Q: I have held BCE for about 3 years now. Cost of $20K and it's worth $13.5K now. Down $6,500... 34%. Wondering if it makes sense to sell half of my BCE (about $7K) and buy $7K worth of Telus to try and leverage any potential gains across both rather than just one. I guess, wondering if splitting my investment across two of these telco's makes sense ... and a brief reason as to why (or why not) I should do it.
5i Research Answer:
Diversification can of course reduce risk, but we are always cautious of making switches in order to 'make up' losses. However, in this case, we have Telus outperforming BCE, with better momentum, and a recent dividend hike. BCE, meanwhile, is still lagging, and has cut its dividend by 50%. Telus still looks better overall. We would be fine with the proposed plan for most investors, and if tax losses can be utilized on BCE then we think it makes even more sense. Both have challenges, but T has managed these better and the growth outlook is higher. It is more expensive on valuation, but we are OK with that.