Slim's picking


Andrew Lyddon

Andrew Lyddon

Fund Manager, Equity Value

Dutch telecoms company KPN has been experiencing a number of issues with its business. It faces stiff competition in its home market and has guided to reduced profits and cash generation this year as it invests in its domestic operations.

Uncertainty over how successful these measures will be in improving cash flow in the long run have caused markets to fear KPN would have to cut its dividend.

The market has been consensually negative on the business, to an even greater extent than it is on most other telecoms businesses, and the company’s share price has broadly halved over the last 18 months … and then, out of the blue, Carlos Slim, the Mexican business magnate and the richest man in the world, has just announced that he controls 5% of KPN’s shares and would like to tender to increase this stake to 28% – just below the 30% level where he would have to bid for the whole company.

Obviously when a man who has made the bulk of his £40bn-plus fortune from telecoms businesses in Latin America flags up an intention to build a significant stake in a telecoms business in Europe, it is worth taking note. Slim has not got where he is by wasting his money or making a lot of irrational investment decisions and indeed, in the past, has been very cautious about taking the plunge with European assets.

Not only is it interesting that while the stockmarket is consensually negative on KPN and on telecoms in general, Slim has decided to make this move at this time with this company, it is also an excellent illustration of the idea we have advanced many time before that value investors should continually be asking themselves the question, “What if?” What if the richest man in the world sees something in a company most of the wider market has written off?


Andrew Lyddon

Andrew Lyddon

Fund Manager, Equity Value

I joined Schroders as a graduate in 2005 and have spent most of my time in the business as part of the UK equities team. Between 2006 and 2010 I was a research analyst responsible for producing investment research on companies in the UK construction, business services and telecoms sectors. In mid 2010 I joined Kevin Murphy and Nick Kirrage on the UK value team.

Important Information:

The views and opinions displayed are those of Ian Kelly, Nick Kirrage, Andrew Lyddon, Kevin Murphy, Andrew Williams, Andrew Evans and Simon Adler, members of the Schroder Global Value Equity Team (the Value Perspective Team), and other independent commentators where stated. They do not necessarily represent views expressed or reflected in other Schroders' communications, strategies or funds. The Team has expressed its own views and opinions on this website and these may change.

This article is intended to be for information purposes only and it is not intended as promotional material in any respect. Reliance should not be placed on the views and information on the website when taking individual investment and/or strategic decisions. Nothing in this article should be construed as advice. The sectors/securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy/sell.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.