<Bt-4z69>Verizon will need to spend to upgrade its technology
A: <$>This attractive, aggressive telecommunications giant faces ongoing industry challenges.
The latest attempt to snare its customers is archrival AT&T Inc.'s offering of the much-publicised Apple Inc. iPhone. Verizon chairman and chief executive Ivan Seidenberg insists that this new product will not alter his own firm's steady game plan.
Verizon (VZ) boasts a strong balance sheet, and its shares are up 13 percent this year after gaining 24 percent last year. Nonetheless, all of its businesses require ongoing spending to upgrade and expand technology.
Verizon Wireless, a 55 percent-owned joint venture with Vodafone Group PLC, added 1.7 million new customers during the first quarter, outpacing AT&T's gains. It generates more revenue than any other US wireless carrier and has 60.7 million subscribers. Its revenues increased 17 percent in the quarter. A concern for Verizon is the decline of its traditional landline business, which serves about 30 percent of the US and provides considerable cash flow. The firm is spending $18 billion on upgrading its fibre line network, but the trends working against landlines won't disappear.
Verizon has rapidly been adding new FiOS (fibre-optic service) TV and high-speed internet connections. FiOS sends data via pulses of light, the fastest method available, which makes it a formidable foe for both cable and internet service providers.
The consensus analyst rating of Verizon shares is midway between "buy" and "hold," according to Thomson Financial. That consists of six "strong buys," 11 "buys," 18 "holds" and one "sell".
Earnings in the first quarter declined 8 percent due to costs of the acquisition of MCI Inc. and the sale of several assets.
Verizon shareholders recently approved by a close 50.18 percent vote a non-binding proposal to give them an advisory vote on executive compensation, one of the first measures to win a majority at a large company. The firm's board will review the result and consider what actions to take.
The initiative argued that Seidenberg's compensation has been excessive; the company said such a vote is unnecessary because shareholders have other ways to communicate any concerns to directors. Seidenberg was awarded $21.3 million in salary, stock awards, incentive plans and other compensation in 2006, according to the firm's proxy statement.
Earnings are expected to decline 7 percent this year, versus 14 percent predicted for the domestic telecommunications services industry. Next year's projected 11 percent increase compares with 19 percent forecast industry-wide. The five-year annualised return is expected to be 6 percent versus 8 percent for its peers. <$>I'm not exactly sure what to make of Mutual Shares Fund. Is it a worthwhile investment? — V.C., via the internet.
A: This unusual fund heads in three different directions at once in order to nab the best available opportunities.
It has inexpensive value stock investments, it is involved in arbitrage and merger situations, and it buys distressed debt. The portions of the portfolio assigned to each of these categories vary according to prevalent investment trends.
Though disciplined, it doesn't fit neatly into investment style boxes. It will also endure dry spells due to its desire to capitalise on trends.
The $25.8 billion Mutual Shares Fund "A" (TESIX) is up 25 percent over the past 12 months to rank in the top one-third of value funds. Its three-year annualised return of 16 percent places it in the upper one-fifth of its peers.
"An investor in this fund must have a long-term investment horizon and be tolerant of its flexible portfolio and the fact it may buy smaller-cap stocks at any point," said Bridget Hughes, analyst with Morningstar Inc. in Chicago. "If you're looking for a fund that's large-cap stocks all the time, this isn't it."
Whether it could represent a core holding depends on what investments an investor already holds, she added.
Portfolio manager Peter Langerman and this flagship fund represent a long Mutual Series value tradition of taking on the management of companies to improve shareholder value and protect interests of fund holders. While this fund's long-term results have been good, it can sometimes take a while for the downtrodden securities it holds to revive.
A: <$>When you hold a physical certificate, the company knows how to reach you and will send company reports and other information directly to you. This may also make it easier to pledge securities as collateral for a loan.
The downside is that you must get the certificate to your broker or the firm's transfer agent to sell it, making a quick sale more difficult. In addition, if you lose your certificate you could be charged a fee for a replacement.
The popular alternative is to have your security registered in "street name" and held in your account at your broker. You won't receive a certificate, but you will get an account statement that lists your securities; dividend and interest payments will be credited to your account; and you'll receive mailings such as annual reports and proxies.
"The biggest reason for keeping a stock in street name is that when someone passes away it is so much easier for heirs to get the assets and proceed with settling the estate," said David Bendix, certified financial planner and certified public accountant with Bendix Financial Group in Garden City, New York. "Too often certificates are held somewhere in a home or deposit box that the heirs don't know about."
(Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, P.O. Box 874702, Tempe, Ariz. 85287-4702, or by e-mail at andrewinv9>@aol.com.)
