Impressive Telus run may be ending, says Toron Capital’s Driscoll

Driscoll says while the stock has been a champion performer, particularly in the past year, all telecoms and consumer staples have rallied. The Toron Capital fund manager says he is concerned about declining margins in the space.
David Driscoll, Partner at Toron Capital Markets, was on BNN’s Market Call Tonight with host Mark Bunting Friday to talk about global equities.

Driscoll says today’s markets are a tricky ones to try and generate income for clients. He believes The Fed and the European Central bank are simply kicking the can down the road with fiscal easing and that ultimately austerity has to come into play and a deleveraging must occur.

To earn a real rate of return in such a low interest rate environment, Driscoll says he often must look globally. If you are willing to assume the currency risk, he says, there are still places, such as South Africa, where you can find a declining interest rate environment and invest in a 5 to 7% yield single A credit vehicle. You can’t get in Canada or the US, he says. Driscoll has been taking profit off the table from consumers and utilities because, he says, because that is where everyone has gone to hide.

One such Canadian company is Telus (TSX:T), which has doubled in price since the worldwide economic crisis of 2008/2009. Driscoll says while the stock has been a champion performer, particularly in the past year, all telecoms and consumer staples have rallied. Driscoll says he would not be “in a big hurry to step up to the plate” on Telus and he is taking money off the table across the sector. The Toron Capital fund manager says he is concerned about declining margins in the space.

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Founded in 1990, Vancouver-based Telus provides a range of telecommunications products and services, including wireless, wireline, data, digital television, and IP services. The company was created by the government of Alberta to facilitate the privatization of a crown corporation, called the Alberta Government Telephones Commission. The Telus we know today was created by the 1999 merger of Telus and BC Tel, a move that instantly made it Canada’s second largest telecom behind Bell Canada. The company’s stock has been a star performer; in the past decade it has moved from under $8 to more than $60.

Shares of Telus on the TSX closed Friday down 1.57% to $60.73.

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