Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
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You're right Fleccy - telecom stocks don't tend to get hit anywhere near as hard as financials and basic resources in a recession, and if that's where we are heading then VOD probably will hold up better, but that doesn't mean it doesn't have further to fall.
It will be interesting to see what actually happens to prices in the telecoms sector if we do into recession. I wouldn't be surprised to see the ones with the deepest pockets drive down prices to obtain market share both organically and by acquisition by driving profits/valuations into the ground and picking up distressed competitors on the cheap.
Selling, holding and/or topping up are very personal decisions that need to be based on when you need your money and what risks you want to take. Always a risk that when you sell you don't buy back at a lower price, either because it doesn't go lower, or it does and you don't pull the trigger thinking it will go lower.
Making binary decisions like buy everything now or sell everything exposes you to quite a lot of risk, as does having too many eggs in one basket.
With a 5 year plus time horizon, being diversified and riding out the bumps has always had the highest chance of success.
"That can very quickly lead to a recession, which in itself is bad for company profits and share prices as gross revenues decline, but a recession with high inflation is even worse as that puts pressure on company margins so profits take a hit from both the top and bottom line."
"VOD could also face very similar problems. Yes they have something everyone 'needs' and they might be increasing existing customers contracts by CPI+3.9%, but in their forecasts they weren't predicting gross revenue to increase by anywhere near that amount."
Don't disagree with you about the risk of recession, but Telecom stocks are among the best recession proof sectors. As far as the UK Telecom price rises, all providers are increasing their prices by CPI+3.9%, but Openreach wholesale prices are regulated to CPI increase only, so the CP's using Openreach infrastructure should benefit by 3.9% above inflation. Consumers can only switch at the the end of their contracts, as the current price rises are written into contracts. Consumers may switch at the end of their contracts, to take advantage of new customer teaser offers, but that's the only risk since all providers are raising their prices.
I wonder about the new UK Altnets, since they're are building their networks from investment, with an uncertain customer takeup. The Altnets can try and undercut Openreach, on wholesale, but offers like Equinox make that difficult. CityFibre have taken OFCOM to court, to fight the decision allowing Openreach to offer the Equinox deal, with the Judgement pending.
https://www.catribunal.org.uk/cases/14263321-cityfibre-limited
It’s the great unknown. Personally not selling, but looking at bringing new cash in to buy up at lower prices. Whether this period goes on for 2 weeks or 2 years, nobody knows.
So i expect the best way to deal with it is to hold money back in cash until it appears to have bottomed out, it's always tempting to sell off stock, poss not a good thing
In summary, we are all doomed, temporarily.
Always painful to be in a market reset.
Fleccy - no he said 10% + so I’ll admit the use of the word hyperinflation wasn’t appropriate - my apologies but I was a bit narked last night.
If you look at the numbers, changes to the base rate don’t have as much impact as you think. Around a third of homes are owned outright, another third have very low mortgages and of the third left a substantial number these days are on fixed rates so it takes a while for increases in interest rates to filter through to reduce inflation - much longer than it did previously when we had double digit inflation.
What was very worrying about what he said is that we are heading into a period of pretty severe stagflation. Wage growth is forecast to be substantially below inflation and even though interest rates are rising, the differential between interest rates and inflation will be the largest it’s ever been in history. That means there is going to be a substantial cut in real incomes both for savers and workers. That means there’s less money to spend which in turn will mean that consumers have less money to spend. That can very quickly lead to a recession, which in itself is bad for company profits and share prices as gross revenues decline, but a recession with high inflation is even worse as that puts pressure on company margins so profits take a hit from both the top and bottom line.
All of that wasn’t being priced in a couple of weeks ago as everyone was thinking that company profits would be fine as companies would just pass on the cost increases to the consumer and maintain their margins, but that’s not feasible when real incomes aren’t keeping pace with inflation.
I think the penny finally started to drop yesterday which is why we are seeing such big falls.
It was probably the combination of the delayed reaction to Powell’s comments about the Fed won’t hesitate to increase rates past neutral. In plain English that means they are going to increases rates at a pace which makes a recession almost inevitable. The rally that followed those comments was market nonsense that was just setting us up for a bigger fall.
The final trigger were the results from Walmart and Target, both of which beat gross revenue estimates (revenue increases of 3-4%) but both were major misses on profitability as the increases in revenue weren't big enough to match the increases in costs. That's why I said the yanks were going to wet the bed, and when they finally digested all of that they have, and are dropping like a stone.
VOD could also face very similar problems. Yes they have something everyone 'needs' and they might be increasing existing customers contracts by CPI+3.9%, but in their forecasts they weren't predicting gross revenue to increase by anywhere near that amount. They know they'll end up with more churn, as when money is tight people shop around for the best deal, and the telecoms sector has been a notorious race to the bottom on pricing. Even if that doesn't happen, people will trim their exis
Don't think he used the words hyper inflation. He did use the word apocalyptic...
