Michael, James and gang,
OK, let's talk about telecom service providers.
I just looked at a number of stocks (T, WCOM, BTY, VZ)
and they are floundering near 52 week lows. I know
that Mike flipped T on his "new lows" rule and I
flipped WCOM on DT acquisition speculation. However,
I want to raise more general questions:
1. Is this "a good business"? For ages, T had
a great unassailable cash cow. I would even claim,
it was a Buffetty business. It's definitely not
Buffetty anymore, but is it at least "a good business"?
Positives: Current infrastructure that has to be replicated
by any new players. Maybe current customers. Maybe
current wireless licenses. Same for current cable
infrastructure (T).
Negatives: Cap ex for infrastructure? Old, difficult to
maintain infrastructure? Cutthroat competition
cutting return-on-infrastructure? No growth prospects?
2. How to value these companies? Most of them are going
through acquisitions, divestitures, tracking-stocks,
joint ventures, partial investments, etc. PE, PSR
are mostly unapplicable. Mike's analysis on T was
great, but it may become obsolete very quickly.
Also looking at historical data T is at a good price
point, but is it really? I also liked WCOM's
results, but is it going to survive without
buying some ridiculously valued wireless company?
Is there a sufficient margin-of-understanding
to just buy them at price X, without going into
nitty-gritty financial details?
3. Currently stocks are trading on merger, divestiture,
etc. rumours. That is one possibility to profit.
Another one is a long term hold ala cable companies
a few years ago. However, I did not understand why
cable companies were undervalued then, and I am pretty
much in the same situation with telcos now.
Buffett would advise to stay out - or to stay in
a "circle of competence". For long-term holders
TTH may be an attractive option.
Any ideas, comments?
Jurgis |
