The Lemon Fool

today's statement indicates improvement in europe but problems in india.

the yield is nice but not well covered and the p/e is high.

directors were buying early this year at around 220 .

the present price is low historically .

i may topup at around 200 for the long term.

These shares seem quite cheap? At just over £2.00 today

Brokers are forecasting £2.40 to £2.85.

Deutsche bank have recommended buy.

a director bought today about £35k at 206.

Where did you obtain the information re the directors purchase?

Thanks

piccadilly wrote:Where did you obtain the information re the directors purchase?

Thanks

It's on Vodafone Investor pages:
http://otp.investis.com/clients/uk/voda ... sid=817322

Vodafone is 3% of my portfolio, I bought 06 Oct 16 at a price slightly higher than today, the yield and decent ROCE are what appealed. Also the non-GBP revenue flow appealed in a Post-Brexit Britain. The non-Cash write-off in the results was for a huge amount of money. That said the opportunity to expand in India will surely reap a decent harvest over the longer term? Furthermore the JV announced in Iran also has the potential to become a big business over time. As long as the dividend is maintained I will continue to hold and if the current (low) SP carries on into 2017 I will probably buy some more Vodafone with 17/18's ISA contribution.

I'm not aware of any insurmountable problems with Vodafone. If anybody is I'd be delighted to know!!

jackdaww wrote:the yield is nice but not well covered and the p/e is high.

VOD is not without blemishes, that's for sure, but as I have mentioned elsewhere, I think the end of Project Spring's drain on cash flow will make coverage less of a worry. I will consider buying more at a price below 200 pence; SSE and GSK are also top-up candidates for me.

The share price doesn't seem to be moving up - fairly static over the last week or so.

Is the reason the slow down in India?

The yield is certainly very appealing.

Why are the brokers tipping in the £2.75 range over the next year?

Vodafone stock has traded as low as 199.65 pence today, according to Bloomberg, for the consideration of anyone mulling a top-up.

Topped up today at 201.

they go xd tomorrow so expect them to be about 190.

.

another director buy today at 202.

I've looked at Vodafone and many of the other telecoms operators over the last few years, but I really struggle to see the attraction. 10 years ago they were free cash flow monsters, but since the recession, their gross margins have just kept getting squeezed and their capex costs have just risen and risen. The dividend does look attractive the the growth rate is impressive, but I really don't think it's sustainable in the face of negative free cash flow and rising debt. Having said that, I do see that capital spending has went down in recent quarters. If that was to continue, I do think that Vodafone could get back to an even keel. Are there any experts in the telecoms business who can comment on this?

tabhair wrote:I've looked at Vodafone and many of the other telecoms operators over the last few years, but I really struggle to see the attraction. 10 years ago they were free cash flow monsters, but since the recession, their gross margins have just kept getting squeezed and their capex costs have just risen and risen. The dividend does look attractive the the growth rate is impressive, but I really don't think it's sustainable in the face of negative free cash flow and rising debt. Having said that, I do see that capital spending has went down in recent quarters. If that was to continue, I do think that Vodafone could get back to an even keel. Are there any experts in the telecoms business who can comment on this?

Tabhair,

I agree. A quick look at the financials shows that over the last three years VOD has spent nearly £30bn on capex for no growth whatsoever in operating cash flow! I would need to understand exactly why that investment was going to pay off if I were to invest, and I agree that industry knowledge would be key here.

So like you I am not tempted. Though having said that, I remember reading that John Hempton of Bronte Capital, an investor I respect, is long Telcos on a pricing power thesis. I think the argument being that the relentless growth in demand for mobile data will lead to the Telcos having substantial pricing power with little incremental investment needed. And in the meantime, as you wait for the story to play out, you get a stock with a fat yield. I'll see if I can dig out the links to his investment case.