"The governor of the Bank of England said almost 2 weeks ago that we are facing hyper inflation we can’t do much about"
Compound, did the BOE governor actually use the word hyperinflation? Since, in my book, hyperinflation suggests out of control inflation where price rises occur on an almost daily basis. All I've heard is 10% inflation, which is high, but not out of control. As far as interest rates are concerned, the BOE doesn't need to raise UK interest rates as high as the US, as even small increases reduce disposable incomes for variable rate mortgage holders, which is a substantial percentage of UK householders; I think the BOE have only been raising in 0.25 increments, for that reason.
Oh, by the way compound I meant to ask you your predictions for the vod sp over the next few weeks? Let's see if you can get it right? If you can then that would be good. Should be easy for you, so I am all ears? Thank you.
Mikey. You just can't leave it alone can you? Time to put it to rest, as Gary said?
Compound. Well I can honestly say I have never come across such a pompous Know it all as you. If you really are that clever, you must be very rich? As for you Knowing more than me? I have never pretended to know anything, just being honest & modest about my investment. You clearly have neither of those qualities. This is not the vod know it all share forum, & as such I think losers like me should be be able to post as well as Know it all (according to you) winners like you. Try & stop being so much up your arse? that might help? You say most of the stuff in the financial press is just garbage, so we just dismiss everything in the press & believe you instead shall we? & you say you can't put up with my nonsense?
Compound - excellent posts and I thankyou for your work . As I have said numerous times danielh insults anybody who does not say a good thing about his beloved Vodafone . I hope Vodafone turns around for his sake but I cant see it happening anytime soon - and sorry I cannot see it happening at all with Read at thw helm , but thats just my opinion ( which we are all entitled to ) - Rocky times ahead I feel .
You really are some kind of special aren’t you Daniel?
Just because you haven’t got a clue what you are doing it doesn’t mean other people don’t.
You’ve invested in a single share that has destroyed your capital and you think that’s normal and unavoidable. The only thing you can do is hope, pray and insult other people.
Well I can tell you from professional experience that your investment decisions (guesses) and performance (losses) stink worse than your attitude.
I know a hell of a lot more about this stuff than you do and if you had an ounce of common sense you would have realised that by now. If you’re in any doubt about that then re-read my posts.
I told you back in Dec/Jan that someone was accumulating and they were.
I said the SP would get to 140p by May and it did.
I said 2 weeks ago that markets were about to tank and they have, and this morning I told you the yanks were going to wet the bed today and US indexes closed between 4-5% down.
None of that was luck or lifting from other people - it was hard work and analysis of a multitude of different data.
Why on earth would I want to lift stuff when I can do my own analysis?
Most of the stuff you read in the financial press or wider media is complete garbage either written by someone who doesn’t know what they are talking about or who have a vested interest in what they are writing - often both. I know because I work in this industry and I frequently tear to shreds the dodgy analysis and actions of others and have to dumb down comments to financial journalists who don’t have a clue what they are writing about.
I’ve tried to help other people out by offering genuine analysis and opinions, as I can remember what it was like when I didn’t have a clue what was going on. Ive moved on from that but you clearly haven’t and never will.
I can’t put up with your nonsense anymore.
GLA whatever you decide to.
Thank you for that compound?? So is this all about you doing it properly & writing detailed post's just your way of paying forward, plus it can help you clarify your own thoughts? (all your quotes) Are you serious?? Is this forum a joke? Come on compound please don't just reprint stuff, that, as you say, we can all just read for ourselves?
Thanks fleccy. I thought the whole point of your support of vod was it's div'i ? So I am puzzled by your comment which suggest's vod should reduce it's deb't by reducing it's divi? I am trying very hard to believe in your positive stance here? But I am having a struggle with that at the moment? We all know vod's deb't is a problem? If vod reduces it's divi, then all you have said in the past goes straight out of the window surely? I think it is fair to say though that anybody who posts anything on here against the sheep like, go with flow,sack Nick Read attitude is not going to get many recommends?
All original content Dan. The numbers and information are all out there in the public domain, you just need to find it. If you tune into Bloomberg or CNBC you can listen to what the policy makers are actually saying, which is usually the biggest driver in the markets, although the reaction can often be delayed.
Financial ‘experts’ invariably have a hidden agenda and financial journalists are far more clueless than you could possibly imagine, so I wouldn’t dream of cutting and pasting any of their work.
Just trying to help people put things into context. Many moons ago I frequented boards like this and got sucked into the euphoria on various boards instead of learning and ended up losing money. I then learned how to do it properly and spending time writing detailed posts is just my way of paying forward, plus it can help me clarify my own thoughts.
