When I took an 8% gain in VZ, I left some money on the table. It has taken time for me to learn the lesson fellow TheStreet contributor Robert Weinstein taught me: If you're not leaving money on the table, you're not making money. Plus, prior to getting into the stock in May, I swing traded some profits in VZ here and there via call options.
Back in the day, I would have let the stock position ride, seeking a double-digit gain into earnings. Given the negative impact of Verizon's more-than-serviceable second-quarter earnings report on the stock, I'm glad I bailed. Revenue at Verizon grew 3.7% year-over-year. EPS popped by more than 12%. Smartphone adoption continues at an impressive clip, driving data usage.
Wireless margins look good and the company expects them to continue to improve in the second half of the year. FIOS continues to gain traction.However, revenue in Verizon's enterprise business did not meet expectations. Analysts chalked up the nearly 3% drop in the stock on Thursday to that. I'm not buying it. Other, bigger picture reasons should trigger caution in relation to not only Verizon, but AT&T (T). VZ data by YCharts
First, allow me to disclaim. As a relatively "safe" core holding, I have no problem with VZ or T. Both pay nice dividends that will not go anywhere anytime soon, if ever. And they run solid businesses with exciting growth prospects. It's just that relative to other dividend payers, particularly in the media and telecommunications space, growth at these two companies could lag. Simply put, I would not undertake a long-term, buy-and-hold position in either stock in search of growth and significant returns going forward. I would entertain core long positions in VZ and T, however, on the basis of relative stability in the two names that makes them more attractive places to park cash than an online savings account yielding 0.80%. With that in mind, regulatory issues in the U.S. will not allow Verizon or AT&T -- at least for the foreseeable future -- to reach the pinnacle of their growth potential. I use a broad definition of potential -- classifying it as what is possible, all else held constant.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV