What happened to the TLS share price?
Telstra Corporation [ASX:TLS] was down by 0.96% in early afternoon trading. The stock was trading at $6.17 a share. Selling of bank stocks continued to weigh on the market today. Jobless rate edged up slightly to 6.2% and is showing signs of stabilisation.
The market is still trying to grasp the weak economic realities in Australia, coupled with a Reserve Bank that seems to be turning hawkish. Should investors believe the Reserve Bank when it says it won’t cut again? Of course not!
Monetary policies are conducted through expectation management. It always needs to keep a tap on inflation expectation, especially when there is inflationary pressure from the property market. In addition, energy price and commodity prices are starting to reflate. All these give the central bank a good reason to use the kind of language that it did.
But one thing remains clear — the Reserve Bank will cut when it needs to. So, it is all very data-dependent. The market has been traded down in recent days, but don’t doubt for a moment that cheaper capital won’t drive up asset markets further. The two assets that stand to benefit are — equities and properties.
Why did this happen to TLS shares?
Now, Telstra is a great blue chip to own. Why? It has great fundamentals. Telstra will become a much more diversified company in terms of its geographical coverage. Telstra plans to make 30% of its income from Asia by 2020.
And, the company pays a 4.7% fully franked dividend. That alone, is enough attraction for investors who are seeking income. Let’s face it, one big reason anyone should hold Telstra shares to get that big fat dividend.
What now for TLS?
But that is not all Telstra can offer. Telstra has been a great stock to trade for low frequency long/short investors in the last twenty years. Yes, twenty years is a long time; it is not for the get-rich-quick-hungry traders out there. But as a long term investment plan, it makes great sense.
If you started trading Telstra at a low frequency in 1997, you would have tripled your net worth over the last two decades. A 20,000 investment with a two times leverage would have given you three million today. All that with a maximum risk of 17%, and that happened to be during the GFC.
Telstra continues to be a great holding for income-seekers, institutional investors and low frequency traders.
Emerging Market Analyst, New Frontier Investor