Navigating an Overvalued Market, Part 3

In my previous two columns, I discussed why I believe the market is overdue for a pullback and how I am positioning my portfolio for that event. I don't believe we are due for more than a 5% to 8% selloff, and the S&P 500 and Dow Jones Industrial Average might even reach all-time highs before experiencing this decline. But I believe a slowdown in consumer spending will trigger some turmoil that the market will have to overcome over the next couple of months. Today I highlight a few stocks on my buy list if they pull back 5% or so. I would love to add to my current positions if we do hit a downdraft in equities. All of these picks have little dependency on consumer spending, sport reasonable valuations and pay decent dividends as well.

Cisco Systems (CSCO): I agree with Stephanie Link that there is value in this networking stock. It is cheap at less than 10x forward earnings and a dividend yield of 2.7%. The company is growing revenue at a decent 5% annually and has a huge amount of net cash on its balance sheet, which accounts for better than 25% of its current market capitalization. The stock currently trades at close to $21 a share. I plan to add to my current position if shares dip below $20....189 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.