The Market Keeps Going Higher

It seems that lately each time I turn on the business news I hear about how the markets are setting new records time and time again. It puts pressure on anyone sitting with a large cash balance to want to put their money to work in order to chase the incredible capital appreciation that just keeps rolling. Analysts routinely revise their price targets higher on stocks and the frenzy around the stock market rages.

Given the nature of this rising market, what are investors to do?
One thing that I always try to remember when hysteria abounds is that the same analysts who raise their price targets and who plead their case as to how high the market can go are the same analysts who will be arguing about the bottom when (yes, when) things turn around. No market rises in perpetuity without a slowdown at some point and certainly not a market that is being fuelled with liquidity from central bank policies.

The most money I ever invested in a single year was done in 2009 when the market was low and optimism among stock market “gurus” was hard to come by. I held faith that the companies behind the market would remain strong and build market share in a difficult environment. I looked to the continued dividend increases and solid earnings power of the strongest companies in the world such as Coca-Cola (NYSE: KO) and Wal-Mart (NYSE: WMT) as reassurance that my money was best invested than held on the sidelines.

Now, years later, I feel markets have pushed too high too fast and I do not trust the levels the market is at. I am hesitant to commit serious amounts of money in a market that is propped up by money printing. If the global economy was truly healthy, what would be the need for added stimulus?

Still, I am content knowing that I am participating in the rise of the market on the basis of money already invested at prices that offer me a margin of safety if things do turn back. My companies continue to churn off cash flow and have each become stronger than when I first bought them at lower prices. This allows me the patience to wait for better prices in the market today. Further, if my companies did see a tumble in their stock prices, I could simply add to them with new cash as their fundamentals continue improving.

If I had no position in the market at this point in time, I would likely consider building some small starter positions to get some skin in the game, but I am averse at this point to jumping into the water completely by buying heavily.

My stance on the market will develop over time as well. For instance, if the stock market were to stagnate, I may add some funds as valuations improve. I always remember that as long as my time horizon is for the long-term, the key is to own terrific businesses and continue building on that foundation.

Full Disclosure: Long KO.

Twitter IPO

As most everyone has heard by now, the social networking site Twitter (NYSE: TWTR) went public this past Thursday, November 7, 2013.

 What does this mean for investors?

If you like using Twitter, buying its stock allows the opportunity to have a share in the company and in its fortunes going forward. By the end of trading on Thursday, Twitter had been valued at roughly $31.7 billion by investors.

Twitter soared from an opening price of $26 into the $40s instantly and has been deemed a very successful IPO offering. That said, smaller retail investors were not able to get in on the IPO and were led to make their purchases on the open market. From its close on Thursday the company fell 7.24% in Friday trading as some investors took money off the table.

Given its massive worldwide usage, there is no doubt that Twitter has outstanding reach with consumers and has found its way into the households of everyday citizens. With over five hundred million tweets per day, there is a lot of content for the company to look at turning into dollar signs. The question over time will be how the company can continue to monetize itself and build on its ad-revenue to generate earnings.

I find it difficult to accept a $30 billion price tag on a company that is not generating profits. What an investor has to accept if they purchase Twitter is that they are buying the hope of future profits and gains while accepting the risk that Twitter may never realize this. There is substantial execution risk in that management may not be able to bring their vision of the company to fruition. Companies in such a situation are subject to extreme volatility in their share prices. For instance, should Twitter miss analyst estimates each time they announce their earnings reports, investors should be aware that they may be subject to serious downside on their stake in the company.

 Competition...

Twitter faces competition from many other social media companies which all vie for advertising dollars and for the eyeballs of users globally. Facebook (NASDAQ: FB), LinkedIn (NYSE: LNKD), and other big-hitters are all working to carve out their own space within the online arena. Over time, I find it likely that users will become overburdened (if they are not already) and social networking sites will get thinned out as people become more selective with their time and choosy as to where they decide to build their online presence.

The bottom line...

I will not be buying Twitter any time soon. While Twitter may offer upside in the form of capital gains, a company that is not kicking off profits does not pay a dividend (and certainly not a stable one), and as such it falls outside of my investment criteria.

The company poses an unnecessary level of risk for my portfolio and does not meet my minimum requirements for investment. While I do operate on Twitter as @DividendTitan, I will pass on owning its shares.

Full Disclosure: No position in any stock mentioned and no intention to initiate one within the next 72 hours.

Is Apple a Dividend Growth Stock?

Steve Jobs had a simple and powerful vision for his company, Apple (NASDAQ: AAPL). He wanted to produce user-friendly, top-of-the-line products with a distinct feel and texture to them that would excite consumers and keep them coming back for more. In building his brand, Jobs was careful to differentiate what he offered from the products of his competitors. When someone is using an Apple product, they know it.

Over the past decade we have had the opportunity to watch Apple’s share price climb from around ten dollars per share to heights of over seven hundred. Since Jobs’ passing, Apple has gained recognition by brand consulting firm Interbrand as the number one brand in the world; dethroning long-time leader Coca-Cola (NYSE: KO) in the process.

Jobs’ successor, Tim Cook, has been guiding Apple since 2011 and has yet to launch his defining product. The world awaits and speculates as to just what the next major driver for Apple’s growth will be. The “Apple TV” is widely regarded as the next product that will expand Apple’s ecosystem. Using the Cloud, the Apple TV could potentially send Apple’s value soaring as it would be something different than just an upgraded operating system on a new version of the iPhone. It would once again be something for people to get excited about with Apple.

I view Apple as one of the most interesting stories in the stock market universe. When Apple initiated its dividend in 2012, many observers felt this was a statement on the part of the company that it felt it could no longer grow as effectively as it has in the past. Initiating a dividend is often viewed as a company throwing up its hands and accepting that the skyrocketing growth of the past has come to an end. At the same time, with Apple, there was the issue of +$100 billion in cash sitting and waiting to be put to work. Investors were growing impatient while Apple lined its coffers.

Given that Apple has only recently initiated a dividend policy, it is difficult to determine whether that policy will be maintained and whether the dividend will be increased in significant fashion going forward. I typically will not pay much credence to a company that has not at least demonstrated five to ten years of solid dividend growth, and this is one of the reasons that leaves me without any shares of Apple at this juncture. Currently sitting just below five hundred dollars per share, Apple is yielding in the 2.5% range, which is decent, but not that great of a lure for me at this point.

I do not consider Apple a dividend growth stock to buy as an anchor for a portfolio. Apple’s products and continued business rely on people purchasing more of their products going forward. Apple relies on a “cool factor” for public approval. Apple depends on consumers to continue shelling out hundreds of dollars for products that – for the most part – they “want” but do not necessarily “need”. Without a basic necessity for people to purchase the products, I can conceivably envision Apple at some point in the future not being able to maintain a dividend growth trajectory despite their rock solid financial position at this point in time.

While I have no crystal ball, I am wary of investing in companies where I have difficulty seeing their future ten to fifteen years out. I have very little idea of who will be the technology leader in 2030. As such, I would be uncomfortable putting my investment dollars to work not just in Apple, but in this industry as a whole.

Full Disclosure: Long KO. No position in AAPL and no intention to initiate one within the next 72 hours.

Rogers To Offer Its Own Credit Card

Rogers Communications Inc. (TSX: RCI.B) has announced that it has been granted approval to begin offering its own credit card by the Office of the Superintendent of Financial Institutions. Rogers hopes to begin offering this credit card to consumers within the next year.

From its own website, Rogers has announced that the final step in the application process has been completed and that those who use this credit card will earn themselves rewards points. Since earning points with Rogers will strengthen the link between the company and its customers, this may be viewed as a move to encourage customer retention.

In 2011, I first wrote about Rogers entering financial services and at the time I pointed out the risk that Rogers would stray from its core offering into uncharted waters. Time will tell whether Rogers is able to navigate the financial landscape profitably and avoid attracting only high-risk customers to its credit products.

I have been viewing the reaction of individuals on the various media postings of this announcement. The public perception and most highly “liked” comments are those that view this move by Rogers as “one more opportunity to rip off consumers”. I find this interesting given the fact that this credit offering is something that a person would need to apply for in order to opt in to it. While I cannot see myself getting one of these credit cards, I think that “more choice” is better for consumers – to each their own, is my view.

Should the addition of a credit card to Rogers’ portfolio prove successful, this will be one more stream of earnings to bolster dividend increases down the road for shareholders. I will be watching closely over the next few years to see how many customers Rogers is able to add and how accretive this will be to earnings. Competition from the already strong Canadian banking sector and other retailers will make this a challenging proposition.

