One of the most difficult aspects of investing is timing purchases and sales correctly. Clearly, everything is easy with hindsight, and it is exceptionally rare to buy at the bottom and sell at the top, but focusing on a company’s operating environment and strategy can help to make it easier.
Take, for example, Vodafone (LSE: VOD). Today appears to be a relatively good time to buy a slice of the telecoms company, due to potential improvements on both an internal and external basis. In terms of its strategy, Vodafone’s move into home broadband in the UK, as well as the potential for a pay-tv service over the medium term, is likely to provide it with considerable cross-selling opportunities. It should also act as a brake on the potential increases in market share for its rivals which may otherwise have taken place as they move into the quad play space.
Furthermore, Vodafone’s operating environment is also showing signs of improved performance. With a heavy focus on Europe as a result of it selling its stake in Verizon Wireless, the ECB’s decision to implement quantitative easing and also potentially increase the scale of asset purchases is very good news for the growth prospects for the region. As such, Vodafone could see its financial performance drastically improve, which indicates that now is the right time to buy into the business.
Similarly, TalkTalk (LSE: TALK) appears to be an appealing, albeit volatile, purchase at the present time. Although the hacking incident is clearly bad news for its short term prospects, with a high likelihood that sales and net profit guidance will be downgraded in the coming months, the company’s valuation indicates that there is a sufficient margin of safety on offer to merit purchase at the present time.
In fact, TalkTalk trades on a price to earnings growth (PEG) ratio of just 0.3. Certainly, there is likely to be a degree of reputational damage and, with an MP’s inquiry and further news flow regarding the hacking incident yet to come, the company’s share price is likely to remain volatile and could fall further in the coming weeks and months. However, for long term investors there is upside potential and, with TalkTalk also having a yield of 5.9%, it could also prove to be a sound income play, too.
Meanwhile, ITV (LSE: ITV) has been a relatively stable performer in recent years and has benefitted greatly from the improving UK economy. As well as greater advertising budgets pushing its revenue and earnings northwards, ITV has also been able to improve the quality of its content and segment it more successfully than in the past. This has led to earnings growth in each of the last five years and share price growth of 273% during the same period.
Looking ahead, ITV is forecast to grow its bottom line by 16% this year and by a further 10% next year. This puts it on a PEG ratio of just 1.4 which, given the positive outlook for the UK economy as well as the stability of the business, makes ITV a strong buy for the long term.