The Canadian telcos are on fire this year and investors would be making money no matter which one they picked. But if you had to choose just one, Barry Schwartz of Baskin Wealth says to go with Rogers Communications (Rogers Communications Stock Quote, Chart TSX:RCI.B).
“You have to own one in your portfolio,” said Schwartz, executive vice president and chief investment officer for Baskin Wealth, to BNN Bloomberg on Monday. “I think that the telcos are an amazing business in Canada. They’re protected, they have great business plans and they have captive customers and they keep on adding new lines of business,” he says.
“There’s the announcement by Google with streaming games and Apple with more streaming. How does this stuff get delivered to us? By the Internet. And who controls the Internet? The telcos,” says Schwartz.
Last year was a rough one for the telecom space as a rising interest rate environment put a damper on investment over the first half of the year. But as the market cooled over the fall and central banks chose to freeze rates for the foreseeable future, more money piled into the sector.
Of the three bigs in Canada, Rogers fared the best in 2018, ending the year up 9.2 per cent, whereas competitors Telus (TSX:T) and BCE (TSX:BCE) dropped 5.0 per cent and 10.7 per cent, respectively.
So far, 2019 has been a different story, with Rogers posting the slimmer gains, up just 2.1 per cent, versus Telus which is up 8.8 per cent and BCE which is up 9.7 per cent.
Yet over a longer horizon, Rogers emerges as the clear winner: for the past 24 months, Rogers has gained 22.0 per cent compared to Telus’ 14.3 per cent and BCE’s marginal growth of 0.7 per cent.
Schwartz says that for growth-minded clients, Rogers is the best option.
“For our income clients, we own Telus or Bell, for our growth clients we own Rogers. If I had to choose one, I’d choose Rogers,” he says. “I think that you get a whole bunch of assets as well as the telco and the Internet at a discount.”
“Rogers has the best CEO in Joe Natale, who is a brilliant operator,” he says. “I like his attitude — he’s like, ‘You’re not getting a dividend raise. I’m going to improve the balance sheet and then you’ll get your dividend raise.’”
“And he delivered on everything he said he was going to do and that’s why the stock has absolutely killed it the last couple of years,” Schwartz adds.