THIS IS NOT A TIP OR RECOMMENDATION. I AM NOT A TIPSTER. PLEASE DO YOUR OWN RESEARCH. PLEASE READ THE DISCLAIMER ON THE HOME PAGE OF MY WEBSITE. IF YOU COPY MY TRADES, YOU WILL PROBABLY LOSE MONEY. I HAVE A LARGE PORTFOLIO AND I USE DIVERSIFICATION TO SPREAD RISK ALONG WITH TRICKS LIKE HEDGING AND OCCASIONALLY BY THE USE OF STOPLOSSES - IF YOU BUY ANY STOCK YOU REALLY SHOULD FOCUS ON HOW IT FITS IN WITH THE REST OF YOUR PORTFOLIO AND KEEP RISK MANAGEMENT AT THE FOREFRONT OF EVERYTHING YOU DO. BE AWARE THAT ALL INVESTORS/TRADERS GET THINGS WRONG AND MANY STOCK SELECTIONS WILL WORK OUT BADLY.
I don’t intend to make this too long a Blog as I am sure most Readers are rather aware of who or what Vodafone VOD is and in many ways over-analysing megacap Stocks like this is rather a waste of time. If you nip over to the ‘Trades’ page of my Website (that sits on the main WD site) then you should see the specific details of my recent VOD buy on there and it is worth noting that this is merely a ‘Starter Position’ which gives me a ‘Foot in the door’ because if I do not do this I tend to forget about the Stock and my attention gets dragged off to something else.
If you are unfortunate enough to be a regular Reader of my Tweets and Blog spiel then you may have seen me mention that I was after some VOD for months and months (if not years and years !!) and I have even started to bore myself on the subject. However, as this is something that now sits in my Income Portfolio, I was highly aware of the big Cash Pile I have parked in that Account and I realise that having such a Cash Pile on the one hand means I am less exposed to Market Falls but on the flipside it means I am not picking up valuable Dividends and with a Portfolio which has picking up Dividends as the true beating heart of its strategy, the drawbacks of having too much Cash are clear.
Like most things related to the Stockmarket and the idiotic pursuit of Investing, it is all about balance. Again regular Readers (ok, I can’t resist it I have to mention All Bran – it’s been a long time peeps) must have picked up the, certainly not at all subtle, vibe that I am extremely worried about the Markets in general and my sense is that we could be on the verge of big trouble – the Balance of Probabilities certainly points this way. For more colour on this, nip over to the ‘Weekly Performance’ page on WD1 which I updated fairly recently and this gives hopefully a very good extollation (is that a real word?) of my thinking behind these concerns. Consequently it makes sense in my view to sit on big Cash Piles as this reduces the hit when Stocks do start to wobble and also it means that once we perceive that the Bottom has been put in, we have Cash to buy the Bargains. Having said that, in my ’Normal’ Portfolio where Dividends are more of a sideshow than the main event, I am more relaxed about having lots of Cash sat to one side. But actually I am in a slightly different situation because in addition to sitting on a lot of Cash at present I have been steadily Selling Stocks through the year and not buying much. And on top of this I have had a few Takeovers and that Cash has been coming in which gives a lovely boost to my Cash Holdings (if you look at the ‘Trades’ page you will see how little I have done this year in terms of Trading Activity). But of more significance is the huge Hedge I have in place with big Shorts on the FTSE100 and a much smaller one on the S&P500 – these have been a pain in the bum all year but it looks to me like they will start to deliver for me in a big way soon and as they drop that will free up loads of Cash for me which will boost my Cash Position even more. So using a mere £3000 on a VOD Starter Buy shouldn’t raise my Risk too much and this means that VOD is now very much in my focus with it sitting on my Income Portfolio on the ADVFN App on my Fone and also it now sits on SharePad in the Income Portfolio List I have set up there. So my eyes will now be on VOD many times on an average day and hopefully in combination with my Brainpower (what little of it there is left), I should be poised to buy more when the time is right. It also means that I am set to pick up roughly another £165 in Dividend Payments over the next 12 Months. Ultimately my Game Plan for the Income Portfolio is to see the £s total I receive each year from the Dividends to keep climbing and in a few years I hope this can take care of perhaps as much as half of my Annual Living Costs – so I don’t need to worry about where the Cash is going to come from and it means I am not ‘forced’ to Sell Stocks which I want to hold on to. I said earlier that over-analysing huge Stocks like this is a bit of a waste of time. I better explain this a bit more. In essence the simple reality (although loads of people will disagree with me on this) is that NOBODY knows what is really going on with this Company. Not the Directors, not the Senior Managers, not the Analysts, not the billions of Commentators in the Media, not the Shopworkers, not the blokes and blokesses who fix the Fone Masts etc. It is a massive behemoth with countless moving parts and it is in essence totally unknowable. It is a fantasy to think this is not the case. To be fair, I suspect the Cleaner on the 4th Floor in Newbury (Mrs Mabel Archer) could tell you more about how the Company is really performing !! Look at it like this. Every 3 Months or so the Company will put out its latest set of Results and of course all the ‘Experts’ pore over these and analyse them to the minutest degree – but it is all just time wasted. The reality is that any Figures you read from a huge Business like this are massively Out of Date (bit like that Liver Pate which is festering in your Fridge as you read this, complete with its furry green jacket). And not only that, the Figures are vastly massaged by the countless levels of Management and Divisions from which the Business is comprised. The way it works is