Why You Shouldn’t Buy Telstra Shares – Ever!

There comes a time when investors just need to let go.

Some things are just not meant to be.

Yet even so, the fascination with and the desire for some investors to buy Telstra [ASX: TLS] shares is unwavering.

Personally we don’t get it. If Telstra was the only share listed on the Australian Stock Exchange, we still wouldn’t touch it. In fact, I think I’d rather buy an over-priced property with a 100% mortgage and negative gearing than buy Telstra shares.

That’s how bad an investment in Telstra is.

Given where the share price is, we’d say that most investors agree:

TLS Weekly

 

But amazingly, there’s still a bunch of investors out there who keep lapping it up. They keep believe it can’t possibly get any cheaper.

Remember the scam last year with the sale of Telstra shares by the Future Fund? The fund managers and brokers were falling over themselves to grab a piece of the action.

So excited were they, that as we recall, the Future Fund ended up flogging more shares to meet the demand.

Yet still the share price has done nothing. And odds are it never will do anything.

But that doesn’t stop the brokers from trying to hoodwink their clients into the stock. Look at the chart below that we got from the CMC Markets Stockbroking website:

CMC Markets Stockbroking

 

Source: CMC Markets Stockbroking

 

Of the five analysts surveyed – which granted, isn’t many – all five of them reckon Telstra is a cracking buy right now.

Then there’s the broker consensus on the Investsmart website. Seven buys and three holds. The analysts obviously reckon they’ve picked the bottom of the market for this dog:

 

Source: Investsmart

 

But when I look at Telstra I just think, “Why would you bother?”

It’s not as though Telstra is the only share available to buy on the ASX. At the last count there was something like 1,800 listed stocks.

And not only that, it’s got so much going against it only a mentallist would consider the stock a good buy.

Think about it. Do you really want to buy or own a stock that owns and maintains technology that is up to 100 years old? And which faces stiff competition from better companies in the new technology areas.

Do you really want to buy or own a stock that has a quasi-government department in control of a big stake in the company?

Do you really want to own a stock where the government could destroy it at the single stroke of a pen? And where the same government is plotting to establish a taxpayer funded competitor?

We don’t. But plenty do.

But then we always hear this one, “Oh, but it pays a good dividend.”

Really? If you’d bought Telstra shares back in 1997 and held on, you would have picked up $2.98 of dividends.

Right now, Telstra is trading at roughly the same level as the initial float price of $3.30. So, taking the dividends into account you’ve almost doubled your money in thirteen years.

Factor in the real cost of inflation and your investment would be well under water.

And if you were unlucky enough to pay $6, $7 or $9 then you’re seeing on a fat loss right now.

We like dividend paying stocks, but that doesn’t mean you should forgo capital value.

The dividend with Telstra just isn’t good enough to justify holding it. There are plenty of other stocks on the market that will give you a decent dividend yield, plus the potential for some conservative growth as well.

But, I’m sure you know why nearly all the brokers and analysts have a buy recommendation on Telstra. The simple fact is, they’re keen to get their snout in the trough the next time the Future Fund decides it wants to flog some stock.

The millions in fees that UBS earned from the last sale is evidence of that. And as for the fund managers, well, it’s not their money anyway, and they’re always keen to do a favour for their broker mates, and vice versa – “You scratch my back…”

Look, maybe we’re wrong and maybe the Telstra share price could double or triple from here. But so what? Who cares? There are so many other opportunities on the market that staying with Telstra is just a monumental waste of your capital.

Our advice to anyone that’ll listen is to just sell the thing and be done with it.

Buy something else. Heck, I’d rather tell you to buy bank shares than Telstra shares – and that’s saying something!

Cheers.
Kris.

Kris Sayce

Kris is never one to pull punches when discussing market developments and economic events that can affect your wealth. He’ll take anyone to task — banks, governments, big business — if he thinks they’re trying to pull a fast one with your money. Kris is also the editor of Microcap Trader — where he reveals the best opportunities he’s discovered in the markets. If you’d like to more about Kris’ financial world view and investing philosophy then join him on Google+. It's where he shares investment insight, commentary and ideas that he can't always fit into his regular Money Morning essays.

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55 Comments on "Why You Shouldn’t Buy Telstra Shares – Ever!"

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michael francis
Guest

Telstra should engage Christopher Joye to see if he can spruik its price back up to 8 bucks. But this time he may have problems, as Steve Keen recently said, ” Australia’s pool of fools is rapidly shrinking.”

glen
Guest

You just forgot one thing. the government is going to spend a lot of money on the nbn. Don’t you yhink we are going to see one of the biggest porkbarrelling in australian political history.
Just imagine 1 in 10 people own TLS shares, with a year to go to the election and ratings approvals down. Let telstra take the lions share of 43 billion to create a nbn. Just watch it’s shares double or triple and romp it home in the next election!
An opputunity to good for any party! START BUYING TLS AT ANY PRICE !

etch
Guest

nnnnnnnnnnnnnoooooooooooooooooooooooooooooo
dont buy that telstra $HIT

BETTER invest in toilet paper

cb
Guest
I might have already referenced the video itself, which you will find embedded in this link, but Bolt also references a new article, a New Paper in Science: Sea level 81,000 years ago was 1 meter higher while CO2 was lower, which you can access from the link. Bolt also makes a very good point about climate scare not being a scandal of science, but also one of the MSM. “The greatest scientific scandal of our lifetime is unravelling before our eyes, and the ABC has to be dragged screaming to even notice. Don’t forget, the reason this scandal grew… Read more »
glen
Guest

A bit of sensorship going on here call a stock $hit or people fools Ok. Suggest the government might porkbarrel an election ooppps can’t be printed !

cb
Guest
“What will happen if decades of filth beneath the climategate iceberg come floating to the surface? The public will see the unholy, international alliance of politicians, publishers, federal research agencies and news media that have been manipulating science as a tool of propaganda to control the people. It is no mere coincidence when — the BBC, CBS, NBC, PBS, Nature, Science, the Climatic Research Unit (CRU) at the University of East Anglia, the US National Academy of Sciences, major newspapers, APS, ACS, AGU, major research institutions and universities, the Norwegian Nobel Committee, NASA, DOE, the UN’s IPCC, Al Gore, George… Read more »
PG
Guest
Telstra is a stock which does have 50% upside & 10% downside from current levels. stock is 3.12 cum div of 14c ff.If there was ever a screaming buy in the market at present then it is telstra. $ 6 bn free cashflow and integral part of any telecomunnications platform in Australia going forward it is a compelling buy. Price is what you pay value is what you get, dont get caught up with past performance, evaluate it on current fundamentals.Yes everyone at present is dumping the stock , that is the reason why it is ehere it is analyst… Read more »
cb
Guest
If anyone decided that they want to lie about something, then I reckon this would be the way to do it, a’ la Pachauri style. This guy really seems to belive his own BS. It has been well documented that claims about the Amazon, Africa, The Netherlands, etc., are all porkies like the one about the melting glaciers of the Himalayas. It has gotten to a point where journalists are putting these things to Kevin Rudd’s partner in thief (only just recently Rudd has given him a cool Million of our money), but this crook will not admit to any… Read more »
cb
Guest

Here is the debunking of Africagate in detail, for anyone interested:
http://eureferendum.blogspot.com/2010/02/and-now-for-africagate.html

cb
Guest

abc — I have replied to one of your earlier questions, a few threads back.

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