Rogers Communications (B) (RCI.B.TO)

(A Top Pick May 24/12. Up 23.21%.) He is still long-term positive on telcos. If Verizon (VZ-N) comes into Canada, $7 billion of market cap will come off the 3 major incumbents and shareholders are already suffering. Also, dividend growth and share buybacks will be slower than expected.

There is more perception than reality of the threat of Verizon, and meanwhile telecoms are off 15%, which is an overreaction. There are a lot of pieces involved here. Would be surprised if they got outside of the major areas. Rogers is not his favourite. He likes BCE-T.

(3 Top Picks have a theme of needing some shareholder activism because there is so much value in some of the stocks they are going to be recognized and will be forced into some changes.) Loves this company because the market is not valuing it properly on the sum of the parts basis. It is ripe to be split into 3 parts. Wireless, Internet and cable. Cable companies in the US trade at 7.5X to 8X EBITDA. This one is 6 to 6.5 times. In the meantime you’ve got a media division that is small but is growing and this could be spun out as a separately traded company as well. If Verizon (VZN) does come in, they have a lot of options. They can sell or buy their Cogeco (CGO-T). They could also buy Shaw (SJR.B-T) or Corus (CJR.B-T). Yield of 4.22%.

Government of Canada is hell-bent on getting a 4^th provider and expect they will bend over backwards to make sure it happens this time. Verizon (VZ-N) has real advantages, buying power, connections with handset makers and they are going to have the governments help.

(Market Call Minute.) Has been paring back his position. He would be picking away at this at around $40. Verizon (VZ-N) coming into Canada is obviously a big threat and if that happens, he doesn’t think you’ll see much room for a valuation breakout.

3% bond due June 6/17. (All 3 Top Picks are based on a strategy that will earn you something without endangering your principal. Yield curve is very steep so when buying a 4 year bond, in 3 years you are one year closer to maturity and obviously less price risk and the yield has fallen and you have a capital gain. Corporate spreads from governments are fan shaped so the longer you go the wider the spread. As you come down a curve, this will trade at a tighter spread as well as a lower yield so you get a double effect of the yield curve and the credit spread.) This company is in a very decent shape as a bond credit.

With Verizon (VZ-N) talking about coming into Canada, which telco would be the safest bet, Bell Canada (BCE-T) Telus (T-T) or Rogers (RCI.B-T)? Interestingly enough, Sprint in the US just announced that they are offering “guaranteed for life” unlimited data so there is a bit of competition in the US. BCE is probably the safest with this one having the most exposure. It is difficult to say what is going to happen with Verizon.

Sees opportunity after the drop from the Verizon rumour. They have not sighed anything. The whole structure of telecom in Canada is now up for question. The game is now open. We have discounted the end of the wireless business and that is a long, long time from now. They are now buying back shares. 4.1% yield. He also holds BCE. Wireless is still a growth business.

Stock has fallen on fears that Verizon (VZ-N) will enter into Canada’s wireless business. Thinks the incumbents have a very strong market share and would be very difficult for Verizon to take away a lot of market share. He would look to buy at these levels. Numbers were very strong.

He doesn’t think Verizon will come up here. Regulatory changes have had an impact and caused the sell off recently.

There will be some management changes in this company over the next year. The way people watch television and use their phones is changing so rapidly with the Internet and Internet protocols. Hard to tell in the longer-term how well these companies are going to come out of it. The future seems to be in the mobile telephones. Gives you close to a 4% yield. Multiples are around 13-14 times earnings right now. Not a bad one to consider. He would have to see it much cheaper from here before he would step in and buy it.

Doesn’t own any telecoms. Has pulled back a bit because of a combination of interest-rate fears and uncertainty about what will unfold in the Canadian wireless. High-quality company and turning out a lot of cash flow. If you want a stable dividend income, they will increase the dividend every year.

Had a fair setback from about $54. Good technical support at around $44-$45. Nice yield. Terrific ROE. Thinks it is due for a nice bounce of maybe 15%-20%.

Likes the Canadian telecommunication space. The industry is afforded a certain amount of protection from the regulators. Pulled back because of rumours of competition coming in. He thinks if this happened, it would be a good thing because it would maintain the status quo from the regulators. Yield of 3.74%.

(Market Call Minute) Fully valued and losing momentum.