This tech giant was once on top of the world…
It was one of the biggest winners of the Internet revolution. Its stock soared more than 85,000% in the 1990s. And it seemed like it could do no wrong.
Then, the dot-com bubble burst… The tech giant’s stock crashed – and languished for decades.
If you’d invested at the top in 2000 and held on, you’d basically be flat today. That’s 24 years of dead money… a brutal outcome for an industry giant.
Now, this stock is moving higher again. It might seem like a hopeful sign. But when we dig deeper into the data, it’s clear this is a breakout to avoid.
I’m talking about Cisco Systems (CSCO). This business sells and services the network equipment that makes the Internet possible. But its history is a tale of two tech giants in one.
The company was the hottest growth stock on the planet for most of the 1990s. But the boom also drove the stock to extreme overvaluation… leading to decades of dead money for investors.
Today, Cisco is a larger, slower-growing business. It has entered a new phase. And that’s important to understand when we look at what’s next for this stock…
Cisco has essentially gone sideways since 2000. But lately, it’s breaking out. Shares recently hit a new 52-week high – and investors are wondering if the rally can continue. Take a look…
The problem is, history shows we shouldn’t expect the gains to continue for long… at least, not in the company’s second phase as a slow-growth tech giant.
To see it, I first looked at all of Cisco’s new 52-week highs since it went public in 1990. We’ve seen 34 other setups in that time frame. And over the company’s full history, they’ve been incredible times to buy. Take a look…
If you look back to when Cisco first went public, buying after new 52-week highs has led to incredible outperformance… and staggering 28.8% gains over the next year.
This doesn’t tell the full story, though. That’s because buying after these situations since the year 2000 – when the second half of this tech giant’s story began – has been much different.
We’ve seen 19 of these setups since then. Here’s what we should expect…
Cisco’s incredible performance ended in 2000. The stock has barely gone higher since… And these setups barely led to positive returns.
Similar setups led to just 2.2% gains in six months and 1.9% gains over a year. Plus, the stock was higher a year later just 53% of the time.
It’s possible that Cisco is about to return to its old ways… soaring to new heights once again. But we’ve seen several similar false breakouts in recent years. And according to history, this one will likely follow the same path.
We’re in a powerful bull market. Plenty of investments are great opportunities right now… But not this blue-chip breakout.
Good investing,
Brett Eversole
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Source: Daily Wealth