billings is the longer term yardstick for revenue health and that VMware smashed billings expectations by seven points, I’m surprised that the stock reacted so casually to the billings beat, choosing instead to focus on the thinner beat on revenues.

VMware’s deferred revenue balance grew to $5.6 billion in the quarter ($3.5 billion in short-term and will be recognized as revenue within the year; $2.1 billion is longer term), up 11% y/y. Software maintenance continues to form the bulk of deferred revenues, consisting of the agreements that customers sign with VMware to receive support and software upgrades over a predetermined term.

One more product-related note: VMware also announced that Gartner (NYSE:IT) has proclaimed it the largest software vendor of hyperconverged infrastructure (HCI), based on sales of VMware’s vSAN. Though VMware doesn’t break out sales by product, I must confess that, at least where it concerns HCI, I’m partial to Nutanix (NASDAQ:NTNX) and consider Nutanix the leader of that space. Nutanix, coincidentally, reported earnings on the same day as VMware and blew away analyst expectations, showing at least that there’s room in the field for two. HPE’s SimpliVity (NYSE:HPE), which the crisis-ridden company purchased earlier this year for $650 million, seems to be a very distant third.

Cash flow in focus, supporting VMware’s valuation

Now that we’ve established VMware’s top line metrics are trending strongly, we can turn to the major reason most investors buy VMware: its cash flow.

Cash flow expansion was driven by top-line growth as well as improvements in opex spending; more specifically:

Sales and marketing expenses dropped to 30.7% of revenues, down from 31.7% in 3Q17 General and administrative expenses dropped to 8.9% of revenues, down from 10.0% in 3Q17

VMware improved its operating margin by 2.1% to 23.5% (up from 21.4% in 3Q17). That might sound like a small amount, but at VMware’s revenue scale, two points is more than $40 million – a good chunk to improve earnings by.

Cash flow expanded in tandem. Operating cash flows in the quarter grew 56% y/y to $970 million, and after netting out $59 million of capex, VMware was left with free cash flow of $911 million, up 54% y/y.

Figure 3. VMware free cash flow bridge
This represents a 46% free cash flow margin, among the highest in software and among large-cap companies in general – which proves a salient point about software companies: in the startup phase (or even in a more mature growth phase), software companies might spend a lot on sales and drive massive losses to spur growth, but once they reach VMware’s size, these businesses become cash cows.

In the nine months year to date, VMware has generated $2.2 billion in FCF, representing a 39% margin to YTD revenues of $5.6 billion. Given that in the prior year’s YTD period, VMware generated only $1.8 billion of FCF on revenue of $5.1 billion (a 36% margin), VMware is driving cash flow margins in the right direction.

It’s no secret that VMware is headed in the direction of $10 billion in annual revenues, as its new product initiatives give it access to cloud-based deals that weren’t open to it before. At this scale (which the company should reach in 2-3 years, given its current growth trajectory), VMware would be generating $4 billion in free cash flow annually (assuming its 40% FCF margin holds; in all likelihood, this margin would expand steadily over time).

Compared to VMware’s current $49 billion market cap and $42 billion enterprise value (the company has ~$7 billion in net cash), VMware only trades at a ~10.5x EV/FCF multiple on its hypothetical future cash flow. For the forward-looking investor who believes in VMware’s growth, this cash flow expansion potential makes the stock’s current ~17x FCF multiple (based on FY17 FCF of $2.4 billion) seem like a bargain.

To sense-check VMware’s current valuation against other value yardsticks, the company also trades at a 5.0x EV/FTM revenues multiple (based on a forward-twelve months revenue estimate of $8.2 billion, applying VMware’s growth linearity to its trailing revenues) and 24x P/E, based on analyst consensus FY18 EPS of $5.07 as reported on Yahoo Finance.

Not the cheapest of stocks, but VMware is a software play with the best elements of growth and value.

