What’s up guys, it’s wiz.
Welcome back to the channel. If you are new, I am a Canadian investor. I cover a whole lot of information about investing in Canada and do research into our Canadian market. I dive into growth investing, dividend investing and Canadian small caps / penny stocks. Today, I will be giving you some info about Canadian depositary receipts, and talk about a CDR stock that has some amazing growth potential ahead. For new investors, you need to join Wealthsimple Trade if you are looking to start investing and live in Canada. If you use my link in the description to join Wealthsimple, you get 2 free stocks worth up to 4500$ so do not miss out.
Canadian Depositary Receipts (or shortly called “CDRs”) are listed on the NEO Exchange. They were introduced about one year ago, CIBC now offers 30 CDRs on its platform, providing even more opportunities to invest in global companies in of course Canadian dollars. Basically, CDRs are shares of U.S. companies and are traded in Canadian dollars on the Canadian NEO exchange, allowing for more affordable access to some of the biggest global companies. Canadian investors can benefit from fractional ownership of popular U.S. stocks, like Cisco, Google, Nike and more. This creates portfolio diversification at a lower, more accessible entry point. A unique CDR feature is the built-in notional currency hedge, which means that your returns depend on the performance of the underlying shares, eliminating exchange rate risks. What this means is that CDRs eliminate the need to convert Canadian dollars to a foreign currency, and with a built-in currency hedge, CDRs eliminate the currency risk linked with global investing. If you want to learn more about CDRs, there is a great PDF summary by CIBC which I will link in the description. This is financial news brought to you by Xemoto Media so leave a like if you learned something new.
The stock I will be talking about is CISCO CDR CAD HEDGED (ticker symbol CSCO.NE). Cisco stock rose 4% during after-hours trading on Wednesday, Aug. 17, following its earnings report for its fiscal fourth quarter and the full year 2022. Revenue for the networking hardware and software maker stayed nearly flat from a year ago at $13.1 billion, but still exceeded estimates by $320 million. Cisco’s growth looked steady, but the company expects it to accelerate again throughout fiscal 2023. Let’s review its core growth, challenges, and valuations to see if it’s worth the investment. Starting in fiscal 2022, Cisco redeveloped its four core segments into six new ones: Secure Agile Networks, Internet for the Future, Collaboration, End-to-End Security, Optimized Application Experiences, and Services. The aim is to give investors a clear view of its businesses. Here’s how those six segments fared over the past year. Cisco’s Secure Agile Networks division struggled this year with slower sales of switches and enterprise routers, which offset stronger sales of access-point, wireless, and server-based devices. The growth of its Internet for the Future segment also stalled out amid declining sales of cable, edge, and optical devices. But the company said its weaker hardware sales were mainly due to supply constraints instead of lower demand.
Cisco’s Collaboration business finally grew again in the fourth quarter as it sold more on-site collaboration hardware, but that growth was offset by slower sales of meetings and calling products in a post-lockdown market. That uneven growth suggests that Cisco is still struggling against Zoom — which is expected to generate 11% revenue growth this year — as well as other competitors in the crowded video conference market. Cisco’s higher-growth software businesses fared better. The growth of its End-to-End Security unit grew, while its Optimized Application Experiences unit benefited from the ongoing growth of ThousandEyes, its cloud-based network service.
Cisco’s fourth-quarter numbers were mixed, but management expects revenue to rise 2% to 4% year over year in the first quarter of fiscal 2023 and 4% to 6% for the full year. That would be an improvement from its 3% revenue growth in fiscal 2022, and put it back on track to achieve its long-term goal of a compound annual growth rate (CAGR) of 5% to 7% between fiscal 2021 and fiscal 2025. It presented that goal last September during a conference call. Chief Financial Officer Scott Herren said Cisco could achieve those numbers even as it remained “supply constrained” in fiscal 2023. Herren said supply chain limits had been easing in the fourth quarter, but that they would still generate headwinds throughout fiscal 2023.
Adjusted gross margin for products fell year over year to 61% due to higher component, freight, and logistics costs related to the supply chain. Adjusted gross margin for services continued to expand, but failed to offset the decline in product margin. However, Cisco expects total adjusted gross margin to stabilize at 64% in the first quarter of fiscal 2023. That outlook supports the notion that supply constraints are easing.
Cisco’s stock could be a safe bear market buy. The company’s steady growth; consistent profits; and massive cushion of $19.3 billion in cash, cash equivalents, and investments should also make it a dependable defensive stock during a recession. Cisco isn’t an exciting investment — but it could be a great stock to buy and hold until the bear market finally ends.
Hope you guys enjoyed the explanation of what CDRs are and the recommendation of Cisco CDR. Make sure to always do your own due diligence before investing into any of the mentioned companies. If interested in more Canadian tools for your investing, check out the kofi link in the description to get access to my custom excel of my stock portfolio and my holdings. I also have a free Canadian investing blog for investors if you prefer reading over videos, head over to unwiz.com if interested. Please watch my previous videos on Canadian stock recommendations and let me know of any Canadian stocks you want me to look into and give my opinion on. Let me know in the comments, since I really want to expand my knowledge in the Canadian market, and you also expand your own knowledge by asking questions. It is a win-win situation. If you did enjoy this video, leaving a like really helps grow the channel! Thanks for watching, I’ll see you guys in the next video!