What a horrific Thursday of trading that was, with the S&P 500 suffering one of its worst single-day declines in quite a while. Indeed, it’s a terrible way to kick off the month of November. But, at the same time, it’s hard to argue against markets being overdue for a painful correction, especially given the froth surrounding certain corners of tech and the hefty multiple commanded after a glorious rally.
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BCE stock is finally having a moment
As just about everything fell into the red, there was one name that was in the green in a big-time way. Enter shares of BCE (TSX: BCE), which gained more than 4.5% on a day that saw the S&P 500 implode by a similar amount. After all the pain that the telecom titan has been through in recent years, such a day was a long time coming.
What helped the telecom juggernaut shine on a day that saw investors hit the panic button like in the days of the COVID stock market crash? BCE clocked in some very promising results, but there is a bigger reason that shares of BCE were able to buck the trend on a day that saw tech getting wrecked massively: shares were already dirt-cheap at 4.5 times trailing price-to-earnings (P/E).
With a 6% dividend yield, investors would need to put $25,000 on the name to land $1,500 per year in dividend income. In my view, that’s just too much to put down all in one go. Instead, taking fifth positions every quarter could make more sense as investors look to average into a full position by buying $5,000 (or maybe less) at a time.
Are more big up days coming for those dirt-cheap BCE shares?
Indeed, it’s days like Thursday that are sure to put a big smile on the faces of BCE shareholders. But the big question moving forward is whether we can expect more of the same or if Thursday’s bounce was just one of those rare post-earnings reactions.
In my opinion, BCE stock looks like a deep-value gem that more investors should strive to own as the masses throw in the towel on tech. As the picks-and-shovels plays retreat, I do see more of the gains moving towards the non-tech names that are getting AI skin in the game. Indeed, BCE is a name that stands to win big as AI infrastructure looks to keep moving ahead in Canada.
With Democrats sweeping in the U.S. midterm elections, it looks like the AI data centre plans could grind to a bit of a slowdown.
Just how many firms will look north for their data centre needs?
That’s the big question. Whether it’s Canada’s chillier climate or differences in policy, I do think there’s ample opportunity for firms like BCE, a telecom that looked quite good with its neocloud-like hat on this Thursday.
Bottom line for income investors
In any case, BCE’s better-than-feared results might act as fuel for a relief rally that’s now years in the making. Of course, there’s still a lot of work to be done, especially on the debt repayment side. As BCE looks to pour capital into promising businesses that could help jolt growth (think the U.S. fibre business and AI data centres), I do think many investors might be underestimating the comeback potential.
With higher rates likely priced in and a decent quarterly showing to build off of, I’d not be afraid to start nibbling, especially since BCE seems to be more likely to move under its own power, with less influence from broader markets.
