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Two Value Traps: BCE and Alibaba




When BCE (BCE) unexpectedly announced that would spend its MLSE proceeds to buy Ziply Fiber, shares fell sharply. The common shares traded with a yield of 10.3% last week. This is more than some of its preferred stock.

BCE is a risky value trap. The stock markets are reacting to the heightened risk of BCE’s domestic business weakness and its entry into the U.S. network market.

In Q3, BCE reported a 1.8% Y/Y drop in revenue, to $5.97 billion. As immigration rules tighten in Canada, mobile subscription sign-ups for BCE, Rogers Communications (RCI), and Telus (TU) will fall.

In the Chinese tech sector, most companies are value traps. Alibaba (BABA) is particularly risky. The stock peaked in October at $117.82, after spending the year trading at $80. This Friday, Alibaba will post quarterly earnings. Markets are ignoring its continued struggle to grow in its domestic market.

The Chinese economy is unstable, with downside risks from a slowdown ahead. Still, the falling currency, the Yuan, should help cut the value of exports. This might boost export volumes.

In 2025, the new Republican president may lead to introductions to higher tariffs. This offsets the decline in the Yuan and limits China’s export growth.



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