Verizon Communications Inc. (NYSE:VZ) is the biggest provider of communication, information and entertainment products. Major area of operation has been in two areas, Verizon Wireless and wireline. They made two big acquisitions in beginning of the year. CNBC’s “Squawk on the street” crew discussed on Verizon’s tremendous performance in the street and also regarding the big money acquisitions and inversions which help the companies like Verizon grow.
The crew discussed how well Verizon Communications Inc. (NYSE:VZ) has done beating all the expectations by a bigger margin. They all feel that Verizon had made a smart move with acquisitions and are getting a good yield from them. Crew in the CNBC studio agrees to the fact that Verizon is the best example for prudent stock which can make a great deal of money for investors. They gave their shareholders a 4.2% dividend after tax which the crew thought as exceptional.
Jim Cramer and others said that Verizon Communications Inc. (NYSE:VZ) had broken the $40 barrier and holding its position firmly above $40 consistently which in itself is a big achievement. They all had the opinion that this is one of the most mis-valued companies.
Verizon Communications Inc. (NYSE:VZ) were heavily linked with acquisition of DISH Network Corp (NASDAQ:DISH). However, Verizon CEO, Lowell McAdam, had trashed the idea of buying the Dish network as he said that there is no need to buy Dish. Squawk on the street crew think that Verizon is still digesting its acquisition of Vodafone Group Plc (ADR) (NASDAQ:VOD) 45% indirect interest at approximately $130 billion back in February 2014.
They feel that Verizon Communications Inc. (NYSE:VZ) and Apple Inc (NASDAQ:AAPL) were the two smart companies which are not financial engineering companies but played the yield perfectly.
“Hundreds of companies have been opportunistic in terms of capital allocation and using the debt markets to fuel whatever it might be, but that gets some concerns for those who are nervous,” David Faber said.
Faber pointed out the fact that Kenya now yields 5.5% which is very big. Companies are using cheap money to buy and getting allocated overseas. As an example, TRW Automotive Holding Corp (NYSE:TRW) acquired and are getting lower tax rates in Germany. They all think that the market is in a buyout phase where companies tend to buy companies which they don’t like but still get benefit out of it.
Acquisitions made by these big companies in foreign land to enjoy the tax and other benefits over there, henceforth getting better yield is called as Inversion. The crew in the studio feels that most of the acquisitions happening currently are inversions. They feel that Verizon Communications Inc. (NYSE:VZ) is criticized for Inversion tactics. But they said it is not the fault of Verizon, because they were forced by competitors who already inverted and Verizon had no choice but to do the same to stay alive in competition.
The crew were of the opinion that this type of inversions might cause bigger impact to US economy. Inversions make the companies in US less competitive and pumps money overseas which cannot be good for countries economy. They said that only way to stop such things is to bring in a tax reform, which they don’t see happening in the near future.