In October, Hazelton Capital Partners closed out its position in Cisco Systems (CSCO). The position was held for just shy of 3 years and generated a total return of approximately 81%, which includes stock appreciation, dividends and option premiums.

Cisco designs, manufactures and sells networking equipment used to connect devices to the internet worldwide. With a 70% market share in switching, 50% market share in routing, and with internet traffic increasing, CSCO has become the de facto provider of equipment to businesses and governments alike. Over the past 10 years, even during the financial crisis, the company has been able to steadily grow its margins and increase its revenues from $28 billion to $49 billion. Over the same period of time, Cisco’s balance sheet saw significant growth as well, with its book value growing from just shy of $30 billion to just under $60 billion with a net cash position making up $40 of the $60 billion.

Gone are the days when Cisco used to be a high-flying internet stock complete with a 120 P/E multiple. Currently, CSCO sports a much more mundane multiple of 12x earnings (when accounting for excess cash balance) even though it has demonstrated consistent and sustainable growth. Hazelton Capital Partners exited its CSCO position in October at around $29/share even though we believe the value of Cisco’s business is currently worth between $31-$33/share. Starting in August and well into September, Hazelton Capital Partners began finding current and new investments whose upside far outpaced our expectations for Cisco and we removed CSCO from the portfolio to make room for new opportunities.

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This article has been excerpted from a letter to partners of Hazelton Capital Partners.