LongbeardRanger wrote:

tabhair wrote:I've looked at Vodafone and many of the other telecoms operators over the last few years, but I really struggle to see the attraction. 10 years ago they were free cash flow monsters, but since the recession, their gross margins have just kept getting squeezed and their capex costs have just risen and risen. The dividend does look attractive the the growth rate is impressive, but I really don't think it's sustainable in the face of negative free cash flow and rising debt. Having said that, I do see that capital spending has went down in recent quarters. If that was to continue, I do think that Vodafone could get back to an even keel. Are there any experts in the telecoms business who can comment on this?

Tabhair,

I agree. A quick look at the financials shows that over the last three years VOD has spent nearly £30bn on capex for no growth whatsoever in operating cash flow! I would need to understand exactly why that investment was going to pay off if I were to invest, and I agree that industry knowledge would be key here.

So like you I am not tempted. Though having said that, I remember reading that John Hempton of Bronte Capital, an investor I respect, is long Telcos on a pricing power thesis. I think the argument being that the relentless growth in demand for mobile data will lead to the Telcos having substantial pricing power with little incremental investment needed. And in the meantime, as you wait for the story to play out, you get a stock with a fat yield. I'll see if I can dig out the links to his investment case.

======================

mobile telcos seem to have a license to print money .

a question is , will vodafone get a good slice of it .

.

LongbeardRanger wrote:Tabhair,

I agree. A quick look at the financials shows that over the last three years VOD has spent nearly £30bn on capex for no growth whatsoever in operating cash flow! I would need to understand exactly why that investment was going to pay off if I were to invest, and I agree that industry knowledge would be key here.

So like you I am not tempted. Though having said that, I remember reading that John Hempton of Bronte Capital, an investor I respect, is long Telcos on a pricing power thesis. I think the argument being that the relentless growth in demand for mobile data will lead to the Telcos having substantial pricing power with little incremental investment needed. And in the meantime, as you wait for the story to play out, you get a stock with a fat yield. I'll see if I can dig out the links to his investment case.

I don't really understand how Hempton could say that Vodafone have pricing power. Vodafone essentially have one product, the transmission of mobile data/voice. If they try to raise prices, customers can just switch to a competitor. In the past, Vodafone were able to use advertising to differentiate. 10 years ago they were even able to offer their own products/services (custom phones, ringtones, etc.). Today though, from what I can tell, they just provide the infrastructure. With regulations capping things like roaming charges, the emergence of virtual operators, competition has gotten even more cut-throat. It still gets worse though. What is even more ridiculous is that they essentially provide a subsidy to Apple for almost nothing in return. They spend all these billions on infrastructure that allows Apple to even have an iPhone, yet they reap none of the reward. Not only do Apple get to use this infrastructure for nothing, the likes of Vodafone will even subsidise their users to buy iPhone's.

Mobile operators were great businesses 10 years ago, but they are not today, and I don't see them becoming so again. If you wanted to own these, then I think you could maybe make money tactically trading them (infrastructure upgrades likely come in waves, so you could buy and sell the dips), but as a long-term holding I wouldn't want to touch them.

So why are the brokers still forecasting £2.75 a share over the next year?

Or am I being naive!

piccadilly wrote:So why are the brokers still forecasting £2.75 a share over the next year?

Or am I being naive!

Are you referring to brokers' price targets? If so I would basically ignore them, they are largely meaningless.

Thank you for the reply.

Yes I am referring to the brokers price targets . I'm relatively inexperienced at this - why are they meaningless?

The internet investment sites are full of them.

piccadilly wrote:
Yes I am referring to the brokers price targets . I'm relatively inexperienced at this - why are they meaningless?

======================

brokers have their own agenda , if they can influence prices in their own interest they may do that.

i only use them as a very minor box to be ticked when evaluating a share deal.

remember the old adage , forecasting is tricky . especially the future .

.

piccadilly wrote:Yes I am referring to the brokers price targets . I'm relatively inexperienced at this - why are they meaningless?

The internet investment sites are full of them.

Because they can't see into the future. Think of all the different scenarios invented for what will happen after Brexit.....