Leading telecommunications company Verizon Communications (NYSE: VZ), overlooked by many investors, has been sporting an attractive stock price. The company has 116.9 million wireless subscribers, and considering how addicted most of us are to our phones, that’s a large and stable business to be in. Over the past five years, Verizon’s free cash flow has been solidly positive.
Verizon has been laying the expensive framework for its 5G network, which has launched in limited markets. That’s great for long-term investors, because 5G should enable Verizon to increase prices on premium customers, while driving new wireless technologies, such as self-driving cars and virtual reality, that will increase the number of wireless connections customers have. The first 5G product to hit the market is 5G Home, a home wireless product that competes with broadband. Being able to offer home broadband wirelessly will expand Verizon’s market potential and should drive incremental growth. That’s just the beginning of 5G innovations.
The company does face intensifying competition, such as from T-Mobile, along with rising costs. It’s carrying more than $100 billion of debt, too. But its stock price reflects that, with its recent single-digit price-to-earnings ratio and its dividend recently yielding 4.2 percent. Overall, Verizon appears to be a solid value stock with a lot of long-term growth potential. (The Motley Fool has recommended Verizon.)
Ask the Fool
Q. Please explain “trading curbs.” – H.S., New Orleans
A. Trading curbs (also known as “circuit breakers” or “collars”) are rules that restrict trading in the stock market in times of extreme volatility. When triggered, they can suspend trading for a specified period of time or halt trading for the rest of the day. The idea is that such breaks will stop or pause whatever trading frenzy or panic is underway, giving investors a chance to assess what’s going on and make decisions in a calmer and more informed fashion.
Trading curbs have been refined over time; the most recent rules halt market trading for 15 minutes if the S&P 500 drops more than 7 percent from its previous day’s close – unless this happens at or after 3:25 p.m., in which case the markets will remain open until their regular 4 p.m. closing time. If the S&P 500 falls 20 percent below its previous day’s close, trading is halted for the rest of the day. “Limit up, limit down” breakers, meanwhile, are designed to briefly restrict trading in a particular stock (or exchange-traded fund) within a defined band when triggered.
Q. Can I track my portfolio online without a brokerage account? – G.A., Rutland, Vermont
A. Yes. Many sites, such as Yahoo! Finance and AOL.com, offer portfolio tracking, as do many brokerages. You can enter the various stocks and funds you own and the prices at which you bought them and then click in any time to see the latest value of each holding, as well as of your overall portfolio. You can even create a separate portfolio for stocks on your watchlist to help you keep an eye on them.
My dumbest investment
My dumbest investment was buying 75 shares of a small company at $4 per share and then buying more when it fell to $3, all based on excitement over a Food and Drug Administration approval. Well, the company’s recent share price was nearly where it was before that approval. – S., online
The Fool responds: This small company is developing robotic surgical equipment, and though that’s indeed a promising and growing field, a closer look at the business would have revealed some concerns. For starters, it has posted only losses in the past decade.
How has it stayed afloat for that period? Well, a look at its financial reports over time shows its total shares outstanding rising from roughly 13 million in 2013 to more than 200 million recently. That’s called dilution – when a company issues more shares, reducing the value of each share. (Imagine a pizza that was cut into eight pieces being cut into 80 pieces instead – each one would be a lot smaller.)
The company did get FDA approval for one of its surgical systems, but it will compete against Intuitive Surgical, which installed 231 of its systems in the third quarter, compared to the smaller company’s four installations. Intuitive Surgical has long been profitable, too, with billions in cash and equivalents.
There’s hope for your shares if the company can sell more and more systems and generate profits. But it’s risky.
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