BT (LSE: BT.A) (NYSE.BT.US) is a company with which I have a long history, having first bought its shares during the 1980s.
Of course, I have done well out of the company as an investor (though I remain a fairly unhappy customer) but I certainly wouldn’t buy shares in the company today, and here’s why.
Perhaps the main reason is the departure of chief executive Ian Livingston, who leaves in September to become minister of state for trade and investment.
Under Mr Livingston, BT has been firmly on the front foot; building a fibre-optic network to offer high-speed internet access and offering BT Sport channels in competition with British Sky Broadcasting.
Indeed, the share price has responded extremely well, having rallied 60% during Mr Livingston’s tenure. This performance compares well against the FTSE 100 (up less than 20%) and although his replacement, Gavin Patterson, has performed well as head of retail operations, the departure of a successful chief executive inevitably brings uncertainty and can affect market sentiment.
Therefore, I would rather wait until the new chief exec has had chance to settle in somewhat.
Furthermore, BT Sport is viewed by the stock market as the brainchild of Mr Livingston and, should things not go quite to plan, investors could be quick to criticise and demand a change in strategy.
Certainly the new boss is unlikely to enjoy the same amount of time to make the strategy work as the old boss would have done. Perhaps a battle against Sky will take a long time to win, too.
In addition, I have never been a fan of the BT’s balance sheet.
There is far too much debt and too large a pension deficit for my liking, although I must admit that, in the past, I have turned a blind-eye to such liabilities as the shares were very cheap.
Today, the shares trade on a price to earnings ratio of 12.6 (versus the FTSE 100 P/E of 12.8) and, when the aforementioned points are all taken into account, BT’s valuation appears to be up with events.
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> Peter does not own any share mentioned in this article.