that right down at the lowest level, the Management down there will ask their Troops what sort of Results they will achieve on Fone Sales and Contracts and Insurance and suchlike and of course the people at the ‘shopfloor’ will massage their response in a way that either flatters what they think they will achieve or overstates it. It is common Human practice to tell your Boss what you think they want to hear. These low level numbers are then taken by the Management at that low level and they then massage them a bit before they collate all the numbers together and they present them up to the next level of Management. Of course these peeps then take these figures and do some tweaking and massaging as well – up or down depending on various incentives such as expected Bonuses or beliefs regarding how Bonuses will be calculated in future, or perhaps around fears over keeping their own Jobs or something. This sort of process goes on and on throughout the Company and remember that not only are there Sales Operations but there are also Cost Centres like maintenance of the Networks and perhaps Human Resources departments and of course other Head Office functions like Accounts and Legal and suchlike. And then we have the Country Operations which are numerous and of course there will be loads of cultural differences and politics and suchlike and this all adds to the messiness of the Numbers as they get reported up through the Organisation. After this extremely lengthy process you end up with Numbers reaching the Directors of the Company which are not only massaged beyond all recognition of what the People at the bottom of the Organisation are likely to achieve but they are also very late and delayed. And of course these delays are enhanced at all levels with various Corporate Governance Checks and then we get Auditors involved and the whole thing is farcical really. So the simple fact is that the Numbers are pretty nonsensical. So I am really sorry to disappoint all the Accountants out there (ok, I might not have disappointed all of you as I know at least one Accountant [with lots of experience of working at the top in FTSE100 businesses] agrees with this kind of thinking and in fact helped me get to this point of view) but it means that really Buying into a Company like VOD is very much about other more qualitative factors and that is really where my focus lies. I also see VOD as a ‘Hold Forever’ Stock in terms of my Income Portfolio and any wiggles up and down over time will really in the main be opportunities for me to buy more and perhaps on very rare occasions I might be Selling part of my VOD position but I doubt that will happen unless there is a huge run up in the Share Price (yes please !!). So bearing all that in mind, I will now list the Key Risks as I see them and the elements that make me think VOD is a pretty decent Buy that will pay nicely for me over coming Years. Key Risks
What I particularly like about VOD
Numbers The ScreenShot below from SharePad I took on 14th August 2019 when the Mid Price for VOD was showing as 148.75p. I paid the princely sum of 149.5p so the ‘f/c Yield’ (Forecast Dividend Yield) of 5.6% pretty much applies to my purchase and the ‘2y fc Yield’ of 5.7% also applies. These are very attractive numbers in my view. The ‘fc PE’ (Forecast Price/Earnings Ratio for next Financial Year) and ‘2y fc PE’ don’t look bad but bear in mind what I said earlier about Numbers on Megacaps being largely nonsense and it will definitely be the case that these P/E Ratios are based on highly massaged and adjusted Earnings Figures. As usual, assuming I have uploaded the images correctly, you should find that clicking on the pics makes them grow bigger so you can see more detail.
The next Screen from SharePad has the Forecasts for various things and I must draw your attention to the fact the Dividend Payments are in Dollar Cents – therefore if and when the Pound strengthens this would lower the Dividend Yield we receive. However, if the Pound keeps tanking (very possible !!) then that will boost the Dividend Yield on the Shares.
Chart
I find the Chart happenings on VOD very interesting and this is why I bought my Starter Stake the other day. I am pretty sure I flagged this up recently in a Weekend Markets Blog and it has continued to look pretty good for Bulls. In a generally weak overall Market this is quite impressive. On the Chart below my Black Line pointed at by the Black Arrow is denoting a Long Term Resistance Line but note where my Blue Arrow is that the Price has now broken free of the Downtrend Line and this is a very bullish development.
On the next Chart I have zoomed in a lot on the Chart I just showed and now I think we could be looking at a Bull Flag – this implies that if the Price can Close over 155p we should see more gains quite promptly. My Black Rectangle is trying to capture the ‘Flag’ bit which is a Sideways Consolidation before another jump higher, and the move from where the Price Broke out of the Long Term Downtrend Line I showed on the previous Chart up to the start of the Flag is the ‘Pole’.
My little Black Arrows are pointing at the Darker Blue Wiggly Line which is the 50 Day Moving Average and the Lighter Blue Wavy Line up above which is the 200 Day MA. It looks to me like we are heading to a Bullish ‘Golden Cross’ where the 50 crosses the 200 from underneath and this is usually a good thing for coming months.
In the bottom window on the next Screen we have the RSI (Relative Strength Index) for the VOD Daily Chart and on a Reading of RSI 66 where my Blue Arrow is this is quite a high level and a bit ‘overbought’. This suggests to me that my Bull Flag theory is not wrong but it might take a while of Sideways wiggling before we get any jump up. However, whatever happens in the meantime, if the Price Closes above 155p that is the time to Buy.
OK, that pretty much covers it. Cheers, WD.
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