The key to everything will be building a base of quality customers on a large enough scale to make this worthwhile. If this succeeds, I will look for similar moves from Bell Canada (TSX: BCE) and Telus (TSX: T) as well.

Full disclosure: Long BCE. No position in RCI.B or T and no intention to initiate one within the next 72 hours.

Separation Anxiety

I am often asked what I like best about dividends. I will detail my position here.
In the investing world, there are basically two ways to make money:
a) The first and most popular way is to buy something when it is cheap and sell it at a higher price later (buy low, sell high). This is the method of trying to achieve capital gains through well timed purchases and sales. It is akin to killing off your cattle to sell their beef, or to cut down your trees to sell their lumber.
b) The second way is to achieve cash flow through purchasing productive assets. This can be done in the same way that a dairy farmer milks his cows perpetually to simply sell the milk, or likewise the owner of an apple orchard who collects and sells the apples from his growing apple trees rather than cutting them down for their lumber. Dividends live here.

So, it becomes a matter of Capital Gains vs. Cash Flow (Dividends) – though over time an investor is likely to experience both.

When you own a company whose future prospects you believe in, it is in your interest to want to continue to hold those shares. Wealth builders through history have been “accumulators”. The way to achieve lasting financial strength is to continue to accumulate productive assets over time. This leads me to my first point.
1) Separation anxiety; aligning your interests with your company.
The problem with trying to achieve capital gains with a company that does not pay a dividend is that some day you will need to sell your position in the company to get any benefit from having owned the shares. I view myself very much as a stakeholder in the companies I own. I believe in their future wellbeing. As such, when I buy a company, I hope to never have to sell it. When I am paid my regular dividend, I believe that my interests and the company’s interests are aligned. We are able to grow together over time.
Selling my shares would mean I would have to end my investing relationship with the company (or lessen it, at least, if I sold only some of my shares). With every purchase I make, I genuinely hope that those shares will be in my final Will some day. Though I will indeed sell my shares if the story changes, that is never my intention at the time of purchase.

Over the very long term, companies typically trade in what might be regarded as a fair range as to their value. In the short run, however, the stock market is incredibly volatile and is traded emotionally. So, my second point:
2) Dividends are more stable than share prices.
Dividends are determined by a company’s fundamentals and future prospects while the stock price may be influenced by any number of factors – many of which may have no specific bearing on the particular company itself. Chasing capital gains can be a tricky business as even if you identify that a stock is overvalued, that does not mean it will go down any time soon. Investors trying to buy low and sell high often suffer from the long periods of time that they need to wait to be “proven right” by the market.
The passive dividend investor who is satisfied with the stocks they own is able to sit back and let the tidal wave of the stock market ebb and flow while they collect their money.

From studying businesses over many years, I have seen companies go on countless acquisition sprees to expand their empires. They often reach far beyond their “circle of competence” (as Warren Buffett would say) and try to operate businesses that are distinct from what they currently do. This can be a destroyer of shareholder wealth and brings me to the final reason I will share today that I love dividends:
3) Restraint on management.
Dividends impose restraint on management. Once a company has initiated a dividend policy and increased their payout for a decade or longer, it becomes a part of the culture. It becomes one of the last things that a company would want to tamper with. Knowing that a dividend must be paid and increased annually, management becomes less prone to going on wild expansion ventures and tends to be more careful with investor dollars.
Even with the slew of recall issues Johnson and Johnson (NYSE: JNJ) has had over the past few years, I doubt whether they even considered touching their dividend payout –even behind closed doors.

So, for investors like me who suffer from “separation anxiety”, the best plan of action is to own quality, dividend growth stocks for the long term and collect an ever-increasing cash flow.

Full Disclosure: Long JNJ

Warren Buffett's Letter to Shareholders, 2012

Warren Buffett releases a Letter to Shareholders to those with a stake in Berkshire Hathaway (NYSE: BRK.B) each year. Though this year’s letter was released several months ago, I have been reading through it again recently and I will provide some commentary on sections that have caught my eye.

Outperformance...
Buffett notes at the outset of the letter that Berkshire Hathaway has outperformed the S&P 500 Index in every five-year period since 1965 when he assumed control of the company (Page 3). At the same time, Berkshire Hathaway tends to underperform in a rising market. As such, Buffett indicates that if the markets continue their unprecedented rise that they have been enjoying since the bottoms of 2009, the S&P 500 may actually achieve a five-year outperformance against him.

