Shaw Communications Inc. (TSX:SJR.B) Is a Discounted Long-Term Defensive Play

Shaw Comunications Inc. (TSX:SJR.B)(NYSE:SJR) is currently trading at a discount despite the impressive opporutnity that the company holds over the long-term.

| More on:

There are plenty of lessons to take from the market fluctuations of the past week. While the markets did see some of their worst days in years, there are still plenty of opportunities to invest in some great long-term stocks right now, such as Shaw Communications (TSX:SJR.B)(NYSE:SJR).

Along with nearly every other stock on the market, Shaw dropped as much as 4% last week, but has since erased those gains. Here’s what you should contemplate when considering an investment in Canada’s fourth-biggest telecom.

Why Shaw? 

Shaw is a great investment choice that is perfect for the current climate for a few reasons.

First, the nature of Shaw’s core business is only poised to grow. While consumers are trying to pull away from the traditional telecom services such as Cable TV and wireline phone service, internet connectivity and mobile phone plans are moving away from being luxury or nice-to-have services to necessities of our  modern world.

By way of example, just consider the growing list of devices that our mobile phones are replacing at an accelerating rate. Everything from alarm clocks and notepads to cameras and calendars is now on our mobile devices using data that the telecoms are charging us for.

Incredibly, Shaw didn’t have a wireless network until recently. The company acquired the assets of former carrier Wind a few years ago, divesting its media arm to become a pure-play telecom and pledging to Wind’s former customers that Shaw would continue to offer service at an affordable rate, which was contrary to the higher rates but better coverage than that charged by the Big Three.

The idea is that Shaw can appeal to disgruntled customers of the Big Three in the markets it has coverage in with its preferential pricing and service, while concurrently building out its national network to counter the Big Three on a national basis.

The tactic must have worked because Shaw has already captured more than 5% of the market in a short period of time.

Finally, there’s the network itself to consider. Most investors realize that Shaw is a defensive stock, thanks to that recurring and increasingly necessary business model that will remain intact irrespective of which way the market turns. To capture a small portion of the mobile market, Shaw had to offload its media arm and invest billions on a multi-year plan of infrastructure construction on top of Wind’s prior network, as well as setting a retail model that drew customers in. The chances of another competitor emerging to disrupt the segment further are incredibly unlikely.

Why now?

One interesting point to make a note of is that Shaw’s stock has been edging lower over the course of the past few months. Over the course of the past year, Shaw has retreated over 10%, making it an interesting option for long-term investors seeking a discounted addition to their portfolio. The opportunity also grows further given that Shaw offers an impressive monthly distribution that currently provides a 4.85% yield.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned.

More on Tech Stocks

online shopping
Tech Stocks

Shopify Stock: Can it Stay Above $400?

Shopify (TSX:SHOP)(NYSE:SHOP) stock has sunk over 80% from its peak level. Is there any value to be had by catching…

Read more »

Online shopping
Tech Stocks

Shopify (TSX:SHOP) Stock: Is the Bottom Here Yet?

If you can predict when a stock has fully bottomed out, you can maximize the return potential by locking in…

Read more »

Tech Stocks

2 Cheap Tech Stocks to Buy After Their Impressive Earnings

Given their healthy growth prospects and discounted stock prices, I am bullish on these two tech stocks.

Read more »

value for money
Tech Stocks

3 Tech Stocks Trading for a Significant Discount

These tech stocks have corrected quite a lot, despite the strength in their business, making them attractive long-term bets.

Read more »

Shopping and e-commerce
Tech Stocks

Shopify Stock: What Investors Should Do if it Falls to $300

Shopify (TSX:SHOP)(NYSE:SHOP) stock fell another 10% on Tuesday, as it nears the $300 range. So, what happens if that comes…

Read more »

consider the options
Tech Stocks

Will Enthusiast Gaming Stock Change Course After the Activist Attack?

Last week's cheer in Enthusiast Gaming stock is reversing this week.

Read more »

sale discount best price
Tech Stocks

Tech Selloff: 3 Bargains to Pick Up Now

Thanks to the current slump, you can buy many tech stocks at a discount price or valuation that's usually quite…

Read more »

TSX Today
Tech Stocks

TSX Today: What to Watch for in Stocks on Wednesday, May 25

Apart from bank earnings, TSX investors may want to keep an eye on the FOMC meeting minutes today.

Read more »