Stay long on VMware. Very few software stocks are “sleep at night stocks” because so few of them ever reach VMware’s scale (the only other such stock I can think of is Salesforce.com (NYSE:CR), another entrenched leader but in the frontend application software space, generating tons of cash flow). Based on the record-setting levels of the NASDAQ and investors’ general jitters on tech’s overvaluation, it’s these kinds of stocks that the market will turn to in 2018.

Disclosure: I am/we are long VMW, NTNX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, Long Ideas, Technology, Technical & System Software, Editors’ PicksWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

Nutanix Inc Stock, Up 25% Before Earnings. Can It Keep Popping Higher?

utanix Inc Stock, Up 25 percent Before Earnings. Can It Keep Popping Higher
Flickr

Hyperconverged infrastructure providerNutanix Inc (NASDAQ: NTNX)stock is getting a lot of investor love ahead of its fiscal 2018 first-quarter earnings. Such has been the bullish sentiment, that Nutanix is stock is up25% alone in the month of November which has propelled the stock to a 52 week high. A string of analyst rating upgrades and price target hikes in this month have also helped the cause ofSan Jose, California-based hybrid cloud company shares. With NTNXstock at a 1 year high ahead of earnings, the question is, can the stock keep popping higher post earnings? Is plenty more upside left in Nutanix stock from here?

NTNX-stock-chart

Nutanix Q1-2018 Earnings Wall Street Estimates.

Wall Street expects the Dheeraj Pandey led cloud computing specialist to report a non-GAAP loss per share of 26 cents a share, bettering theloss per share of 37 cents in Q1 2017 by a significant11 cents, near 30% year-over-year (YoY) growth. On the top line front, the analyst consensus is a revenue of $266.9 million, good for a 60%YoY growth. Interestingly, though, the managementrevenue guidance is very conservative, even the high-end revenue estimate also falls below Wall Street consensus. The top management gave a revenue guidance of $240-$250 million and earnings estimate of 37 cents loss per share. With the analyst estimates comparatively much higher, the expectations are very high ahead of earnings and any disappointment could result in the stock giving up some of its massive recent gains.

Nutanix will need more than an earningsbeat to sustain the high valuation.

Nutanix has a strong history of beating analyst estimates in its short public life. The hyperconverged infrastructure provider has delivered a beat on both the top line and bottom line numbers in all the quarters since its IPO. With NTNX stock trading at its highest sales multiple of 7x since going public, an earningsbeat is a must and perhaps would need much more than that to sustain the high valuation. Give the strong earnings history of NTNX stock, an earningsbeat is likely. TheNutanix Q1 earnings whispernumber makes case for much better earnings with aloss per share of just 21 cents, implying 5 cent beat and a massive 16 cents higher than management’s earnings estimates. The guidance again is very vital since the stock is prone to makemassive moves in either directiongoing by the stock price history. In the past post-earnings moves, the guidance played a major role in which direction the stock moved. Analysts expect the company to report a revenue of $282 million for the second quarter.

Key things to watch out for in the earnings release.

Given that the company is still at some distance on the road to profitability, it needs to maintain its strong revenue growth. Once again the company needs to show strong growth in deferred revenue to assure investors about its long-term growth story. The 77% YoY growth indeferred revenue to $526 million in last quarter earnings had outpaced its Q4 revenue growth of 62%. This has also been boosted by the impressive 87% YoY rise in the customer base. The company’s software segment gaining traction has got investors excited since pure software play means higher margins than its core hardware business. Thesoftware only bookings grew by 96% YoY in the fourth quarter forming 17% of the total bookings. The impact of the OEM agreements with IBM (NYSE:IBM) for software and Pure software agreement with Cisco (NASDAQ:CSCO) and Hewlett Packard Enterprises (NYSE:HPE) hardware is also likely to be closely watched. With DRAM prices expected to rise further, the increase in software moat could be very much welcomed by the investors.

NTNX-revenue-chart

Bottomline.

