Taking Stock: Buying Swiss and selling American

Selling GE to buy Swiss telecom stock is “a big mistake.”
Modified: August 2, 2013 at 11:43 pm •  Published: August 4, 2013
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Dear Mr. Berko: I recently spent 12 days in Switzerland and was very impressed with the phone system there. I'm interested in buying 200 shares of Swisscom, especially because I read that Goldman Sachs has a buy rating on the stock. I would sell 400 shares of General Electric to purchase Swisscom, but I would first like your opinion.

MK, Kankakee, Ill.

Dear MK: Switzerland is a place high in the mountains where the people don't like to fight. So they get people to do their fighting for them while they ski and eat chocolate. Our politicians could learn a lot from the Swiss. But one thing I'd like to know is how the Swiss encouraged Goldman Sachs to raise its rating on Swisscom (SCMWY-$46.70) from “neutral” to “buy.”

I like Switzerland. I've been there a couple of times. But it has the highest amount of wealth per adult (financial and nonfinancial assets) in the world, and among its 8 million people are too many of the most insufferably stuffy and unfriendly adults in the universe. An American expat I know who lives in Basel explains that it may be illegal for Swiss nationals to have a sense of humor. However, I think it's because most Swiss people are constipated from the high altitude. Anyhow, considering the neutral prospects for SCMWY's future revenue and earnings, my expat acquaintance believes that Goldman raised its rating from “neutral” to “buy” after the Swiss Parliament made Lloyd Blankfein (Goldman's CEO) an honorary Swiss admiral.

SCMWY's 19,000 employees run this telecom's $12.14 billion-revenue business. During nine of the past 11 years, those revenues declined. And that's not surprising, considering the country's low birthrate and the clenched-fist frugality of most Switzers. And in a surprisingly un-Swiss manner, SCMWY's long-term debt grew nearly threefold, to $8.3 billion, and share earnings crashed like a rock from a high alp during the past decade. Revenues for 2014 are expected to rise by a couple of million dollars, and earnings may improve from $3.34 to $3.37 a share, but that's not much to yodel home about. The swell dividend of $2.30, which is paid once a year in April, yields 5.2 percent, and the share price is up 18 points from its average price of 10 years ago, but I can't find a compelling reason to own this stock today.

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