One thing I enjoy most about Buffett is that he sets a target (such as outperforming the S&P 500 Index) and sticks to it. Year over year, his tune remains much the same and we never need worry about being surprised by him shifting his alleged goals to make himself appear in a better light. This yardstick that he uses is a clear indicator of his job as a manager. In his view, if he cannot beat a simple benchmark index, then the average investor would be no better served by trusting him with their money than simply buying the index.

Due to Berkshire’s financial strength, I would prefer to have a position in it rather than the broader S&P 500 Index. To me, it is how an investor performs in a lagging or declining market that counts most. The comfort of knowing that my wealth will not be wiped out with one catastrophic event is worth more to me than trying to outpace everyone else during a “good” market or rising tide.

Major Acquisitions...
This year, Berkshire assumed a fifty percent stake in a holding company that now owns all of Heinz, which is best known for its ketchup (Page 4). While Berkshire certainly “paid up” for this acquisition, Heinz is a stable business and this meshes perfectly with Buffett’s overall strategy of being willing to pay a fair price for a solid, well-positioned brand.

America’s Future...
Time was spent in this year’s letter with the hopeful note of Buffett offering his view that American business will continue to do well long into the future. Uncertainty will always be there to rear its head at investors, but that is what makes the market. Different parties taking different sides is what moves the ticker, but Buffett is willing to continue to bet on business fundamentals and the American dream of future prosperity. I tend to agree with him.

Railroads...
Buffett discusses the economy of railroads at length, and this section is well worth reading in its entirety. One statistic that truly stands out is that Burlington Northern Santa Fe (owned by Berkshire) actually moves a ton of freight around 500 miles on one gallon of fuel while “trucks taking on the same job guzzle about four times as much fuel” (Page 10). That is certainly efficient both in terms of dollars on Berkshire’s end and also a big plus on the environmental side of things.

Further, once tracks are down, it is very unlikely for new entrants to enter the market and compete. So, once a railroad has their line set, they do not need to fear constant competition eroding their ability to sustain profitability (they have a moat, as Buffett would say).

The railroad business offers one extra advantage to Berkshire Hathaway as well; a place to invest its free cash flow. Berkshire has many businesses that kick off loads of excess cash. Owning a capital-intensive railroad offers the perfect outlet for some of that cash flow.

Changing of the guard...
Berkshire’s stock portfolio, which notably has large stakes in The Coca-Cola Company (NYSE: KO) and the American Express Company (NYSE: AXP), has always been managed by Buffett. Given that Buffett is getting older, Berkshire has taken steps to assure the company will continue into the future on a well-guided path. As such, Todd Combs and Ted Weschler now have been given the reins to make investments of their own, on behalf of Berkshire (Page 15). This is a relatively newer development for Berkshire and one to watch closely in order to discern the money management style of these two investors.

Dividends...
This year’s letter included a section explicitly on dividends and a discussion as to why Berkshire does not pay one. Buffett discusses each of the intelligent uses of capital that a company may employ, including share repurchases, reinvesting in businesses already owned, purchasing businesses outside of their current industries, as well as paying out a dividend.

Buffett ultimately concludes that shareholders of Berkshire are currently best served by the company retaining all earnings to build future growth as they have in the past (Pages 19-21). That said, he leaves the door open to the possibility of future dividends should those within Berkshire believe it to be in the best interest of shareholders at some point in time. Though I am generally largely in favor of dividends being paid, I am willing to grant Buffett the benefit of the doubt given his extensive and successful track record. Without such a dividend, however, I have not yet initiated any position Berkshire – though it is a possibility down the road.

You can find all of these Letters to Shareholders at www.BerkshireHathaway.com. Please read them.

Full Disclosure: Long KO. No position in BRK.B or AXP and no intention to initiate one within the next 72 hours.

Adding To My Bell Canada Position

Bell Canada (BCE) is a Canadian telecommunications company. It is the largest of the “Big Three” comprising Bell, Telus (T), and Rogers (RCI.B).

Already having a sizeable allocation to Bell within my portfolio, I decided recently to add to my position with additional funds as opposed to only the reinvested dividends the company sends me. My current purchase will add roughly 25% more shares to my Bell position.

