BCE is a top pick for this fund manager

Newhaven Asset Management CEO and portfolio manager Ryan Bushell said on BNN Bloomberg’s Market Call on Oct. 17 that BCE (BCE Stock Quote, Chart, News, Analysts, Financials TSX:BCE) remains a “durable, asset-rich” holding despite its share price decline over the past year, noting that the telecom’s restructuring into a more technology-focused operator could position it for recovery over the long term.

Bushell was revisiting his November 2024 top picks when he recommended BCE at $38.60. The stock has since fallen 14% to $33.58 (as of close Oct. 21), producing a total return loss of roughly 6% over the period.

At the time, Bushell said he viewed BCE’s situation as “misunderstood,” with investors overly focused on dividend risk.

“The company had come off and there was a lot of worry about a dividend cut,” he said. “We were pretty resolute that they could sell the MLSE assets and prepare the business.”

That sale came on Sept. 18, 2024, when BCE announced it would sell its 37.5% stake in Maple Leaf Sports & Entertainment to Rogers Communications for $4.7-billion, stating that the proceeds would help fund its transformation from a traditional telco to a “techco.” As part of the agreement, Bell Media retained long-term broadcast rights for MLSE-owned teams under 20-year contracts at fair market value.

Two months later, on Nov. 4, 2024, BCE unveiled plans to acquire U.S.-based Ziply Fiber for $5-billion (US$3.6-billion), expanding its presence in the Pacific Northwest. The transaction closed on Aug. 1 of this year, with Ziply now operating as a wholly owned subsidiary.

Bushell said these strategic shifts initially unsettled investors but were necessary for BCE’s evolution.

“They sold the MLSE assets and they bought Ziply — that really ticked some people off, and that led to the divestiture cut,” he said.

Reflecting on BCE’s long-term history, Bushell noted that the company’s share price is now roughly “where it was pre-Teachers,” referring to BCE’s abandoned $51.7-billion leveraged buyout by the Ontario Teachers’ Pension Plan in 2008, which would have been the largest corporate takeover in Canadian history before collapsing amid the global credit crisis.

Since then, he said, BCE has built out extensive fibre-optic and wireless infrastructure, strengthening its asset base even as it weathers a transitional period.

“We think it’s still a pretty asset-rich company,” Bushell said. “The dividend’s now been reset. Management had their investor day this week, and lo and behold, a few brokers are now upgrading the stock after it bounced off 29 to 34. We’re happy to own this company.”

He added that BCE’s long-term fundamentals remain intact despite cyclical weakness.

“When you think about durability, we don’t think the need for telecommunications is going away,” he said. “Fibre-optic data networks are only going to have increased value going forward. Big companies go through these periods; then you come out the other side, and everybody says, ‘Look at all the cost-cutting, look how good the company’s performing.’ We’re happy to buy it down here when nobody wants it, and we’ll see if there’s another day for it three, four, five years down the road.”

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