Take your profit on BCE, this investor says

BCE (BCE Stock Quote, Chart, News TSX:BCE) has had a nice little run so far in 2019, but there are signs that further upside might not be in the cards.

So says David Cockfield of Northland Wealth, who warns that more bad news on the economic front could spell trouble for the markets.

Canadian telecom play BCE has been kind to investors this year, climbing almost 14 per cent year-to-date. That came after a poor showing in 2018 where the stock endured a lengthy decline, losing about 18 per cent between December 2017 and October 2018.

The stock has been at or above the $60 mark for the past few months, but there looks to be a tough resistance level keeping it from going much higher, says Cockfield, managing director and portfolio manager at Northland Wealth, who spoke to BNN Bloomberg last Friday.

“I have to admit that I’ve been taking profits in BCE, which I’ve owned forever and it has been a core stock,” Cockfield says. “But I’ve looked at a couple of the major bank research departments and I think that one had a price objective for the year of $62 and another had a price objective of $63. We’re talking about a stock that is right up there, with pretty good resistance around the $62 – $63 range.”

“The yield is still good but I thought I’d take myself some profits and leave some room to buy it back [on share price weakness],” he says. “It can move ten to twenty per cent within a market cycle.”

BCE rose through early August on the back of promising quarterly results delivered on August 1. The company’s second quarter featured operating revenue of $5.93 billion, up from $5.8 billion a year ago and beating the consensus forecast of $5.9 billion. BCE beat the Street on adjusted earnings as well, coming in with $847 million or $0.94 per share in comparison to the expected $0.90 per share.

The company impressed with its wireless customer additions over the quarter, which grew at a 25.5 per cent year-over-year clip.

“Bell’s strategy to bring the fastest broadband networks and the latest service innovations to Canadians in every region continued to drive strong operating and financial performance across our business in Q2,” said CEO George Cope in a press release. “We significantly increased net new subscribers to our wireless, retail Internet and IPTV services, achieved our 4th consecutive quarter of growth in business markets, and again led the Canadian media industry in audience expansion and programming innovation.”

But gloomy general market trends are likely adding to the lack of promise on BCE, says Cockfield.

“I have a tendency right now towards having some cash on the sidelines,” he says. “You want to wait to see how this particular market cycle works it way out. There’s still bad things to come and markets could go significantly lower.”

“Look what happened last December — who would’ve thought that they’d take the tanking they did,” he says. “So, there’s always a potential for a good market correction, particularly when the economic news is deteriorating, which it is right now.”