A Very Cheap Asset Class

Europe is one of the most hated regions in the world by investors. Within Europe the most reviled sector is telecom. Many stocks in this sector sport double digit free cash flow and dividend yields despite their utility like nature. It has been a lonely position of mine that this sector is simply too cheap. Vodafone is a very large position for me.

Today it seems that the richest man in the world, Carlos Slim, agrees with me as he offered to buy $3.5 billion worth of Dutch telecom company KPN's stock. This would give him a toehold in the European telecom market. This follows Li Ka Shing's (the richest man of Asian decent)  reportedly unsuccessful bid for an Irish telecom company in recent days. It does not surprise me that two of the richest men in the world are buying the most reviled sector. That is why they are rich.

4 comments:

Brent Barber said...

I would agree - time to go shopping in Europe, but probably best to still stay away from financials.

I also own VOD, and recently bought some of Spanish utility Iberdrola - IBDRY.  They, like many big Spanish companies are really global companies and they get half their revenues from Spain and half from the UK, US, Latin America. They are cheap at P/E of They
are at a P/E of 7 in a very expensive industry and have a dividend
yield of almost 10%.  They, of course, have some issues at this price and growth is non-existent as the Spanish economy has slowed, but 10% while you wait is a pretty good place.

Tsachy Mishal said...

VOD is a chicken little play because they are priced like a European telecom but are not really a European telecom. Seems like IBDRY might be somewhat similar. I will take a look. There was an interesting presentation from the Value Investors Congress on MarketFolly about European value stocks http://www.marketfolly.com/2012/05/bob-robottis-presentation-on-enterflex.html

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