Moody’s downgrade today impacting SP. Was back down near to 10-year closing lows of 135.08 seen 29th January. Only 136+ as I write. Though one’s almost grown accustomed to setbacks with VOD, it’s still a huge disappointment.
Whilst markets often see many stocks oversold & overbought at various times, it’s getting harder to shrug off some prevailing concerns surrounding VOD. Debt is indeed high, revenues falling, competition increasing & bringing down prices, whilst some key markets face economic downturns.
From what I’ve seen during my involvement in markets since 2009, technology stocks are notorious for running into difficulties after longer periods of relative calm. One reason is that technology changes fast. Tech companies frequently need to make huge fresh investments just to keep up. That’s fine as long as revenues also increase & debt is manageable. But when debt is high & revenues fall, as in VOD’s case, then we have alarm bells. Then negative sentiment can dominate for longer periods.
Whilst all BBs of high-yielders tend to see plenty of comment from long-term investors, so bullishness dominates as we’d expect, it’s important to recognise that any of us can fall into occasional confirmation bias where mostly positives are highlighted. I’m sure I’ve done so a few times. Thus issues like high debt can be understated as very manageable, when in reality things can get even worse fairly quickly as upgrading to new tech tends to be expensive.
After reading so many times that circa 143 was a bottom here, then 135, I’m now wondering where we go from here? I’m also considering reducing or pulling out altogether at some point if we see further bad news & more SP falls on much higher than average volume. Latter would suggest more large funds pulling out.
If I do so, I’ll immediately re-enter my VOD funds into a stock that seems likely to return my losses on VOD. Despite yield taken here, those are significant. But that’s not a decision for today with SP near 10-year lows.
FWIW, most brokers seem equally perplexed about this as most of us. VOD’s targets range from 125 to as high as Goldman’s 300. One can’t help but question their credibility. Though one doesn’t expect consensus, such extreme variance suggests very different methods of determining forecasts, to say the least.
JD holding on & no rash actions planned. But despite a high yield, one needs to keep a close eye on this if mounting paper losses are a concern. I hold both shares & leveraged longs here, so my take on that aspect will be obvious enough. As are the potential perils of leverage. - GLA.