One of Warren Buffett’s famous investing sayings is “be fearful when others are greedy and greedy only when others are fearful”. Or, in other words, sell when others are buying and buy when they’re selling.
But we might expect Foolish investors to know that, and looking at what Fools have been selling recently might well provide us with some ideas for investments that may be past their prime
So, in this series of articles, we’re going to look at what customers of The Motley Fool ShareDealing Service were selling last week, and what might have made them decide to do so.
Lacklustre
Between July 2009 and January 2014 the share price of Vodafone (LSE: VOD) (NASDAQ: VOD.US) more than doubled. But when it sold its 49% stake in Verizon Wireless back in February many investors were concerned that the company’s best days were now behind it.
And the fact that Vodafone’s share price has fallen 7% since the disposal, compared with a fall of just 1.5% in the FTSE 100, might suggest they were quite right to be concerned.
So perhaps the somewhat lacklustre performance is what persuaded enough people to sell Vodafone last week to put it in the number 4 slot in our latest “Top Ten Sells” list.*
Spurt
Mind you, after a six month long slump, dropping to 184p in mid-October, Vodafone’s share price has recently left the market standing, with a 22% rise in share price over the past six weeks or so, versus an 8.3% rally by the FTSE 100.
So maybe it’s actually Vodafone’s recent spurt that prompted the sell-off, with recent buyers taking a quick profit.
But whatever their reason for selling, might people have been better to hang on to their shares? What do Vodafone’s prospects currently look like?
Holy grail
Despite the company predicting a slight rise in full-year profits — which it now expects to come in at between £11.4bn and £11.9bn — Vodafone is still operating in a highly competitive market. And it’s a market that’s still experiencing significant convergence.
The “holy grail” of the industry is now the “quad play bundle” — to sell customers a package of broadband, pay-TV, fixed-line telephony and mobile, thereby blocking out your competitors from every angle.
Virgin Media launched the first quad play bundles in the UK back in June, and the rest of the big players are now making strenuous efforts to catch up.
For example, in addition to its dominant position in both broadband and pay-TV, BT is now seeking to become a major player in mobile, too, via an acquisition, perhaps of O2 or EE.
And then there’s Sky, which already sells TV and fixed-line telephony services alongside its broadband provision, and which has recently been in talks with the main UK mobile operators about piggy-backing on their networks to offer a “virtual” mobile service to its customers.
Upside
So what’s Vodafone going to do? Launch its own broadband and TV services in spring next year, that’s what, using the fibre network it acquired when it bought Cable & Wireless Worldwide (C&WW) in 2012.
As Vodafone CEO Vittorio Colao said recently: “If BT comes more into mobile then we will go more into consumer broadband.”
Indeed, he may well be planning to kill two birds with one stone, by buying the European business of Liberty Global, which owns Virgin Media’s cable network.
That would give Vodafone a superfast fibre broadband network that reaches more than half of UK households — and that’s on top of the 20,500km fibre network it got when it bought C&WW — and remove a competitor from the marketplace at single stroke.
So whilst there’s undoubtedly going to be very stiff competition, if Vodafone’s plan comes together there could be a lot of upside left in its share price.
And there’s also the near-5% dividend to enjoy whilst waiting for that to happen.
But, of course, whatever anyone else was doing last week, only you can decide if Vodafone is a ‘buy’ or a ‘sell’ right now.
