TLS - Telstra Corporation
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Yep, which I was I added that bit to my original post last night.
I often get bored during the day at work and read some of the news blogs / forums. I've seen a few times people saying that they have sold TLS because of the "articles on asbestos" and such. Which is why I brought it up... I figured it was either them or myself missing something since I disagreed with the fact that it was fundamentally important.
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Yep, which I was I added that bit to my original post last night.
I often get bored during the day at work and read some of the news blogs / forums. I've seen a few times people saying that they have sold TLS because of the "articles on asbestos" and such. Which is why I brought it up... I figured it was either them or myself missing something since I disagreed with the fact that it was fundamentally important.
"Fundamentally important" isn't the issue it's perception that does the damage.
As a holder what are your thoughts? We don't hear from you much on the stock boards, Julia!
skc
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It's the unwinding of the yield trade.
There's no asbestos in NAB, Westfield or APA gas pipelines!
CanOz
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The dollar dude...
skc
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Why would the dollar fall?
And I pre-ask why on the next 6 layers of explanations.
A bit like peeling an onion, isn't it?
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Good question Julia and I don't have the answer. But I'm not sure if reason, rather than sentiment, explains the fall. We could equally ask the same question about the rapid uptrend that Telstra has enjoyed.
We sold a third of our TLS hold, amongst others, last week. However this stock, and other Telcos, have certainly supported our SMSF this past year.
No pretence here about understanding. I can assure you of that.
Best wishes
Rick
My sense of it is that global investors piled into our market through the course of late 2012 / early 2013 chasing the larger liquid stocks with earnings certainty. These also happened to be the stocks that provided good yields (others went up too, like CSL Ramsay, etc). Basically anything with a degree of earnings certainty got pushed up.
Now, these offshore investors are benchmarked against global indices which are measured in US dollars. Their outperformance is measured every quarter (and bonuses are paid off the back of that, but don't go there). As long as these investors are "market weight" to Australia, they don't really care because the performance of the Aussie market (in A$ and US$) doesn't impact their outperformance / underperformance because they are tracking along at market weight. The problem was that with the amount of money they put to work in the last 6 months in Australia, coupled with the sharemarket rally the larger stocks had - this all meant they ended up overweight to Australian stocks. As the currency came off, this impacted their US dollar returns and Australia started to be a source of underperformance for their portfolio. They simply hit the sell button and left. There was not enough liquidity around to catch the sudden supply of stock. Most domestic managers are at the minimum level of cash allocation at present. When the offshore funds hit sell, they are usually only in the larger stocks and these have been smashed (including TLS).
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Yield is still sought, just not as many will try achieve their returns through Telstra. Hence there will be less demand.
Theoretically, more domestic money will move out of stocks and into property.
Growth stocks which have been hampered by the historically high AUD should get more attention now.
People will start positioning their investment for an interest rate rise and subsequent dollar appreciation in USD.
The AUD is no longer supported by higher relative interest rates and this depreciates the AUD- like what we're seeing now. What do you think that does to the value of TLS shares held by international investors?
Simple economic theory. The yield play has been on, and easier to spot given the presence of QE. But it always had to come to an end.
TLS might bounce from here, and the chart still looks healthy, but I'm fairly certain the trend has nearly run its course and we won't see prices much higher than $5.
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Thanks very much to both of you for going to the trouble of answering my query.
So it seems the fall is mostly because of off shore money, I didn't realise the market was propped up so much by external funds.
TLS now represents good value for those in AU if the price doesn't fall too much further resulting in loss of capital.
Knobby22
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True, but the dollar fall continuing is a real risk so I would like to see a yield of 7% before I buy any more.
If you are investing as a retiree then its pretty good value as an alternative to fixed interest, especially if the RBA lowers interest rates next month which the market says is a 50% chance.
I reckon anyone thinking of buying should wait a couple of weeks before plunging in. You might get them for $4.30 or ideally $4.00 with a 7% yield. At $4.00 you can relax and not worry about the price.
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Julia
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+1. Such a contrast to the cryptic minimal answers from the clever people.
Why the snide comment? I thought most of the replies were helpful.
Trembling Hand
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Unfortunately some are so blind that even when trying to explain something as its unfolding they cannot see their own nose let alone an up coming disaster. You are left trying to prompt sensible consideration and in return end up have to do this.
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