The overall market sentiment towards NTNX stock has turned more bullish recently. The short interestdecline in the latest period by further 7.4%, a drop for the consecutive fourth quarter also suggests so. However, the short interest is still very high at 17.5% of the float with days to cover at 6. A strong showing post earnings could result in much higher gains as there is a possibility of a short squeeze. Having said this, investors need to be little cautious as the technical set up is not entirely favorable for Nutanix shares. The NTNX stock technical chart has some bearish signals which could mean the upside from here could be limited. The company shares are in overbought zone as both popular technical indicators Relative Strength Index (RSI) and Bollinger Bands suggest that the stock is heavily overbought. Given the recent run-up in Nutanix shares, and the unfavorable technical set up, the stock will certainly need something more than a beat to continue popping higher.

Nutanix Stock technical chart

Looking for fundamentally better tech stocks than Nutanix? Check out Amigobulls’top stock picksfrom the tech sector, which have beaten the NASDAQ by over 166%. Interested in automotive stock? Then, we also have ourtop picks from the auto sector, which have beaten the S&P 500 by 282%. If you’re a trader though, you should check out ourdaily trading ideas sectionfor daily, free updates on the latest crossovers and other popular technical signals.

3 High-Yield Dogs Of The Dow To Buy Immediately

“When the going gets weird, the weird turn pro.”- Hunter S. Thompson

I know I’ve used this quote before, but it so applicable to so many situations, especially now considering the lofty state of equity markets. Markets do seem to be in weird place.

Pundits are almost split down the middle as to whether the current bull run has any more steam left. Some argue that valuations are stretched thin while others continue to pound the table, goading investors to pile in. Im splitting the difference.

The S&P 500 trades at 19.4 times expected earnings. We’ve seen it much richer in the past. However, there are some visible cracks showing.

Some sectors, such as energy and telecom services, are negative for the year. But despite news to the contrary, there are bargains in the market. Previously, I highlighted a consumer staples stockthat stood out in another lackluster sector.

One of the most consistently successful value investing strategies is the venerable Dogs of the Dow. Created in 1972, the year I started kindergarten, the remarkable beauty of the Dogs as an investment strategy is its simplicity: Buy the ten highest dividend yielders in the Dow Jones Industrial Average (DJIA).

Here is the current list of Dogs going in to 2018…

Symbol Company Price Yield
GE General Electric $18.19 5.28%
VZ Verizon $47.01 5.02%
IBM International Business Machines $151.84 3.95%
XOM ExxonMobil $81.42 3.78%
CVX Chevron $116.51 3.71%
PFE Pfizer $35.49 3.61%
MRK Merck $54.35 3.46%
KO Coca-Cola $45.88 3.23%
CSCO Cisco Systems $36.49 3.18%
PG Procter & Gamble $88.45 3.12%

Since its inception the Dogs strategy has turned in an average annual return of 11.5%, besting the index by 6.3% for the same period.

Collectively, the current dog pound boasts a dividend yield of 3.8%; 67% higher than the average corporate bond yield of all ten companies. Even more compelling, as of November 18, the average Dogs of the Dow stock was trading at an 11.5% discount to its 52-week high.

While the entire basket is comprised of the highest quality names an investor could own, here are three that are best positioned to rise in the near term.

1. Cisco Systems (Nasdaq: CSCO) — Still the global market leader in computer and telecom networking equipment, Cisco has been successfully transitioning its focus to a more service-centric business model, concentrating on software and subscription sales.

The results are starting to flow through. In the companys most recent earnings report, recurring revenue grew by 32%. However, the companys core hardware business will remain relevant in the growing “internet of things” environment. CSCO shares trade at $37.03 and yield 3.1%.

2. Verizon Communications (NYSE: VZ) — The top U.S. wireless telecom, with 149 million subscribers, Verizon has also managed to grow its digital content business, albeit quietly when compared to its acquisition-junkie rival AT&T (NYSE: T). Recently, the company has built a top brand portfolio of digital properties that include AOL and Yahoo as well as their attached email platforms. The end result will be a decent media offering with much lower acquisition costs, allowing its precious cash to be spent on its core wireless telecom business. VZ shares are priced at $47.45 with an attractive 5.0% dividend yield.

3. International Business Machines (NYSE: IBM) — Often referred to as “Big Blue,” the company remains a steady, franchise player in the technology space. Having made the shift from hardware to service and software long ago, the company delivers a wide spectrum of capabilities, including artificial intelligence (AI) development, cloud platforms, as well as big data infrastructure. The stock is attractively priced at $151.81 with a 4.0% dividend yield.

Risks To Consider: As all three of these stocks fall in the information technology space, their success lies in continued economic expansion. Any slowdown could threaten those prospects. But all three companies have successful recurring revenue models that deliver predictable, steady revenue streams. This gives all three companies a defense posture in the event of a recession.

Action To Take: Surprisingly, there are few if any pure-play Dogs of the Dow ETFs or mutual funds available. However, they have always been available in unit investment trust form (UIT). Money manager First Trust Portfolios is one provider.

Collectively, my favorite three Dogs yield a combined 4.1% and trade at an average forward P/E of 12.6, which is extremely cheap compared to the market as a whole. Long-term investors looking for income with above-average growth prospects should be able to outperform the Dogs. Expansion of the forward P/E from 12.1 to 14 would result in a total return of nearly 16% including dividends, outperforming the Dogs of the Dow historical average by 45%.

Editor’s Note:There’s a simple investing system that regular investors are using to collect extra paychecks every month…totaling as much as $23,000 per year. It’s called The Dividend Trifecta, and they are telling us that this $23,000 number is the real thing. They don’t have special resources or connections…they just have The Dividend Trifecta…and 10 spare minutes a month to use it. Now it’s your turn: click here to learn how it works.

JPMorgan, Cisco Systems Lead the DJIA Higher Tuesday

November 28, 2017: Markets opened higher Tuesday and, barring a mid-afternoon dip, have traded positively all day. The Senate Finance committee passed the Republican tax bill, furthering bolstering spirits this afternoon. Among the sectors, financials and telecom posted the largest gains while real estate was the only sector to trade in the red. WTI crude oil for January delivery settled at $57.99 a barrel, down 0.2% for the day as investors wait for Thursday’s OPEC meeting. December gold added 30 cents on the day to settle at $1,299.20. Equities were headed for a higher close shortly before the bell as the DJIA traded up 1.09% for the day, the S&P 500 traded up 0.96%, and the Nasdaq Composite traded up 0.40%.

The DJIA stock posting the largest daily percentage gain ahead of the close Tuesday was JPMorgan Chase & Co. (NYSE: JPM) which traded up 3.44% at $101.30. The stock’s 52-week range is $78.39 to $102.42. Volume was about 10% above the daily average of around 11.6 million shares. The big bank had no specific news.

Cisco Systems Inc. (NASDAQ: CSCO) traded up 2.20% at $37.68. The stock’s 52-week range is $29.12 to $37.80 and the high was posted this afternoon. Volume was about 30% above the daily average of around 19 million. The network equipment maker had no specific news.

The Travelers Companies Inc. (NYSE: TRV) traded up 1.95% at $133.03. The stock’s 52-week range is $113.18 to $135.71 Volume was within 5% of the daily average of around 1.7 million shares. The insurance company had no specific news.

The Goldman Sachs Group Inc. (NYSE: GS) traded up 1.71% at $239.12. The stock’s 52-week range is $209.62 to $255.15. Volume was about equal to the daily average of around 2.6 million shares. The company had no specific news Wednesday.

Of the Dow stocks, 27 are on track to close higher Tuesday and just 3 are set to close lower.
ALSO READ: OECD Sees Global Growth Hitting 7-Year High

3 High-Yield Dogs Of The Dow To Buy Immediately

“When the going gets weird, the weird turn pro.”- Hunter S. Thompson

I know I’ve used this quote before, but it so applicable to so many situations, especially now considering the lofty state of equity markets. Markets do seem to be in weird place.

