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Cisco to Become the Next Apple: Undervalued by 200%

Tickers in this article: AAPL CSCO
NEW YORK ( TheStreet) -- One of the biggest challenges for investors has always come when trying to assess the investment worthiness of stocks that are already trading at higher multiples. Not only does this get complicated when one does not already have a standard for what represents "value," but it gets a bit more problematic when the investor is not yet certain of his/her objectives -- whether growth, income, or for that matter, value.

In these situations, a market-beating portfolio often comes down to finding the right balance of all three. As enamored as I have become with tech stocks, I will conceded that it is rare to find such a balance, particularly when the added bonus of dividend is thrown into the mix.

For that matter, recently the prevailing question has been, is it possible to find a technology stock that trades at a multiple that would be considered "reasonable," pay out enough of its earnings, offer excellent growth opportunities and to top it off, offer yields that would interest dividend-growth investors?

This situation is akin to finding a needle in a haystack. But if one stock merits such consideration, it would be networking giant Cisco(CSCO) , not only does it fit the criteria of a perfect stock, but it is positioning itself to trade at $60 within three years -- a return of 200%.

How's That Going to Happen?

"The great one," Wayne Gretzky, once summarized his success by suggesting that "a good hockey player plays where the puck is. A great hockey player plays where the puck is going to be." It seems Gretzky understood the very important investment premise of forward-looking and anticipating trends. And this is a quality that Cisco is starting to demonstrate today more than any other company in the stock market.

A perfect example of this was when it recently announced its intent to acquire NDS Group, a provider of content streaming and security software that will help expand its next-generation video services. But one of the more interesting components is that NDS also specializes in software that allows TV content to be delivered to a variety of devices.

>>Investors Ignoring Cisco . . . but Not for Long

Interestingly, this announcement arrived after an extensive study in which Cisco projected that global mobile data traffic is poised to explode in the next four years. In anticipation of mobile network traffic demands over the next four years, the company's study suggests that by 2016, monthly global mobile data traffic will surpass 10 exabytes, while over 100 million smart phone users will belong to the "gigabyte club" (over 1 GB per month).

Cisco sees the number of mobile-connected devices will exceed the world's population by the end of this year, while the average mobile connection speed will surpass 1 Mbps in 2014. These are pretty remarkable statistics when one considers the challenges presented today from the likes of Verizon (VZ) and AT&T (T) in terms of data restrictions.