Great stocks with impressive long-term returns can do more than tantalize investors. They might also guide us to the next great stock. For example, networking-solutions giant Cisco Systems
Finding the tail on this coat
While Cisco has plenty of competition in the market for networking products and services, the company maintains a dominant position in the area of routing and switching products. As the demand for bandwidth on the Internet and inside corporate networks continues to surge, more demand also arises for Cisco's intelligent products that help manage data flow rather than just direct bits and bytes between points. Telecom networks are expanding furiously as well -- such as Verizon's and AT&T's fiber-optic network rollouts -- to keep up with consumer demand for video content, including more data-intensive high-definition video.
If we can nail down some companies profiting from the burgeoning ecosystem that Cisco is driving, we might find a hidden treasure worthy of investment. With a giant like Cisco, investors typically follow the conventional wisdom in looking only for direct suppliers or partners. Obvious choices include major partners such as EMC
Tagging along with CAPS
With CAPS, investors can look through Cisco's tag list for other companies sporting similar attributes. For instance, Cisco falls under tags such as "Networking & Communication Devices" and "Voice Over Internet (VoIP)." In addition, the comments that CAPS investors leave regarding rated companies can sometimes lead to similarly attractive investments, even those with little or no direct connection to Cisco.
These CAPS resources could lead investors to companies such as recent IPO Riverbed Technology
CAPS also turns up another interesting networking play in optical-communications specialist Finisar
Still looking for more stock ideas? How about Web-solutions provider and Motley Fool Rule Breakers pick Akamai
Of course, plenty of coattail investments have proved to be mere copycats, ultimately flopping for investors. That's why CAPS is best used as a research tool, not a device to pick stocks for you. Rather than take anyone else's recommendation, investors should always perform their own due diligence. But you can't beat the information and resources for the price -- namely, 100% free.
Is there another stock you know about that has Cisco's wind in its sails? Give your own opinion in Motley Fool CAPS.
Akamai Technologies has returned investors a whopping 137% since it became a Motley Fool Rule Breakers newsletter service recommendation in May 2005. To see what stocks David Gardner is picking to thump the market today, take a free 30-day trial.
Fool contributor Dave Mock has never worn a coat with tails; he prefers the waiter style. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. Microsoft is an Inside Value pick. The Fool's disclosure policy is often imitated but never duplicated.