If I’d invested £3,000 in BT shares 3 months ago, here’s what I’d have now

BT shares have shot higher, but I reckon the stock is worth consideration as a long-term investment and here’s why.

| More on:
One English pound placed on a graph to represent an economic down turn

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Has the BT (LSE: BT.A) recovery finally started, and will the share price now continue to soar?

Maybe. The full-year report delivered on 16 May appears to have fired the starting gun on a change in trend for the stock after years of falling.

It looks like chief executive Allison Kirkby’s words did the trick.

The telecoms company has passed peak capex regarding its full-fibre broadband rollout. On top of that, the £3bn cost and service transformation programme has completed a year ahead of schedule, Kirkby said.

A positive outlook

There was no holding back the optimism: “We’ve now reached the inflection point on our long-term strategy”.

What does that mean? Well, Kirkby said the directors now have the “confidence” to provide new guidance. BT expects “significantly” higher short-term cash flow, and free cash flow looks set to “more than double” over the next five years.

Looking towards the next moves for the business, she said the intention is to “accelerate” the modernisation of operations. The directors also aim to seek ways to “optimise” global operations.

Kirkby thinks the strategy will help to deliver “significant” growth in the coming years.

Is this really it? Has BT finally turned the corner after a long and torrid time for the business and its shareholders?

Maybe. But it’s worth noting the adjusted figures for the trading year to 31 March were a bit underwhelming. Revenue was essentially flat year on year, earnings declined by 16%, and net debt rose by almost 3.3%.

Nevertheless, investing in stocks is all about looking forward rather than back. That’s perhaps why the share price shot up when the report hit the newswires.

But what if I’d invested £3,000 in the stock three months ago? How much would I have now?

No dividends have gone out over the period, so the gains will all have come from the rising share price.

In early March, I could have picked up around 2,830 shares for about 106p each. Fast-forward, and those shares are now changing hands for around 133p.

Ignoring trading and execution costs for this example, my gain would have been about 25% or £750. So, I’d now be sitting on an investment worth approximately £3,750.

Why I’d consider BT shares now

That’s not a bad return for such a short period. I can understand why it may be difficult for new investors to consider BT shares now after the strong and fast rise.

After all, the initial investor optimism may fade, and the share price could decline. Also, the company may have difficulty living up to its own high expectations in the coming years. One area of concern is the huge pile of debt on the balance sheet – BT still comes with plenty of risk.

Nevertheless, I think it would be a mistake to avoid the company now. Often, businesses and stocks really do start new and enduring phases of prosperity and growth after such initial strong reversal price movements – it goes with the territory of positive changes to business fundamentals.

My plan would be to focus on BT now and dig in with deeper research and consideration with a view to buying a few of the shares for the long haul.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Should we buy cheap FTSE 100 shares now, before it’s too late?

The FTSE 100 is up 5% so far in 2024 and hit an all-time high in May. That means the…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Here’s why I think the Lloyds share price could hit a 5-year high in 2024

It's up 13.5% so far in 2024, and reaching new highs. But where might the Lloyds Bank share price go…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

If I’d put £15k into this FTSE 250 stock in 2008, I’d have over £1.26m today

This multi-billion-pound business has created plenty of millionaires over the last 16 years, but can it repeat this performance?

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

3 dividend shares I’ve bought for the next decade!

I think these UK dividend shares can amplify my long-term passive income, and could even be on track to becoming…

Read more »

Investing Articles

If I’d put £5,000 in Scottish Mortgage shares at the start of 2024, here’s what I’d have now

Scottish Mortgage shares have staged a recovery lately, powered by the public and private growth stocks held in the portfolio.

Read more »

Happy couple showing relief at news
Investing Articles

9.9% dividend yield! Is this FTSE 100 stock a brilliant bargain?

This leading British enterprise looks like a delicious deal for passive income, trading at a low multiple while offering a…

Read more »

Investing Articles

If I’d put £5k in a FTSE 100 tracker fund 5 years ago, here’s what I’d have now

Investing in a FTSE 100 index fund is a terrific way to start building wealth passively with minimum effort. But…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

What’s going on with the Scottish Mortgage share price now?

The Scottish Mortgage share price is up 30% over the past 12 months, outperforming the index. Our writer explains why…

Read more »