TLS - Telstra Corporation

[nulla nulla]

This might help explain some of the recent share price drop.

http://www.smh.com.au/business/future-fund-hedges-its-bets-20100920-15jq0.html

"THE Future Fund has plunged almost $10 billion, or 15 per cent of its assets, into a suite of hedge funds in the United States in an effort to diversify overseas and away from its dominant holding in Telstra.

The fund, which invests superannuation for government employees, appointed nine hedge funds in the US and a boutique hedge fund in Britain to manage $9.8 billion last financial year, up from an allocation of $2.6 billion in June last year.

More than 15 per cent of assets are now invested in the ''alternatives program'', which the fund describes as ''[using] skilled managers to take advantage of capital scarcity and market inefficiency''.

Overall, the Future Fund generated returns of 10.6 per cent in the past year.

It also sold down its stake in Telstra from 16.4 per cent to 10.9 per cent last month."

 

[nulla nulla]

The day started well with the share opening at $2.78 then started into $2.79 but then it became a bit like "the word had got arround, the colt from the future fund had got away" and the sellers jumped in pushing the price down to close at $2.72.

Mr Murray wants to spread his risk and diversify his portfolio. Understanderbly he needs to cash out of some shares and then buy into others. However you have to question the way he has gone about it.
Seems to me, that passing large parcels of his portfolio to U.S. hedge funds to sell and replace with "stressed shares" seems like the super funds lending the shares out for the hedge funds to short the market down, buy back at a lower price, then pocket the difference and return the lower valued shares to the super funds.
The U.S. hedge funds probablty can't believe their good fortune.

Of course as soon as it becomes public that the super fund has reduced their holding from 16% to 10%, the rest of the public wants to bail out as well. No wonder the price tanked today and will probably drop again tomorrow.

 

[polska]

great high dividend stock good old telstra, but will fall to 2.50 in my honest opinion, then i may have a look at it

 

[sptrawler]

Well it will be interesting Singtel dividend 4.7 and p.e of 12.8. Telstra div 10.4 and p.e of 8.6. If polskas right it would be an interesting dividend.

 

[Boggo]

Trying to make some sense of it from a charting viewpoint (apart from the obvious).

It has overshot the 1 = 1 from the previous significant high although it did hesitate in that area for a while.

Next level then may be an expansion to the 1.272 area around 2.60.

Re the dividend, if the stock price drops and the dividend stays at the same $ value then the dividend will always look (misleadingly) good, a bit like peeing in a wetsuit, initially you get a nice warm feeling but then reality sets in

Just my

(click to expand)

 

[outback]

Why do you say misleading? 10% plus dividend yield is good. Isn't it? Or have I missed it again?

 

[Boggo]

Why do you say misleading? 10% plus dividend yield is good. Isn't it? Or have I missed it again?

Assume a 28c annual dividend (2x14).

Stock price $2.70 = yield of 10%
Stock price $8.00 = yield of 3.5%

Which would you rather have, TLS at $8.00 or at $2.70 (price you bought at being a variable of course)

Another chart view below...

(click to expand)

 

[drsmith]

The future fund sold down its stake in Telstra from 16.4 per cent to 10.9 per cent in August 2009, not last month.

 

[BrightGreenGlow]

Well once again TLS is making me cry lol..... Soo many sellers. People must be seeling out and just running with a big loss...

Was just on the business channel and an analyst from Macquarie said negotiation between TLS and NBN were nearly finalised. Said $2.65 could be a great BUY depending on result... Wouldn't imagine it being a bad result for TLS... but who knows

 

[flee]

Sound fundamentally, and would've assumed that Labor and the NBN getting into power would've been good for Telstra... yet investors are still selling out?

 

[outback]

Assume a 28c annual dividend (2x14).

Stock price $2.70 = yield of 10%
Stock price $8.00 = yield of 3.5%

Which would you rather have, TLS at $8.00 or at $2.70 (price you bought at being a variable of course)

Another chart view below...

(click to expand)

Ahhh I understand your worms now. Our 10% yield is of course dependant upon buy price, but buying now means we receive that, if TLS goes to $8.00 I'll take the 3.5% yield and worry about the CGT on the 300+% I made on the deal.

