Forum Archive Index - February 2004

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi winner69,
 
> 
>Over the last few days 467 has been a solid support
>level - several times on Monday and again today it dropped to that
>price ... but didn't go any lower.
> 
>Phaedrus has shown us that after the long downtrend was broken 
there
>was a period when the price trended up nicely. He also pointed out
>recently that that uptrend has ceased and that TLS is now in a trading
>range and with todays action it seems that 467 is a solid support
>level of the current trading range.
> 
>On fundamentals the market seems rather confused. The latest half 
year
>result was a bit mixed - cost savings of about $150M but then they
>spent $250M more chasing market share. And the market is probably
>concerned about further potential writedowns re Reach and talk of
>acquiring Fairfax makes a few punters nervous
>  
>However the dividend will underpin the price at the current level and
>when you take into account this magic of this 467 figure buying at
>this price is probably a safe bet.
>

I always get amused when I see that phrase 'safe bet'.

My dictionary defines 'safe' as meaning 'free from risk'.

While 'bet' is 'a promise made between parties on the probable 
outcome of an uncertain fact.'

The way I look at it, where you have uncertainty you have risk.   So the 
whole idea of a 'safe bet' is a tautology, usually made by the betting 
person in an attempt to convince themselves that their position is less 
risky than it really is.

However, that little diversion into the English language over, I fully 
appreciate the desire to limit downside risk (upside risk is never a 
problem) on any investment and indeed this is something I control in 
my own portfolio by very careful share selection.

I think Telstra does have a low downside risk.   That's because it is the 
dominant player in the telecommunications industry in Australasia by 
far.   It has a solid asset backing per share.   It has a proven ability to 
compete vigorously in the markets in which it operates.  It has a stable 
profit growth profile, notwithstanding the PCCW fiasco which it seems 
they have learned from.  And yes it does have a good yield in the point 
of view of Oz investors who are the primary drivers of the share price.

The fact that the share price has not gone lower than $4.67 recently is 
about as useful as knowing that the ultimate answer to the ultimate 
question is 43.    Interesting, but not very useful as a fact in its own 
right.

>
>You can always bail out at 500 odd (top of the trading range) if
>things don't look too good in a few weeks/months.
> 

So the share price will rise 15% or so to $A5 if things start not looking 
so good?    In that  case I hope that things 'don't look so good' for my 
whole share portfolio for the rest of the year!

Still you are right that Telstra does have good liquidity, which is an
 important consideration in any investment that at some point you 
might want to quit. 

>
>Phaedrus also said that often these trading ranges are often a period
>of consolidation before the uptrend starts again. 
>

Or it could just mean the share has found fair value, and with the 
stabalization of the business model, the extreme volatility of the past 
has gone.

>
>My theory is that if
>the price breaks out of the top of the trading range the new uptrend
>will rise as much as it previously rose from the commencement of the
>previous uptrend - ie to about 542 or thereabouts.
> 
>Thats a good return from 467
>

That sounds like a hope, rather than a sound theory.

> 
>Numbers reflected on a drawing that reflects the sentiment of the
>multitudes say this is likely - and the TLS chart seems to behave
>quite well. 
>

Numbers on the chart reflect the snapshot sentiments of fringe players 
who are trading on the day at that time.  ' The multitude' either let their 
pension funds determine what will happen for them, or have the last 
Telstra report filed in a back room while they get on with their daily 
lives.   In the absense of an extreme event, the multitude are probably 
not hunched over their computers trying to pick the next share price 
breakout.   

However, there is no reason to suppose that the traders around the 
margin will not continue to behave predictably, somewhat along the 
lines of their past behaviour, unless of course they decide not to do so!

SNOOPY

discl: hold TLS


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on Pegasus Mail version 4.02
----------------------------------
"You can tell me I'm wrong twice, 
but that still only makes me wrong once."


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