VIACOM CBS

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RECOMMENDATION: EXTREME BUY and HOLD

DISCLOSURE: Currently I have a position in this stock.

ENTRY POINT: 4/03/20 @ $12.00

SUBSEQUENT: n/a

AVERAGE PRICE: $12

PRICE TARGET: $33.32 (6/01/07 previous pre-crisis high before great recession) - $36.04 (low of 2019)

SOLD: N/A

Use this handy tool to calculate the ROI based on these dates and amounts, and the current price from the table below, or choose your own data points.

Return on Investment (ROI) Calculator

https://www.calculator.net/roi-calculator.html

Why this stock? What's the rationale for it at this time?

As with almost all stocks in March 2020, the prices of nearly every issue mandated that we look at anything that was on sale at multi-year and, in some cases, multi-decade lows, as was the case with Viacom CBS. At $10.10, VIAC has not seen prices this low since Aug 3, 2009! Prior to the great recession of 2008-09, VIAC peaked at $33.32 on 6/01/07 and proceed straight downhill to an all-time low of $3.84 by 3/2/09, a drop of 88% in 9 months!

During the next 6 years of the next bull run, VIAC rose to $67.08 by 02/03/14 for a fantastic return of 1647% for an annualized return of 79%/yr. A $1000 investment would have returned $17,470 in just 6 years.

VIAC started 2020 at $42.09 and similarly lost 76% by the bottom on 3/23/20 at $10.10. If past experience is any indication what might happen again this time as businesses reopen from the Covid19 shutdowns, I am looking at two possible price targets:

  1. $33.32 This price was the closing high on 6/01/07, which was the last time VIAC peaked prior to the massive great recession-induced price collapse. Should it rise to that previous high, the ROI would be a modest 230% from the low of $10.10. Entirely possible in my opinion and was nearly achieved on 6/08/20 at $28.51 prior to pulling back during a horrible week to $22.90 at the time of writing (June 12).
  2. $36.04 This is the lowest price of 2019 marked on Oct 21. Should we see VIAC return to last year's lows, that would amount to a 257% ROI, again quite achievable within 6-12 months.
  3. $53.71 Represents the 52 week high attained on 7/16/19. Although not quite the all time high of nearly $69 in 2014 and 2018, a return to this level, though unlikely, would be a whopping 432% return.

VIAC obviously profited greatly after the post-2008 crisis run during the longest bull run in history of 11 years. In the last 5 years alone, the stock has spent all of its time in the $40-$70 range, up until 9/23/19 when the downtrend began. With the expected resumption of business, advertising, and sporting events, VIAC is sure to see a massive resurgence in its stock price as cash flows begin to return to more normal levels.

At a 4.19% current dividend yield, a low 9.68 PE, and a market cap of $14 Billion, VIAC represents an extremely good valuation in my mind. I was up 138% (12,142% annualized) prior to the recent pullback, but I am still sitting up 90.83% (3524% annualized) after only 2 months.

Lesson Learned

Given these massive gains, I had wisely decided I should put stop losses at $26 to lock in my profits in the event of a correction. When it did start on its ultimate 4-day disastrous 23% drop on June 8, I decided to cancel the stop losses because I didn't want to be taken out early and miss out on future gains as I had earlier in April and May with some other stocks. However, I did not think it would drop as far as sub-$22 on June 11. Stop losses at $26 would have saved me over $4/share in additional lost gains. My greed got the better of me as I could have bought back in at a discount had I been stopped out. I was one day away from liquidating it all but decided to hang on for the long term (unless it drops below $20 again). With a one day reprieve so far on June 12, I am emotionally relieved for now. Volatility will be an issue to contend with as I wait patiently for the above targets to be met.

Going Forward

Unlike the systemic problems of 2008-09, the economy really was not suffering from severe structural issues in 2020, but rather an emergency forced pandemic response that shuttered global market demand temporarily. I do not feel that this will be a long-term event and that advertising, sporting events, and businesses will rebound significantly before the end of 2020. Unless a second wave pandemic again shutters the economy, VIAC should easily hit my targets inside of 12 months.

In making stock picking decisions under such circumstances, I look at short/med/long-term charts to determine what the trend was before the events of 2020. If you click on the 1Y, 5Y, and All time charts, it seems pretty certain that we can expect a rebound to at least the former lows of $40 over the last 5 years. I was fortunate to be watching this stock on March 10 when I saw it begin rising 20% to $12. That signalled to me a confirmed bottom and that's why I jumped in. Given the fast run-up of 127% since the bottom, the opportunity is not as good for you now as it was for me in April. Nevertheless, if just my first target of $33.32 is reached, you would still enjoy a healthy ROI of 46%. Still a strong return in anyone's books!

CONCLUSION

Based on the foregoing analysis, and the presumed perpetual and continuous need for digital media and broadcast advertising, I fully expect that VIAC will eventually return 3-5 times my money, without even counting dividends. For investors after June 12, 2020 (@$22.90), this stock still represents a great buying opportunity, especially on the recent dips.

This stock, in my opinion, is an EXTREME BUY and HOLD until at least the $33.32 mark, with plenty of uncertainty along the way based on the fickleness of the markets, stimulus from the FED, and the length of lock-downs which could extend the recovery. Beyond that, you could consider profit-taking or beginning to trade in and out of the stock with the long-time frame cyclical nature of VIAC in the $40-$55 range.

Until then, enjoy the ride and make VIAC an out-sized part of your portfolio. Currently, it accounts for 6.51% of my RRSP account which is 3 times my normal allocation of one stock. The best part is that the capital gains will be 100% tax-free within my RRSP when I finally do liquidate it a few years from now!


Technical Analysis, Recommendations, Financials, and Interactive Charts.

Below you will find the current live data from TradingView.com to help you view some of the data I look at when choosing the right stocks for my own portfolio. All stocks in this course are one that I currently own or have owned since starting this platform. If you just follow what I am doing here, you can achieve similar results.

Chart Adjustments

The chart below is adjustable in many ways. Feel free to experiment. One layout change that is not apparent is the vertical border between the graph and the chart on the right side margin. Hover over the grey vertical bar between the camera lens and the word Details in the top margin and you will see a left-right arrow ↔ appear. This handle allows you to adjust the width of the margin so that all the details of the right sidebar appear. Simply hover over the grey vertical bar until the handle appears, then hold down the left mouse button, and drag the bar to the desired position.

To expand the entire chart into a pop-out window, click on the box with the upward right pointing arrow (see left of the camera icon) and the chart will open in a new adjustable, full view window.

Hover over the chart and scroll your mouse wheel to zoom in or out on the chart details. Or, select the desired viewable time period from the bottom margin to zoom to the desired number of days, months, or years.

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