I find it interesting to watch things change over time. My job as an advisor of investments is to stay ahead of that curve by investing in opportunities in the early stages and to sell investments that are facing various headwinds and risks before it’s too late.
I think Facebook’s purchase of WhatsApp last month was the first nail in the coffin for the telecom and cable companies. Everything in the realm of communication and accessing information has been transitioning to the internet – VOIP, video chat, messaging, reading news, sharing just about anything, streaming TV and movies, etc. We’ve been able to do a lot of these for a while but I now feel like it’s all coming together and becoming available with super ease. And the best part is that everything is either free or dirt cheap (other than the cost of internet).
We’ve gone from paying extra for long distance calls to companies begging you to accept their “triple play” package because no one even wants home phone anymore. Pretty soon I think we’ll all be using the “single play” of just internet. Just think about every service/app you use on your smartphone – they’re all internet driven. I personally have been considering dropping our cable. TV shows are put online the very next day, sports can be watched with apps or online, and movies can be rented with services like Netflix. All you need is a Smart TV with an internet connection, a smartphone, tablet or laptop.
The telecom and cable companies have been very slow to adapt and in the world of business that means you’re losing. I’m sure they’ll still be around because they provide internet and cell coverage, but I see them as being stuck between a rock and a hard place. The cost of these services are going to drop dramatically (they already have been) as competition from the internet pulls people away. I basically see their sources of revenue being cut in half – that’s just what technology does over time. Another sign that an industry is struggling is consolidation so we’ll consider Comcast’s proposed deal to buy Time Warner last month for $45 billion as exhibit A.
Considering they’re fighting an uphill battle, I’m cutting the remaining positions (which fortunately was just AT&T in income portfolios for the dividend). I think these companies are the next wave of stocks to go nowhere for a decade. Think: MCI Worldcom, Microsoft, Intel, Motorola, Hewlett Packard, Dell, etc.
Maybe AT&T is trading like death because it’s slowly dying…?
AT&T (black line) vs. S&P 500 (blue line) – 1 year
I hope everyone has a great weekend!
-Nick
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