Tales from the Telecom Trenches

The past week or so has brought to light some interesting Telecom plays. I thought the appearance of these buying opportunities brought to light of the diversity of approaches to this sector.  I also found it odd that they all hit at the same time as these seem to be driven by somewhat unrelated and company-specific circumstances.

First is Telecomunicacoes de Sao Paulo which is a landline/internet/TV provider in Brazil. This is an annual dividend payer who has already paid the for the year and had a 20% price drop in the last month. While this is riskier than my usual purchase, I bought in at my buy price and doubled up once the price dropped another dollar. It's now up from its' 52 week low (induced by recent yearly dividend payout), but I'm still in the red. Nonetheless, I'm pretty happy with this holding because it was acquired at a good price and is a longstanding company. But if I have to hold it until the next dividend payout, I’m sure I will change my tune. This might be a good lesson in buying stocks that pay dividends on yearly schedules.

Next is Telecommunications Systems. They provide services for the wireless industry and do not pay a dividend.. I’ve had past success trading this stock, so it is one of the rare exceptions to my rules about trading growth stocks. They have also had a recent swoon in their stock price to 10 month lows. I bought a small lot with an expectation that the earnings call next week could send the prices up or down. If it goes up, I’ll sell out for a good profit as the trading range is quite broad. If the call send the price downward, I’ll probably load up. Recent news has been reasonably good indicating a good revenue stream on the horizon even if they had a bad first quarter.

Finally, there’s Nokia, the Finnish wireless handset provider. They took a huge 13% plunge today as they had bad news on multiple fronts. This one was very tempting. The price was actually down even further early in the day and well below my buy price. Also, I’ve traded Nokia in the past and have made my desired profit. But I just couldn’t pull the trigger despite the attractive price. This one smells too much like a Nortel at the moment and would not allow me to sleep at night.  Also it's another international stock that's an annual dividend player and I don't think I have the constitution for more than one of those at a time.

I find these decisions to be a strong test of my trading strategy. Of these three stocks, Nokia is the only household name and it’s the only stock that I choose not to buy. I hope to be able to look back at this in a few months and say I made the right calls.