So why did I do it?
Bell is currently trading at around $42 per share and yields just over 5.5% at the moment in the form of a quarterly dividend. In the current environment, I am quite content to acquire more shares of a very solid performer in Bell with future growth prospects that I believe to be appealing, at a price that is reasonable.

Over time, I expect Bell to continue increasing its dividend at least once per year. With a starting yield of 5.5% and reinvested dividends, even modest annual dividend growth in the 4-7% range will produce a sizeable future cash flow fifteen or twenty years down the road.

In addition, the money I used to increase my position came from dividends that were accumulating in my account already from dividends from other companies. This means that I did not need to add additional funds to my brokerage account to pay for these shares. In effect, this allowed me to “play with the house’s money” while increasing my stake in a quality enterprise.

How did I do it?
Bell had been trading just slightly above the price at which I wanted to pay for it over a period of a few weeks. I wanted a starting yield of 5.5% for my new shares, so I simply set a limit price that would make this possible and waited. I set the expiration on the order a month out, after which time I would re-evaluate if Bell shares never dropped below my target. If the order expired, I would have missed out on acquiring more shares (or I could have just opened a new contract at that time). This was not a real concern of mine, as the stock market tends to gyrate significantly enough to give the patient investor the opportunity to shop at a bargain.

Having now added to my position in Bell, I do not foresee any future additions in this sector for some time. I will allow my dividends to continue reinvesting themselves to passively grow my stake, but new funds will not be provided.

Risks to my assessment?
Verzion (NYSE: VZ), the behemoth telecom from the U.S. has been eyeing the Canadian marketplace. It has expressed interest in purchasing Wind Mobile and Mobilicity here in Canada. Assuming it was able to dip its fingers into Canada (amid protests from Canada’s Big Three), this would be viewed as a serious threat to the current establishment. If Verizon comes to Canada, I would expect each of the Big Three companies to take a hit on the stock market as analysts revise their estimates downward in light of a fourth large competitor in the marketplace.

Even with the knowledge that Verizon may attempt to invade Canada, I still feel comfortable investing in Bell. The thing with the future is that it is always uncertainty. The investor who waits to have all the facts about what is going to happen will live forever on the sidelines. Bell is a solid company now and still would be if Verizon arrives on the North side of the border. If Verizon decides to stay at home, then that will only further strengthen the bet I have made on BCE.

Full Disclosure: Long BCE

Detroit City Bankruptcy

Just under one week has passed since the City of Detroit filed for Chapter 9 Bankruptcy on July 18, 2013, making it the largest municipal bankruptcy in the history of the United States with an estimated $17-$20 billion debt burden. After taking some time to let the dust settle, let us take stock of this landmark event.

Detroit’s Emergency Manager, Kevyn Orr, was given the task in March of this year to manage the city’s finances. Since then he has commented on the fact that Detroit has been operating on an insolvent cash flow basis (more going out than coming in) and has recommended this drastic action of bankruptcy as a last resort.

Before looking at the implications that may arise, it will be prudent to consider some of the facts. This bankruptcy, though large in scale, does not come as a surprise. Detroit has been suffering greatly not just through the financial crisis which shook the foundations of “Motor City’s” automotive industry, but also because its population base of 1.8 million in 1950 has shrunk to somewhere in the 700,000 range. What this means is the base of people that may be taxed in order to raise revenue for the city is greatly diminished and local government is not able to turn the faucet on to easily or quickly solve the problem.

In addition to the population whittling away considerably, there are many other unresolved issues in the city. Detroit has an exorbitant amount of vacant buildings in the ballpark of 70,000-80,000. Basic functions within the city have suffered as well with an estimated 40% of the streetlights being out. Issues such as these are serious fundamental problems that are only likely to be exacerbated as Detroit enters bankruptcy proceedings.

What is at stake?
Everyone with a financial stake in the city of Detroit can be expected to be pursuing their claims. I have heard estimates of pensioners potentially facing cuts of up to 90%, though I would suspect that number to be far too drastic. Nevertheless, with the city’s future so incredibly uncertain, more and more of the residents with the means to do so can reasonably be expected to pack up and move on. At the same time, less people will be encouraged to make the move to call Detroit home.

Bondholders and other investors may find the risk/reward proposition unfitting and take their dollars elsewhere as Detroit suffers the fallout of bankruptcy. Without new money flowing in, the city will continue to decay.

