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Holding = 23,200
Avg Price = 118.11p
Been buying VOD since 03/2018 thinking it was trading near its cyclical bottom but the bottom just kept on falling.
If you look at most of the UK Equity Income and UK High Yield funds, VOD doesn't feature in their Top 10 holdings, which is surprising given the way the yield has risen in that time. That tells you that the pros don't fancy this share as a core holding and, looking at the Special Situation funds I can find, it doesn't feature there as a recovery play either. You have to say the pros have had it right all along on this one.
The 3 merger has been well telegraphed in the mainstream press for months and the sp has continued to fall. When they finally confirmed their intention this week, the sp hardly blinked. A few things stand out to me here:
1) The merger is slated to take 2 years to approve and then 5 years to complete and start to realize +ive cashflow. They are estimated to have burnt through ~£500m in integration costs by then - though I can see that heading north - costs always spiral one way. Overall, that's a long time to wait to see if your gamble has paid off and the market will look to shorter term, lower risk plays.
2) Approval is not guaranteed and I think the market sees incompletion as a high risk. A Hong Kong telco owning 49% of the combined business doesn't sit well those who see China as a growing threat and telco as a key battleground. I wouldn't be surprised if this got canned on a national security basis.
3) I'm not seeing any strategic vision offered by the board. They are betting their entire strategy on the merger. Maybe they are right and size is all that counts but it would have been nice to see more than 1 lever being pulled to jump start the engines.
I think the major factor is debt. VOD has been in long term decline for sure but that decline only steepened when borrowing rates went up, so if the sp heads north again I suspect that will be more to do with rates coming down than confidence in VOD or the merger. Basically, if you want to see £1 again a certain World leader needs to accidently fall out of a window, which means geo-political risk is in play and out of the board's hands.
Sorry to say it but this share is a dog. You buy these things because they tick Buffett's boxes of high cashflow and barriers to entry and still the rug get's pulled. I'll let the re-invested divi (for as long as that lasts!) slightly lower my AvgPrice over time, but I'd tell anyone else to steer clear, unless they want a synthetic way to bet on the Ukraine war ending sooner rather than later.
"An investment is a trade gone bad". 100% true for VOD for the last 5 years!
I'd been wondering about buying in, but your post makes perfect sense. On CPI,RR, CINE etc. , all these posters bleating on about LTH, as you say, a long term position for me, is a short term one gone bad!
Bloomberk, agreed.
I also own 23k of these and will be very happy if I even get my money back!
My average is 91p but will drop to about 89p when the divi gets reinvested.
I hope with time we will both get our investments back.
GL
Bloomberk, It's just so easy to get caught up in these share traps, when the share price drops you may think it's a good opportunity to average down, thinking it will go back up again, then it drops and drops in vods case since 2018
I can fully understand why people would want to take a bit of a gamble at these very low prices, but there has been a lot of extreme views here lately such as it's going bankrupt and we will lose everything or this is a no brainer and going to make me very rich
I've just been saying hey be careful here, they don't always work out the way we would like
but hopefully something good can finally come from this one for all of us
Robleo - We is lucky to have you in our little group as the voice of reason.
I has noticed you is very calming for Dan the man when he gets upset.
Gutter, thank you, but nor sure i could do that nor would i want to try, as long as we finish with another blue day tomorrow i think everyone will be happy :-)