Monday, 21 November 2016

Vodafone (VOD) ... time to turn on a dime?

Monday 21st November 2016

Apropos of just looking at its share price chart (see what I mean below), I noticed that Vodafone (VOD LN, mkt cap £54Bn) has a habit of turning on a dime. Valuation wise, this company has always been something of a mystery to me. Its P/E is not for the faint-hearted, while the EV/EBITDA is not as scary, and consensus forecasts would have it offer an attractive - albeit not well covered - income yield. 

Valuation aside, I notice that in the last five or so occasions where it has approached oversold and the 200p/shr level, it's swiftly turned around and rallied around 10% over the course of the following month. It's currently at 203p/shr and at its most oversold for over a year. Whether this means it will repeat history I do not know. However, I saw January 2017 225p calls, providing 60 days to expiration, at 0.75 pence per lot. This seemed to me to be an attractive price to pay in the light of its historical performance. So in a modest size, I bought them.    

Vodafone share price since Sep 2015
Source: Bloomberg
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