Pundits are almost split down the middle as to whether the current bull run has any more steam left. Some argue that valuations are stretched thin while others continue to pound the table, goading investors to pile in. Im splitting the difference.

The S&P 500 trades at 19.4 times expected earnings. We’ve seen it much richer in the past. However, there are some visible cracks showing.

Some sectors, such as energy and telecom services, are negative for the year. But despite news to the contrary, there are bargains in the market. Previously, I highlighted a consumer staples stockthat stood out in another lackluster sector.

One of the most consistently successful value investing strategies is the venerable Dogs of the Dow. Created in 1972, the year I started kindergarten, the remarkable beauty of the Dogs as an investment strategy is its simplicity: Buy the ten highest dividend yielders in the Dow Jones Industrial Average (DJIA).

Here is the current list of Dogs going in to 2018…

Symbol Company Price Yield
GE General Electric $18.19 5.28%
VZ Verizon $47.01 5.02%
IBM International Business Machines $151.84 3.95%
XOM ExxonMobil $81.42 3.78%
CVX Chevron $116.51 3.71%
PFE Pfizer $35.49 3.61%
MRK Merck $54.35 3.46%
KO Coca-Cola $45.88 3.23%
CSCO Cisco Systems $36.49 3.18%
PG Procter & Gamble $88.45 3.12%

Since its inception the Dogs strategy has turned in an average annual return of 11.5%, besting the index by 6.3% for the same period.

Collectively, the current dog pound boasts a dividend yield of 3.8%; 67% higher than the average corporate bond yield of all ten companies. Even more compelling, as of November 18, the average Dogs of the Dow stock was trading at an 11.5% discount to its 52-week high.

While the entire basket is comprised of the highest quality names an investor could own, here are three that are best positioned to rise in the near term.

1. Cisco Systems (Nasdaq: CSCO) — Still the global market leader in computer and telecom networking equipment, Cisco has been successfully transitioning its focus to a more service-centric business model, concentrating on software and subscription sales.

The results are starting to flow through. In the companys most recent earnings report, recurring revenue grew by 32%. However, the companys core hardware business will remain relevant in the growing “internet of things” environment. CSCO shares trade at $37.03 and yield 3.1%.

2. Verizon Communications (NYSE: VZ) — The top U.S. wireless telecom, with 149 million subscribers, Verizon has also managed to grow its digital content business, albeit quietly when compared to its acquisition-junkie rival AT&T (NYSE: T). Recently, the company has built a top brand portfolio of digital properties that include AOL and Yahoo as well as their attached email platforms. The end result will be a decent media offering with much lower acquisition costs, allowing its precious cash to be spent on its core wireless telecom business. VZ shares are priced at $47.45 with an attractive 5.0% dividend yield.

3. International Business Machines (NYSE: IBM) — Often referred to as “Big Blue,” the company remains a steady, franchise player in the technology space. Having made the shift from hardware to service and software long ago, the company delivers a wide spectrum of capabilities, including artificial intelligence (AI) development, cloud platforms, as well as big data infrastructure. The stock is attractively priced at $151.81 with a 4.0% dividend yield.

Risks To Consider: As all three of these stocks fall in the information technology space, their success lies in continued economic expansion. Any slowdown could threaten those prospects. But all three companies have successful recurring revenue models that deliver predictable, steady revenue streams. This gives all three companies a defense posture in the event of a recession.

Action To Take: Surprisingly, there are few if any pure-play Dogs of the Dow ETFs or mutual funds available. However, they have always been available in unit investment trust form (UIT). Money manager First Trust Portfolios is one provider.

Collectively, my favorite three Dogs yield a combined 4.1% and trade at an average forward P/E of 12.6, which is extremely cheap compared to the market as a whole. Long-term investors looking for income with above-average growth prospects should be able to outperform the Dogs. Expansion of the forward P/E from 12.1 to 14 would result in a total return of nearly 16% including dividends, outperforming the Dogs of the Dow historical average by 45%.

Editor’s Note:There’s a simple investing system that regular investors are using to collect extra paychecks every month…totaling as much as $23,000 per year. It’s called The Dividend Trifecta, and they are telling us that this $23,000 number is the real thing. They don’t have special resources or connections…they just have The Dividend Trifecta…and 10 spare minutes a month to use it. Now it’s your turn: click here to learn how it works.

Cisco Systems Q1 Earnings: Exciting Times

Large cap networking stock Cisco Systems, Inc (NASDAQ: CSCO) reportedQ1FY18 after the market closed Wednesday with the results being as follows:

GAAP Results
Q1 FY 2018 Q1 FY 2017 Vs. Q1 FY 2017
Revenue $ 12.1 billion $ 12.4 billion (2)%
Net Income $ 2.4 billion $ 2.3 billion 3%
Diluted Earnings per Share (EPS) $ 0.48 $ 0.46 4%

Q2 FY 2018 outlook was given as the following:

Revenue: 1% to 3% growth year over year Earnings per Share: GAAP $0.46 to $0.51; Non-GAAP: $0.58 to $0.60

The CEO commented:

“Our results in Q1 demonstrate the continued progress we’re making on our strategy. The network has never been more critical to business success. Cisco is delivering more insights and intelligence as we help our customers build highly secure, intelligent platforms for digital business.”

The CFO added:

“We delivered a solid Q1 and executed well as we focus on strategic priorities and maintaining rigorous discipline on profitability and cash generation. We delivered strong growth in operating and free cash flow, focused investments on long term profitable growth, and returned $3.1 billion to shareholders through repurchases and quarterly dividends.”

In a Barrons interview after the earnings call, the CFOnoted first off that Cisco Systems had beaten its own outlook for revenue and earnings per share last quarter, adding “but more important, were seeing the benefit of this transformation we have been going through the last couple of years.” She also noted: “Its an exciting time and weve been steadily executing.”

Cisco Systems was a previous Elite Opportunity Pro (EOP)portfolio pick in the past with our SCN EO newsletter having this to say in August 2015:

just like we’ve continued to suggest owning Amazon (AMZN) and Google (GOOGL) for the long haul, we’re convinced CSCO is another stock to own for the next several years, even with the current markets hovering around all-time highs. You won’t hear us say that about many stocks right now, but when you dig into Cisco’s valuation metrics, there’s plenty to like. Our theme of continuing to diversify with solid companies across various sectors is evidenced by today’s addition of CSCO. We’ll set our long-term target at $80, which dates back to the stock’s all-time high back in 2000. It’s obviously going to take a long time to get there, but this is precisely why we’re not going to provide a short-term SSL. This strategy clearly suggests we believe CSCO is a stock to own for the next several years, regardless of what it does over the next few months.

In January, our newsletter suggested that it wastime to get back intothe stock:

Following this morning’s surprising acquisition of AppDynamics for $3.7B, and after listening to Cisco’s CEO Chuck Robbins this morning, we’re convinced this could be the year CSCO finally starts to behave like many of its Internet Bubble counterparts have over the last few years, like Amazon, Microsoft and so many others.

If you’re looking for broad exposure to everything from cyber security to the Internet of Things (IoT), don’t think for one second CSCO doesn’t offer some of the broadest and best exposure to those tech sectors which stand to grow substantially over the next several years

Provided below is a weekly chart of the stock, and as you can see, it really hasn’t done much ever since it topped out back in September of last year. However, you can also see the stock still hasn’t managed to retrace either its3/8th’s or more attractively its 5/8th’s retracement level from last year’s low to last year’s high.

