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0. News

1 Top 5G Play to Consider Post-Earnings

The pandemic has been both good and bad for telecommunications stocks. Indeed, this pandemic has been a difficult one for investors to assess for telecom stocks.

On one hand, customers have relied heavily on high-speed internet connectivity to comply with work-from-home norms. On the other hand, telecom companies have not generated revenues from roaming charges as they had prior to the pandemic.

Accordingly, recent results have been murky for these stocks. That said, I think Telus (TSX:T)(NYSE:TU) is well positioned for growth in this environment. Here’s why.

Growth outlook remains strong Telus’s growth outlook really hasn’t changed much as a result of the pandemic.

During the past quarter, Telus saw a 9% revenue-growth rate year over year. That’s not bad at all. Telus grew revenues to US$4.02 billion, up from US$3.94 billion from the same quarter last year.

Additionally, Telus has benefited from recent spinoffs of late. By selling its stake in Telus International, the company was able to pull in $1.3 billion in cash.

Here’s why that’s a big deal.

Telus is spending heavily on updating its infrastructure. The company’s spending plans for fibre optics is US$750 billion alone. The total bill is likely to come to US$3.5 billion for 2021. Raising capital in equity markets reduces the company’s debt burden and makes its infrastructure rollout easier on its balance sheet.

Other subsidiaries also saw impressive revenue growth; for example, Telus Health had 10% revenue growth this past quarter. If other spinoffs materialize as expected, Telus could stand to benefit further from this trend.

5G catalyst remains key for telecom investments The other key area of investment for Telus will be on upgrading its 5G network.

Indeed, from a wealth-creation perspective, 5G is one of the most profitable opportunities in the telecom sector. Telus seems to identify this opportunity well and is accelerating its expansion. With funds raised from equity and subsidiary spin-off, Telus also predicts installations will, for the most part, be done by 2022. Additionally, operational costs will begin to drop (and margins rise) in 2023.

For long-term investors, Telus provides an excellent risk/reward thesis at these levels. For those who believe in the cash flow-generating power of the 5G revolution, Telus’s heavy investment today could pay massive dividends over the long term — both figuratively and literally.

I think Telus stock provides investors with the right mix of defensiveness, growth, and income today. The company’s 4.8% dividend yield is one of the best bond-like returns investors can get in the market today. Combined with the 5G growth catalyst, this stock looks like a no-brainer for long-term investors.

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0. News

1st Tesla and Now China: Is Bitcoin Finished?

Bitcoin has been taking a beating lately. After Elon Musk announced that Tesla would stop accepting BTC, the world’s largest crypto went into a free fall, declining 32% in price. Much of that decline occurred relatively slowly over the course of a month. But today saw a particularly sharp downturn after the Chinese government announced that it was banning crypto trading by banks and institutions. The most extreme action China has taken against crypto yet, it sent Bitcoin into a tailspin. At one point earlier today, Bitcoin shed 6% of its value in just five minutes. The question investors need to ask themselves is this: Is this a sign of things to come or just a blip on the screen?

China bans crypto trading by banks The first thing to know about China’s crypto ban is that it isn’t the first such action China has taken. China has threatened to ban crypto many times before and nothing much has come of it. The current action doesn’t look that dramatic. What China has outlawed is crypto transactions by banks and financial institutions. It still allows

  • Mining operations;
  • Buying and selling on foreign exchanges; and
  • Crypto-related investment products.

This move probably won’t be devastating to the crypto market on its own. It may, however, be ominous when viewed in tandem with other large entities’ actions on crypto. So far this year, we’ve seen China, Turkey, and Tesla all move to restrict crypto transactions after previously allowing them. The big-picture trend certainly doesn’t favourable to Bitcoin. Of course, there is also a trend toward increasing crypto adoption by U.S. institutional investors. But you never know when regulations will throw a wrench in that one as well. Recently, Bitcoin was used as the currency of choice in an extortion attack against a major U.S. oil pipeline. That’s exactly the type of thing that tends to get regulators’ attention, and the SEC is getting more and more vocal about the matter by the day.

A word to the wise If you’re a crypto holder looking at all that’s going on, you might feel a little bit nervous. Here we’ve got countries and major corporations banning Bitcoin, and it’s by far the most “mainstream” crypto out there. How can this possibly be good news for the broader crypto universe, most of which isn’t nearly as socially acceptable as Bitcoin is?

We’ll have to wait and see how it all plays out. Bitcoin has taken dips bigger than the recent one and still survived. But a word to the wise: If you currently own an all-crypto portfolio, you might want to diversify a bit more.

By buying ETFs like iShares S&P/TSX 60 Index Fund (TSX:XIU), you can take much of the volatility out of your portfolio while retaining the upside. Most modern investing experts recommend diversification in stocks and bonds, with “ultra-risky” plays like Bitcoin making up just a tiny portion of your portfolio. There’s room in a portfolio for some high-risk stuff. But ETFs like XIU should be your meat and potatoes. With a fund like XIU, you get built-in diversification (XIU has 60 stocks in its portfolio), high liquidity, and much less volatility than you get with crypto investments. In exchange, you pay only a small fee (1.6%). If you throw a bond fund like the BMO Mid-Term U.S. Corporate Bond ETF into the mix, you reduce the risk even more. It all adds up to a diversified portfolio that dramatically cuts back on volatility. And yes, you can still keep a bit of Bitcoin in there if you wish.

