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.
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piccadilly wrote:Where did you obtain the information re the directors purchase?
Thanks
jackdaww wrote:the yield is nice but not well covered and the p/e is high.
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?
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.
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.
piccadilly wrote:So why are the brokers still forecasting £2.75 a share over the next year?
Or am I being naive!
piccadilly wrote:
Yes I am referring to the brokers price targets . I'm relatively inexperienced at this - why are they meaningless?
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.
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