Shaw Communications (Shaw Communications Stock Quote, Chart, News TSX:SJR.B) hasn’t seen much movement over the past three months, but investors looking for a nice defensive play during these uncertain times could do a lot worse than this stock, says portfolio manager Stephen Takacsy of Lester Asset Management.
“We all know Shaw well by now,” said Takacsy, CEO and chief investment officer at Lester, who spoke on BNN Bloomberg on Tuesday. “It’s a company that’s spending a lot of money to grow its wireless business and defending its TV and internet business against a formidable competitor in Telus. But I would say that Shaw or any of the other companies in that sector —Rogers, Bell, TELUS— are good investments at this time.”
News broke last week that Shaw and Telus were involved in a different form of tussle as Telus filed a suit against Shaw, both companies with strong presences in Western Canada, for purportedly misleading customers in regards to its Fibre+ internet service. Telus said in the lawsuit that Fibre+ is a data over cable service rather than a true fibre-to-the-home (FTTH) service, the latter which has higher speeds and fewer outages than the coaxial cable medium used by Shaw’s Fibre+.
Shaw, which next delivers earnings on July 10, last reported in early April where fiscal second quarter revenue grew by 3.7 per cent year-over-year to $1.36 billion while its profits were up 8.4 per cent to $167 million or $0.32 per share.
Shaw said it added about 54,000 net postpaid customers over the Q2 with a wireless subscriber base of close to 1.8 million and growth of 6,100 in its Wireline Internet business.
“Our second quarter performance reflects our continued focus on execution, delivering stable Wireline results and sustained Wireless growth, supported by underlying networks that continue to prove their worth,” said CEO Brad Shaw, in the quarterly press release.
Like many companies, Shaw withdrew its 2020 guidance, citing uncertainties surrounding the COVID-19 pandemic. Shaw closed its retail locations nationally while at the same time management acknowledged the role that telecom and connectivity services play as essential services during the current crisis.
Takacsy said it’s that prime role played by telcos like Shaw that makes the stock an easy bet.
“They’re defensive names,” Takacsy said. “They’re affected to a certain degree in terms of getting new subscribers on the wireless side, but it's a very defensive business. More people are at home using the Internet, using more bandwidth and so on.”
“Shaw, obviously, is withdrawing guidance and has suspended its share repurchases, but the dividend is safe and you're getting over 5 per cent yield so I wouldn't hesitate to buy shares.”
“We can’t own them all and we happen to own BCE and Telus, but I think Shaw is extremely well managed and, remember, it's more of a duopoly out West, so the competition is a little less intense than in the Eastern part of Canada. But I wouldn't hesitate to hold Shaw. It’s a very stable stock and a very defensive name.”