“That's your problem Gary, you know absolutely nothing about VOD”
Fleccy - Some posts on here are tinged with irony, tired irony from long suffering VOD holders.
The thing is mate one has to possess a certain amount of intelligence to understand irony … you obviously don’t get it but never mind.
Hello compound. Great to have your input? But do you actually come up with all this yourself , or just uplift it all ? Sorry mate,but if we all just uplift stuff we will get nowhere, just one uplift against the other? How long did it take to write that? Reading it was a marathon?
Lots of reasons this is tanking - I’ve been posting them.
Macro economic situation is dire. Inflation running hot and yanks are hiking up rates to try and control it. The chairman of the Federal Reserve yesterday said that basically they are going to keep rising rates until they get inflation under control, even if that means putting the US into recession. Markets didn’t get it yesterday but they have today which is why the US markets are tanking, and where they lead we follow.
The situation is worse in Europe as inflation is just as high, but 60% of it is rising energy costs, so raising interest rates will have limited effect, and besides Europe (where VOD derives most of its income) is already teetering on recession because of the Ukraine conflict. UK is some where in between the two and has more scope than Europe to raise rates, but nowhere near as much as the US. The governor of the Bank of England said almost 2 weeks ago that we are facing hyper inflation we can’t do much about, and a recession is looking likely, but again the magnitude of those comments still hasn’t sunk in.
VOD does have relatively stable income streams which they are trying to increase to keep up with inflation, but they have rising costs as well - everything from energy, wages and material/construction costs for the 5G rollout. Their forecasts in the results this week was for increased turnover, but flat EBITDA and slightly reduced FCF as the higher cost of borrowing and capex slowly kick in.
The dividend is safe for now but won’t be increasing and neither will profits. Bond yields are rising and it won’t be long before you can get a guaranteed 5% income from investment grade debt, so why on earth would you hold a share to get a 6% dividend yield when that dividend could be cut or stopped and there are significantly higher risks to your capital.
The UAE do indeed have money to burn and have been buying anything at any price for years, so I wouldn’t read too much into that.
VOD declined offers a few months ago as the price wasn’t good enough, and there’s no way in hell those offers are going to get any better from any shrewd investors / companies as they’ll be keeping their powder dry for potential fire sale bargains.
So the macro economic picture is rubbish and now results are out and there’s virtually no chance of any juicy M&A happening, I’m not really sure what could drive the price up in the short term, although ex div day is going to be a shorters wet dream now most of the upside risks are off the table, and they will be targeting £1 a share at least.
We are all entitled to our opinions about what might happen in the future, I’m just explaining what’s happening now.
Markets move in cycles, and right now it looks like the only cure for high inflation is a recession, so be prepared for that eventuality.
Hi fleccy and any others, so if the debt is not the main issue here, what do you think the reason is for this going back on the famous ski sope, as it's looking like it's heading in that direction right now, cheers guys, think we would all like all your thoughts on this
"Hello fleccy. You sound a bit rattled today. unusual for you. What do you think about vod's deb't?"
Not rattled, just been roasting in this hot weather. I don't like Debt, but Vodafone has carried a ton of debt for years. If they wanted to go debt free, they could have done that when the sold their share in Verizon Wireless. I'm not sure why Telecom companies like to carry debt; They don't need to carry as much as they do, as they could focus on debt reduction using their profits, possibly at the expense of the dividend. It must suit them to carry the debt, otherwise they would reduce it, an accountant might have a good idea why.
I think the 8 years was in reference to Telecoms in general, with moves to 5G/IOT/FTTP. I said 8 years as companies like McKinsey reckon on multi Trillion Dollar revenuse from IOT by then.
"By 2030, we estimate that it could enable $5.5 trillion to $12.6 trillion in value globally"
https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/iot-value-set-to-accelerate-through-2030-where-and-how-to-capture-it
That will be spread across multiple industries, but Telecoms should get a good cut of the profits imo.
Hello fleccy. You sound a bit rattled today. unusual for you. What do you think about vod's deb't? Is it manageable? You did mention 8 years for vod to turn this around in an earlier post which is a bit worrying I think? I don't think the average vod shareholder has that much patience? Cheers mate.
Gary. Fair point, Even I recommended your post.(your 1st post that is) At least you have a sense of humour. Have a good day.
" Time will tell & if I know VOD that will be a very long time."
That's your problem Gary, you know absolutely nothing about VOD.
Three reasons Rob, debt, debt & debt as Mikey correctly says it is still going up.
Perhaps four reasons as VOD need to shell out much, much more on upgrades etc every year just to stand still so very probably more debt. Proper investors just have no confidence in VOD apart from those lot who just brought nearly 10% at almost £1.30.
We have to ask ourselves why & why at that price, perhaps there is something in the offing or perhaps they just had too much money floating around. Time will tell & if I know VOD that will be a very long time.