Will we see a bailout?
I will be watching most closely at any actions the federal government takes to bolster Detroit. On the face of it, it may appear to be a straightforward solution to this problem, but it can be a slippery slope. If Detroit gets bailed out by the government with an influx of money, what would stop other struggling cities or states from likewise filing bankruptcy and asking for a handout? Further, what if one lump sum is not enough? Supposing the federal government clears Detroit’s debts, this still would not necessarily address the cash flow situation and the city may once again find itself in need of further handouts until this underlying issue is addressed. It can indeed be a bottomless pit. All the same, if the bailout does get fully approved by the courts and things move forward, I do expect a bailout on some level to take place. Governments cannot seem to help themselves but to print money as a short-term fix to their problems at the cost of their constituents and future generations alike.

One suggestion to aid matters has been for the city to put its art collection up for sale. At an estimated $15 billion, this would all but clear Detroit’s debts while leaving a void in the cultural soul of the city. Additionally, these art works are tourist attractions which generate revenue. A one-time sale, again, would not solve the cities structural issues, but rather buy time.

The bankruptcy of a city is, in my view, a more interesting proposition than that of a corporation (which can be sold off in pieces and cease to exist) or a person (creditors take what they can and the individual is left to rebuild from ground zero). A city must, in the midst of trying to regain its financial footing, continue its day-to-day operations such as hauling waste, providing public transport, and so on.

Domino effects also exist in a municipal bankruptcy. For instance, if pensioners (many of whom likely still reside in Detroit) have their incomes cut, they will have less disposable income to spend within the city and businesses will feel the ripples as their sales decrease, leading to further layoffs which force people to apply for social assistance, deepening the problem.

A call to action...
If anything, this case may serve as yet another example to demonstrate that individuals absolutely must take their financial futures into their own hands. When we have cities going bankrupt and once-rock-solid government pension funds being called into question, everyone should have their eyes wide open to what is happening. The world is reaching a critical mass with its debt load and the troubling part is that there are no signs of slowing. People continue to use their credit cards as ATMs with no thought to the cost. Governments are facing the stark reality that they may not be able to cash the cheques they have written in the past as demographically, aging populations pose a serious threat to social assistance and systemically important pension plans.

Bell Receives CRTC Approval on Takeover of Astral Media

It has been announced today that Bell (TSX: BCE) has received approval on their takeover offer of Astral Media by the CRTC (Canadian Radio-television and Telecommunications Commission). The CRTC is, ultimately, the watchdog for the Canadian media industry. It is responsible for ensuring fairness and competition among the various media participants including, among others, big name players such as Rogers (TSX: RCI.B) and Cogeco (TSX: CCA).

As part of this takeover, Bell would be acquiring some of the television channels and radio networks currently owned by Astral Media. This deal, for a ballpark sum of $3 billion, would move Bell’s share of the French-language television market to 22.6%, while enjoying a 35.8% share of the English-language market, as per the CRTC (http://crtc.gc.ca/eng/com100/2013/r130627.htm). The Commission assures Canadians that this will still allow for a competitive landscape and not impede the interests of consumers (the little ones, like you and me).

If there is one thing we can learn by looking through the history of large industry consolidations and/or mergers, however, we find that they do not often result in a sweetened deal for the little guy. Of course, the CRTC approval does include some conditions which will restrict any monopolizing agendas by Bell and, fortunately, require them to also invest in Canadian-specific content and youth initiatives.

Once the dust settles on this deal and Bell has integrated Astral, I expect this to be a value-adding proposition. Gaining such a considerable share of the market will allow Bell to have greater control over their content and essentially broaden their media asset portfolio.

What does all of this mean to the astute dividend investor? A more secure income stream as Bell will have more assets to rely on to smooth revenues and assist in growth. It will also lessen Bell’s exposure to wireless where it already competes heavily with Rogers and Telus (TSX: T). My hope as an investor is that this will be accretive to Bell’s earnings from the get-go and spur further dividend growth down the line.

I am encouraged by Bell’s ability to put large sums of cash to work in this environment where companies have been sitting on the sidelines waiting for more political and economic certainty. In an age where companies often perform takeovers in unrelated industries for the sake of growth itself, I believe this deal actually makes a lot of sense.

Full Disclosure: Long BCE.