The post 1st Tesla and Now China: Is Bitcoin Finished? appeared first on The Motley Fool Canada.

Categories
08. Buy Stocks

Beyond Your Geographical Boundary

With any portfolio, it’s important to diversify. That means looking beyond your own backyard. Consider other stocks listed on other exchanges including the Hang Seng Index in Hong Kong or the London Stock Exchange (LSE).2

Going global will give you access to foreign stocks and potentially cheaper alternatives.

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08. Buy Stocks

Social Media

The social media industry has also been an attractive target for day trading. The massive influx of online media companies—think Snapchat and Facebook—has been followed by a high trading volume for their stocks.

Moreover, debate rages over the capability of these companies to transform their extensive user bases into a sustainable revenue stream. While stock prices theoretically represent the discounted cash flows of their issuing corporations, recent valuations also take into account the earnings potential of the companies. Thus, some analysts argue this has resulted in higher stock valuations than the fundamentals suggest. Either way, social media continues to be a popular day-trading stock group.

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08. Buy Stocks

Financial Services

Financial services corporations provide excellent day trading stocks. Bank of America, for example, is one of the most highly traded stocks per shares traded per trading session.1 Bank of America is a prime candidate for day trading, despite the banking system being viewed with increased skepticism, as the industry has demonstrated systemic speculative activity.

Bank of America’s trading volume is high, making it a relatively liquid stock. For the same reasons, Wells Fargo also makes for a very popular day-trading stock. Both of these stocks have high trading volumes and uncertain industrial conditions.

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08. Buy Stocks

Trading Volume and Trade Volume Index (TVI)

Day traders frequently use the trade volume index (TVI) to determine whether or not to buy into a stock. This index measures the amount of money flowing in and out of an asset.

The volume of the stock traded is a measure of how many times it is bought and sold in a given time period—commonly within a single trading day. More volume indicates higher interest in a stock—both positive or negative. Often, an increase in the volume of a stock is indicative of price movement about to transpire.

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08. Buy Stocks

High Liquidity and Volatility in Day Trading

In financial markets, liquidity refers to how quickly an asset can be bought or sold in the market. It can also refer to how trading affects the security’s price.

Liquid stocks are more easily day-traded and tend to be more discounted than other stocks, making them cheaper. In addition, equity offered by corporations with higher market capitalizations is often more liquid than corporations with lower market caps. That’s because it’s easier to find buyers and sellers for the stock in question.

Stocks that exhibit more volatility lend themselves to day-trading strategies as well. So a stock may be volatile if its issuing corporation experiences more variance in its cash flows. While markets will anticipate these changes for the most part, when extenuating circumstances transpire, day traders can capitalize on asset mispricing. Uncertainty in the marketplace creates an ideal day trading situation.

Check out some of the online financial services, such as Yahoo Finance or Google Finance. These sites will regularly list highly liquid and highly volatile stocks during the day. You can also get this information from most online broker sites in real-time.

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08. Buy Stocks

Consider Your Own Position

Just like everything else in your financial life, the stocks you choose for your day trading strategy should be tailored to your goals and your personal situation. After all, there isn’t a one-size-fits-all approach.

Consider how much capital you have, what type of investing you’re going to take on, and your risk tolerance. And don’t forget to discount the research. The best way to do that is to study the market, read up on company financials, consider what sectors best reflect your personal needs, personality, and values, and remember to start early. You’ll need to get a head start on the trading day, so it’s a good idea to time yourself according to market openings.

A few things to keep in mind while you’re day trading: don’t get emotionally attached to any particular stock. Remember, day trading is all about looking at patterns to figure out when you can best enter and exit to make a profit or minimize your losses. And, keep up to date on the news.

You don’t need to be attached to your television or the news, but you should know when earnings season is and what the economic calendar looks like. This should help you identify the potential stocks for your trading day.

Categories
07. Rules

Keep Trading in Perspective

Stay focused on the big picture when trading. A losing trade should not surprise us; It’s a part of trading. A winning trade is just one step along the path to a profitable business. It is the cumulative profits that make a difference.

Once a trader accepts wins and losses as part of the business, emotions will have less of an effect on trading performance. That is not to say that we cannot be excited about a particularly fruitful trade, but we must keep in mind that a losing trade is never far off.

Setting realistic goals is an essential part of keeping trading in perspective. Your business should earn a reasonable return in a reasonable amount of time. If you expect to be a multi-millionaire by Tuesday, you’re setting yourself up for failure.

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07. Rules

Know When to Stop Trading

There are two reasons to stop trading: an ineffective trading plan, and an ineffective trader.

An ineffective trading plan shows much greater losses than were anticipated in historical testing. That happens. Markets may have changed, or volatility may have lessened. For whatever reason, the trading plan simply is not performing as expected.

Stay unemotional and businesslike. It’s time to reevaluate the trading plan and make a few changes or to start over with a new trading plan.

An unsuccessful trading plan is a problem that needs to be solved. It is not necessarily the end of the trading business.

An ineffective trader is one who makes a trading plan but is unable to follow it. External stress, poor habits, and lack of physical activity can all contribute to this problem. A trader who is not in peak condition for trading should consider taking a break. After any difficulties and challenges have been dealt with, the trader can return to business.