John O'Connell, CFARogers Communications (B)RCI.B.TOCOMMENTApr 21, 2015

No growth in this industry. Less immigration = less growth. That overhang has hurt the entire space. He owns this name for clients who want income. Undervalued. Low dividend payout. Potential catalysts as they monetize sports assets. Better potential total return.

He was probably feeling defensive last year with these picks, same as he is now. Sports asset value has increased dramatically, and it'll be able to monetize that. Huge positive announced last quarter that capex would be cut dramatically, which will increase FCF.

Bought because he liked the margin of safety. Pays a smaller dividend, so the remaining FCF could be used to pay down debt, buy back stock, or make other acquisitions. MLSE purchase probably wasn't such a bad move. Reducing capex, substantially increased guidance for FCF.

Likes it the best in the group because it's crystallized its sports assets.

It's outperformed BCE and Telus which she owns for the dividend (Telus has the most turnaround potential). The street expects Rogers to spin off their sports division. You can't go wrong with any telcos, which aren't getting any love now. They are undercutting each other are prices. She likes it for defence and yields, though is not high-growth

Trying to monetize sports division, but a ways to go. Falling behind on network quality and investments such as Shaw acquisition. Unfocused. Personal note:  He changed his cell to Rogers, can't believe how bad it is.

Growth has sold off and the market is running to income names. In Canada, income names he likes are Rogers and Brookfield Infrastructure.

He doesn't own telecom. It looks a little better than Telus and is more diversified. Also the payout ratio is much less at 20%. He sees some but not a lot of earnings growth.

Pricing pressure in the sector. Doesn't see appetite for another big telecom merger anytime soon. 

In the sector, he'd probably look at BCE or RCI.B.

A lot of these companies have high debt levels. It has had a full recovery from the bottom of its breakdown to $34 which is a big drop for such a big company. Above a $55 consolidation range indicates a positive signal.

Doesn't rank super-well in his universe (in bottom 1/3 out of 1000 Canadian companies), and has a lot to do with earnings acceleration profile. Move off the bottom probably due to value seekers, dividend, and sports plans. Wireless side is challenged.

A purely dividend investor could hold.

(Note the shortish timeframe.)  Telcos are still in the penalty box. Price war has effectively slowed down. Infrastructure assets are underappreciated. Slower immigration has been a drag. Still likes the sector. 

Regulatory changes on immigration have impacted the entire sector, and competitive pricing has weighed it down.

His choice in the telco space. Opportunities to monetize MLSE. Among peers, its balance sheet is the most compelling going forward.