 

[nulla nulla]

The future fund sold down its stake in Telstra from 16.4 per cent to 10.9 per cent in August 2009, not last month.

The link I posted above was a current newspaper article that indicated the future fund sell off was last month.

http://www.smh.com.au/business/futur...920-15jq0.html

 

[nulla nulla]

Ahhh I understand your worms now. Our 10% yield is of course dependant upon buy price, but buying now means we receive that, if TLS goes to $8.00 I'll take the 3.5% yield and worry about the CGT on the 300+% I made on the deal.

There is a very unreliable assumption here that telstra will continue to pay $0.28c per annum dividend. Particularly after the Chairman advised that they would have difficulty maintaining the dividends at the current level.

Also, how long since tls was $8.00? If it can get back to $3.36 I will be happy.

 

[shinobi346]

The link I posted above was a current newspaper article that indicated the future fund sell off was last month.

http://www.smh.com.au/business/futur...920-15jq0.html

Quoting your article:

"Overall, the Future Fund generated returns of 10.6 per cent in the past year.

It also sold down its stake in Telstra from 16.4 per cent to 10.9 per cent in August 2009."


If I get $2 back I will be happy.

 

[Julia]

Well once again TLS is making me cry lol..... Soo many sellers. People must be seeling out and just running with a big loss...

Was just on the business channel and an analyst from Macquarie said negotiation between TLS and NBN were nearly finalised. Said $2.65 could be a great BUY depending on result... Wouldn't imagine it being a bad result for TLS... but who knows

So what's your plan here, John? Do you have a price at which you will accept the loss and sell? Or do you continue to watch it fall, while hoping it will eventually recover?

Why/when did you buy it, and what was your plan at that time?

 

[laurie]

Ahhh I understand your worms now. Our 10% yield is of course dependant upon buy price, but buying now means we receive that, if TLS goes to $8.00 I'll take the 3.5% yield and worry about the CGT on the 300+% I made on the deal.

Why is everyone quoting 10% yield! its approx 15% allowing for franking credits

laurie

 

[So_Cynical]

Why is everyone quoting 10% yield! its approx 15% allowing for franking credits

laurie

The market would seem to be pricing in a fall in dividends, perhaps getting a little carried away...perhaps not.

Time will tell.

 

[Boggo]

When a stock is falling then paying dividends just adds to the pain, and 100% franking further adds to it.

When TLS pays a 14c dividend each share is effectively worth 14c less, add approx another 4c to that for the tax they have paid (30%) and each share is worth around 18c less in rough figures.

SRL went ex dividend yesterday, it could absorb that as its in a climb and it has proven that by closing higher today just one day after going ex.

The only stock worth getting a dividend on is one that can absorb the payout and resume its upward trend.

If you hold the likes of TLS in a SMSF then there is an advantage in the 100% franking (ie 30% paid) as you get a 15% tax credit for the super fund.
If a stock is falling however it is still false economy to even consider the perceived benefit of the dividend (and the franking credit).

I don't have the figures in front of me for SRL but I think their dividend yield is only around 2.8%, I know which one I would rather be holding, compare both charts and tell me which you would rather be holding.

Sorry if I seem to be too matter of fact about this but if you want to make a squid there is no place for sentiment when it comes down to this scenario and judging by the selling off that's going on TLS I am not alone in that method of thinking.

Having said all of that, at some point it will bottom and turn up, until then...

 

[laurie]

Well its horses for courses Telstra is not a growth stock just a cash cow that pays dividends and if Telstra falls further that return will grow again.I will get some more if it bottoms out at $2.60 and starts to turn up but one has to be sure its not a dead cat bounce

laurie

 

[nulla nulla]

Quoting your article:

"Overall, the Future Fund generated returns of 10.6 per cent in the past year.

It also sold down its stake in Telstra from 16.4 per cent to 10.9 per cent in August 2009."


If I get $2 back I will be happy.

You are right. The link to the article now shows that the sell down took place in "...August 2009".

However, when i made the initial thread post, I posted the http link and cut and pasted the quote directly from the article. It would appear that the article has since been edited.
I will see if I can recover the paper from the recylce bin to see what went to press on the day.