I added to my recent positions today in United Parcel Service Inc (UPS) at $88.46 and Verizon Communications Inc (VZ) position at $51.115. UPS and Verizon are now my 5th and 6th largest holdings respectively.
I initiated a position in Verizon Communications Inc (VZ) position on 3/6/2020 at $57.156. Verizon is not in my top 15 largest holdings.
I’ve been watching Verizon for a while attracted to the utility of the company and it’s dividend looking to build more a of an income producing side of my portfolio. I’ve also wanted to have more exposure to 5G but feel that many of the top companies benefiting from this area are bit over priced. Verizon seems to be a good compromise on this.
Believe it or not my wife and Heavenly have never had a cell phone that had wireless service until recently. We recently got a couple Tracfone’s with a year of service on them and found that we most likely are using the Verizon network on them as Tracfone is basically a reseller of the major wireless networks. Therefore this investments meets my wishes of being something that I actively use myself. We now don’t have any landline phone service. I see this trend only continuing overall. Verizon used to be the primary landline provider in my area, but they sold the business to Fairpoint which is now Consolidated Communications. I think this was a great move in that they could then use that money to re-invest in the wireless network. I believe eventually they will end up getting back a good portion of the customers they sold a while back such as myself.
I think Verizon makes for a stable and safe place to park cash as well during uncertain times such as these to earn a safe and stable dividend that’s quite good in this low interest rate environment.
- Largest network with great reputation
- Largest customer base
- Making significant investments in fiber-optic network and 5G wireless technology
- Lower wireless technology costs are reducing costs to build a network
- Balance sheet/ debt load
- Price/Forward Earnings: 11.29
- Earnings Yield %: 8.33
- Forward Div Yield: 4.41%
I believe Verizon and their biggest rival AT&T will continue to dominate the space and use their size to keep costs down and prices low making it difficult for new competition to emerge. The continual investment in new technology is a major barrier to entry. The current earning yield and dividend yield are very attractive to me.
FALLING KNIFE DEFINITION: A slang phrase for a security or industry in which the current price or value has dropped significantly in a short period of time. A falling knife security can rebound, or it can lose all of its value, such as in the case of company bankruptcy where equity shares become worthless. A falling knife situation can occur because of actual business results (such as a big drop in net earnings) or because of increasingly negative investor sentiment. Source: Investopedia
I do like the falling knives! I usually find the best opportunities in the companies who’s stocks fall hard, some deserve it, but sometimes is unwarranted panic selling. I got many of my current holdings this way. I bought the bulk of my Merchant’s during the last economic crash when all banks were being sold no matter how safe/dull their business practice was. Cisco (CSCO), Keurig Green Mountain (GMCR), GE (GE) Google (GOOG), eBay (EBAY), Apple (AAPL)… I bought my stakes in all of these when people were overly pessimistic on them.
Why Catch Falling Knives?
Often, you will have companies have some bad news, maybe an earning or sales miss, an unexpected one time expense… temporary problems even though the company’s business is sound, the stock will drop hard. This makes for a great opportunity.
Some of the ones I’m looking to buy now are Staples (SPLS), Merchant’s Bank (MBVT), 3D Systems (DDD), Stratasys (SSYS), Amazon (AMZN), AT&T (T), Verizon (VZ), Sierra Wireless (SWIR) – either for the fact that they have fallen a bit, but still have sound fundamentals based on the current price or have decent dividends which help keep a floor on further downward pressure with great potential for upside.
But generally right now I’m putting together a nice list of potential ideas while keeping a wait and see attitude, waiting for the right time to strike.
MBVT is one that I’ve consistently held a core position while trading around it. I like it at $28.50 or less usually. At the last stockholder’s meeting (which I still need to post my write up on) they mentioned they are in the process of completely upgrading their computer system which will increase efficiency, customer service and lower overall cost. However, the whole cost of this upgrade is expensed this year so it could scare people (which it looks like is already happening) that just look at the numbers… could create a nice opportunity there.