Will Cisco Systems, Inc. (CSCO) Protect You If the Market Collapses?

On the cash front, Cisco Systems, Inc. (NASDAQ:CSCO) is one of the most cash-rich companies on the street. The recent lawsuit between Apple Inc. (NASDAQ:AAPL) and hedge fund manager David Einhorn not only made Cupertino’s hoarding of $137 billion front-page news, but it called attention to the cash situation that exists at many companies. While Einhorn was ultimately successful in his suit, it has not yet pushed Apple to begin dispersing cash. To put this in context, Moody’s says that the top five technology companies, including Apple and Cisco, account for 24% of non-financial cash balances — this is within the tech sector that itself accounts for 38%.

Cisco CEO John Chambers specifically said that his company’s treatment of its large overseas cash balances would be dictated by U.S. tax policy, meaning that Cisco Systems, Inc. (NASDAQ:CSCO) would not repatriate this money as long as the tax burden was so immense. In the longer run, however, this should allow the company to remain better globally diversified, which will be of particular importance if the stock market continues to reverse.

As Cisco continues to innovate — it recently released a new router that has full application delivery ability — its growth potential may be diminished, but it is not gone. The company pays a very respectable dividend and is sitting on a mountain of cash. These three attributes combine to make this a strong play in most market conditions, and a particularly nice one if the market reverses. The value angle will offer some protection in a market downturn, and the underlying growth potential should help the company to continue to deliver the solid results we have come to expect. Cisco Systems, Inc. (NASDAQ:CSCO) looks very well positioned here and belongs in your portfolio.

Fool contributor Doug Ehrman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. It also recommends Cisco Systems.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.