Editor’s note: As of 9/20/11 Lucas Krupinski no longer manages a Covestor model
Covestor model manager Lucas Krupinski works full time in the field of trusts and estates. He became more and more interested in investment management, so after a bit of self-directed study he formed a state (Florida) Registered Investment Advisory. He describes his investment approach like this:
I read newspaper articles and reputable finance websites to get ideas. I go through company balance sheets and income statements thoroughly, and if anything catches my interest I make determinations from there.
Krupinski manages Covestor’s Small Cap Fundamentals portfolio which
[s]eeks to generate returns through various methods including holding long term positions, trading around short term positions and seeking exposure to investments that generate current income. Preference given to smaller cap issues, but is not constrained to any set of investments or methodologies.
This is a concentrated portfolio that holds American Capital Agency Corp (Nasdaq: AGNC) and Vodafone Group (Nasdaq: VOD), a position which Krupinski added to on March 29. VOD is a mobile communications company operating across the globe providing a range of communications services, with equity interests in over 30 countries and over 40 partner markets worldwide.
The New York Times recently wrote about VOD’s business in India:
But despite adding tens of millions of customers to become India’s third-largest mobile phone company, Vodafone has found this vaunted high-growth market full of unexpected hazards.
First came a surprise tax bill, estimated at $2.5 billion, that Vodafone is still appealing to the Indian Supreme Court. And a brace of new competitors has squeezed margins so tight that Vodafone last May wrote down the value of its India operations by $3.5 billion.
Most recently, a government corruption scandal over the awarding of additional wireless radio spectrum has delayed the much-needed industry consolidation, making it impossible to predict when Vodafone’s profits will improve.
VOD’s ownership stake in Verizon Wireless (VZ) has recently been in the news following AT&T’s (T) acquisition of T-Mobile. According to David Green of the Hotchkis and Wiley Value Opportunities Fund,
Vodaphone actually owns 45% of Verizon Wireless, a fact that many people don’t know or have overlooked. Verizon Wireless is the dominant wireless carrier now. When AT&T and T-Mobile merge, they will also become very strong. But we do not think it will impinge upon Verizon Wireless’ dominant position in the marketplace.
About a year from now we expect a huge amount of cash flow to start coming out of Verizon Wireless, and that will be paid to Verizon and 45% of that will go to Vodaphone. When that happens, Vodaphone, which already has a nice dividend yield, should be able to raise their dividend yield substantially, and we think the stock will do very well.
The Wall Street Journal recently wrote about the potential upside for VZ from the AT&T, T-Mobile deal:
While Verizon Wireless would clearly become the nation’s second-largest mobile carrier after the deal, industry consolidation that marginalizes low-cost offerings could benefit the company by boosting its power to control pricing. Additionally, Verizon could win customers from a distracted AT&T, which analysts say likely will face tough and prolonged regulatory scrutiny for the merger.
Sources
“For Vodafone in India, a Swift but Bumpy Rise” Heather Timmons. New York Times, 3/27. https://www.nytimes.com/2011/03/28/business/global/28vodafone.html
“Forgotten Wireless Company to Make Out Big” Gregg Greenberg, The Street, 3/30. https://www.thestreet.com/_yahoo/story/11060059/1/forgotten-wireless-company-to-make-out-big.html
“Verizon Could See Upside in AT&T, T-Mobile Deal” Melissa Korn. The Wall Street Journal, 3/21. http://online.wsj.com/article/SB10001424052748703858404576214622654801138.html#ixzz1I8fChx6y
