As a $122 billion company, it's no surprise that there's plenty of retail and institutional interest in networking giant Cisco Systems (Nasdaq: CSCO). Nonetheless, I was surprised to find out that last year, Cisco was the No. 6 most-owned stock by investment clubs, as measured by the folks at Better Investing. Retail investors' high opinion on the stock got me thinking: What's the consensus sentiment view on Cisco?
As it turns out, the view is mixed. Let's have a look at a few key sentiment drivers.
1. Analyst opinion
Analysts believe in Cisco. Data from Yahoo! Finance captures the lovefest:
| Strong Buy | 17 |
| Buy | 13 |
| Hold | 14 |
| Sell | 3 |
| Strong Sell | 0 |
With 30 buys or strong buys and only three sells, Cisco is an overwhelming favorite of analysts.
2. Insider buying
The insider buy/sell picture is less bullish. Over the past year, Cisco insiders have sold $171.4 million worth of their company's stock. During the same time period, insiders did not buy a single share of Cisco. (Data from Form4Oracle.) While insiders sell stocks for a whole host of reasons, the trend isn't positive: Insider selling far outweighs insider buying.
Interestingly, while insiders haven't done any buying, the Cisco board of directors has approved a massive buyback campaign.
3. Guru buying
Next, we'll look at "guru" ownership of the stock. According to GuruFocus, gurus are mostly positive on Cisco. Noted fund managers Don Yacktman, Bill Nygren, and Ron Muhlenkamp each have stakes in the company. On the flipside, gurus Ken Fisher, Mario Gabelli, and Richard Aster each reduced their stake in the company for the quarter that ended Dec. 31.
Still, all three remain owners of Cisco. The overall guru trend, then, is bullish.
4. Retail investor community sentiment
For retail investor community sentiment, I turn to Motley Fool CAPS, our proprietary stock rating system. CAPS generates ratings on a one-to-five-star scale; the maximum five-star indicates that the Fool community believes in a stock's future. Cisco has a respectable four-star rating in CAPS.
5. Short-sellers
Next, we'll look at whether short-sellers are circling the stock. There are 43.3 million Cisco shares sold short, according to Capital IQ. As a percentage of shares outstanding, that's a short interest of 0.8%. That's not very high -- a struggling operator like Barnes & Noble has a short interest of 13.5% right now. For determining sentiment, we'll take it as a good sign.
6. Does Buffett own it?
This is the "cherry on top" test, and in Cisco's case, it's a no: Berkshire Hathaway does not own shares. (This isn't much of a surprise -- Buffett is famously shy about his understanding of technology companies.)
Adding it up
Cisco is liked by analysts, the CAPS community, and a few fund manager "gurus." Furthermore, short sellers aren't betting against the stock in a significant way, and the company has authorized a huge buyback program. However, insiders haven't been buying any shares, and the company doesn't pass the "does-Buffett-own-it?" test. Add it all up, and Cisco comes out with a mostly bullish aura.
Of course, you can't base an investment philosophy on who likes the stock you like, and a consensus opinion can sometimes be a scary thing. Quoting Buffett: "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." There's hardly a "greedy" sense surrounding Cisco right now, though.
The purpose of this exercise wasn't to make a definitive buy or sell call on Cisco. Instead, by looking at a stock's sentiment, I aim to help you place your own opinion of it in a broader context. (Here's my look at GE's sentiment.)
One final thing: If you want to keep tabs on Cisco's movements, and for more analysis on Cisco, make sure you add it to your Watchlist.
