Forum Archive Index - February 2003

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

Hi Phaedrus,
 

> Snoopy,
>I would agree with your statement "I don't think you can
>judge what is a blue chip by looking at a share price chart
>(alone)." I do feel though that it is equally valid to say "I
>don't think you can judge what is a blue chip by looking at
> fundamentals (alone)".
>
>

I've got a one word answer for that Phaedrus: "Fronterra", or if you 
want an overseas example "Red Bull".

These shares are not tradeable on the market, so the *only* way you 
can check out if it is a blue chip or not is to look at the 
fundamentals. 

> 
>
>Why restrict yourself to either approach, when you can use both? 
>
>

I'm not ignoring the chart Phaedrus.  My interpretation of what is 
happening to the Telstra chart is a change in sentiment, not a change 
in the underlying business.  When Telstra floated the whole 
telecommunications boom of the late nineties was taking off 
and peoples expectations were sky high.   Now telecommunications is a 
dirty word and people are wondering how there can be any growth in 
it.  We have seen the extremes of Mr Market being irrationally 
exhuberant, and now manic depressive and this is what I see in your 
chart.

Your chart shows TLS falling, but trends don't last forever.   You 
will be waiting for the worm to turn before jumping back in, holding 
off purchasing as you perceive a significant risk the share may go 
much lower.  TLS *may* go much lower.   But given the high dividend 
yield from an Australian perspective and the sound business 
fundamentals *I don't think this is likely*.  I see what the chart 
is telling me.  To be fair I'm not jumping in yet buying more shares 
with both boots.  But I'm very comfortable with sitting on my holding 
in TLS at current prices.   I don't know when Mr Manic depressive 
will cease to hold sway over the TLS share price.  But I know that by 
holding I will be in there when he does and, looking forward, will 
probably be riding my TLS shares from a lower cost base than you 
will be from yours (given that as a trend follower you will be 
jumping in late).

That and the fact that while I wait the dividends are piling up just 
as if I had the money in a bank deposit, means my strategy for 
investing in TLS is on track as I see it.

SNOOPY

discl: hold TLS



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