“IF I GO CRAZY WILL YOU STILL CALL ME SUPERMAN?”
–3 Doors Down
Can you breath underwater?
Bull markets come and go. Yet ones lasting almost a decade leave a lasting impression. We know precisely just how difficult it is to stay out of this fugly treacherous market. On one day we both bought and sold what we hoped could be a long-term position.
Few issues have held up as well as United Health and Verizon. Are they showing deterioration? We vented both.
Living almost entirely by the charts has not been our way. Now however, no choice exits. The very best are casually beaten along with the rest. How far are you willing to drop while attempting to “scale-in?”
A 50% drop in share price requires a 100% move to return to it’s previous price. Exactly how many 100% movers are in your portfolio now?
$SPX(mountain), UNH(overlay, blue)
United Health is a fortress with a sparkling future. The core business is thriving, while the digital IT side increasingly strengthens. UNH’s management’s attitude remains “wait and see.” Amazon’s PillPak sits on the near horizon as a potentially damaging competitor for UNH’s drugs distribution business.
As Good As It Gets Now.
United Health Group(UNH), 12-11-18.
Verizon–a phone company with a carnival attached.
$SPX(mountain), VZ(overlay, blue).
On October 23 Verizon posted a 2.9% EPS beat, a $1.22 on a $1.18 consensus estimate. As more of a utility than anything else, such results aren’t terrible. Q4 estimates represent a 27% EPS growth rate–if they make it.
Verizon Communications Inc.(VZ).
AT&T is not the only player swimming in debt. Verizon’s current debt stands proudly above $110 billion. Yet cash flow is king and VZ creates flow. Nonetheless, debt servicing will only become more difficult as rates rise, more so if economic conditions weaken.
Verizon’s core business is strong. Their legacy business of mostly commercial landlines, will continue to be a drag on profitability. Verizon’s Oath reads to us as a distraction. Oath is a hodgepodge of old Yahoo and AOL assets. Also thrown in are notions of AI, and VR. Hum. Facebook still struggles to monetize virtual reality through it’s Oculus Go and Rift. VR-based forms of communication are coming, yet not all will ultimately profit. VZ isn’t. Today we learn that VZ is preparing to take a 5.4 billion write-down.
Facebook’s Oculus Go/Rift in the market place;
News on the front burner for Verizon is yesterday’s announcement about cuts to personnel. By the middle of next year, 10,400 employees are expected to depart, through the company’s “separation program.” VZ expects to take a charge of $1.8-$2.1 billion.
Buyers are scared. Plunging share prices day-after-day make investors weary of buying even the “defensive” plays like Verizon. Market Edge Second Opinion calls VZ a “BUY,” along with Ned Davis Research–and they hate everyone. That’s why we like them for that exact reason. Ned loves a value, yet on-going market-wide volatility, and rising rates, make owning even Verizon a tough call. We’ll pass and keep our cash, through year end.
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