A technical chart for Cisco Systems shows shares recently testing a key resistance level at the $34.50 level:

A long term performance chart shows large caps Cisco Systems and Motorola Solutions Inc (NYSE: MSI) giving roughly the same positive albeit sometimes bumpy performance whileQualcomm, Inc (NASDAQ: QCOM) has fallen in and out of negative territory:

Finally, here is a quick recap of Cisco Systems recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page going into the current earnings report:

Earnings History10/30/20161/30/20174/29/20177/30/2017
EPS Est. 0.59 0.56 0.58 0.61
EPS Actual 0.61 0.57 0.6 0.61
Difference 0.02 0.01 0.02 0
Surprise % 3.40% 1.80% 3.40% 0.00%
EPS TrendCurrent Qtr. (Oct 2017)Next Qtr. (Jan 2018)Current Year (2018)Next Year (2019)
Current Estimate 0.6 0.58 2.43 2.56
7 Days Ago 0.6 0.58 2.43 2.55
30 Days Ago 0.6 0.58 2.43 2.55
60 Days Ago 0.6 0.58 2.43 2.55
90 Days Ago 0.6 0.58 2.43 2.55

12 Stocks To Watch For November 16, 2017

12 Stocks To Watch For November 16, 2017

Some of the stocks that may grab investor focus today are:

Wall Street expects Wal-Mart Stores Inc (NYSE: WMT) to report quarterly earnings at $0.97 per share on revenue of $120.89 billion before the opening bell. Wal-Mart shares slipped 0.26 percent to $89.60 in after-hours trading.
Analysts expect Applied Materials, Inc. (NASDAQ: AMAT) to post quarterly earnings at $0.91 per share on revenue of $3.94 billion after the closing bell. Applied Materials shares rose 0.50 percent to $56.05 in after-hours trading.
Cisco Systems, Inc. (NASDAQ: CSCO) reported better-than-expected profit for its first quarter on Wednesday. Cisco shares gained 5.83 percent to $36.10 in the after-hours trading session.
After the closing bell, Williams-Sonoma, Inc. (NYSE: WSM) is expected to post quarterly earnings at $0.84 per share on revenue of $1.29 billion. Williams-Sonoma shares gained 1.61 percent to $51.60 in after-hours trading.
Analysts are expecting Viacom, Inc. (NASDAQ: VIAB) to have earned $0.86 per share on revenue of $3.23 billion in the latest quarter. Viacom will release earnings before the markets open. Viacom shares gained 0.29 percent to close at $24.61 on Wednesday.
NetApp Inc. (NASDAQ: NTAP) reported stronger-than-expected results for its second quarter and issued strong Q3 guidance. NetApp shares climbed 11.41 percent to $51.05 in the after-hours trading session.

Find out what's going on in today's market and bring any questions you have to Benzinga's PreMarket Prep.

Before the markets open, J M Smucker Co (NYSE: SJM) is projected to report quarterly earnings at $1.9 per share on revenue of $1.89 billion. Smucker shares gained 1.40 percent to $108.00 in after-hours trading.
Wall Street expects Gap Inc (NYSE: GPS) to post quarterly earnings at $0.55 per share on revenue of $3.76 billion after the closing bell. Gap shares gained 0.56 percent to $27.05 in after-hours trading.
RH (NYSE: RH) increased its outlook for third quarter and fiscal 2017. RH shares jumped 15.67 percent to $96.35 in the after-hours trading session.
Analysts expect Best Buy Co Inc (NYSE: BBY) to report quarterly earnings at $0.78 per share on revenue of $9.36 billion before the opening bell. Best Buy shares rose 1.48 percent to $58.15 in after-hours trading.
After the markets close, Ross Stores, Inc. (NASDAQ: ROST) is estimated to post quarterly earnings at $0.67 per share on revenue of $3.26 billion. Ross Stores shares rose 1.07 percent to $65.30 in after-hours trading.
L Brands Inc (NYSE: LB) reported in-line earnings for its third quarter on Wednesday. L Brands shares dropped 4.34 percent to $47.12 in the after-hours trading session.