Despite its great run, Telstra shares could still see further gains ahead.
That’s how the team at Fairfax described recent trading on the ASX.
At the time, the S&P/ASX 200 was trading 0.07% higher. It’s safe to say investing fortunes weren’t going to be made that day!
Perhaps it’s a case of the mid-summer blues — after all, the market’s had a pretty good run over the past two months, the S&P/ASX 200 jumping 9% higher.
A pause for breath is both welcome, and healthy. Breathe in, breathe out…
As to the market’s next move, as ever there’s a wide divergence of opinion.
You don’t have to look far to find some random doomsayer predicting the next market crash.…
“While the market has rallied strong for four straight years, the current price structure of the trend indicates we could be due for quite a correction ahead — one that could lead to a 20%-plus decline.”
– Frank Ochoa, Daily Markets, January 14 2013.
One bet I’m confident of winning
Sign me up for the other side of that bet.
20% declines are so few and far between that I’ll happily bet against such a crash in 2013. The fact that our doomster’s prediction is based on the direction of some random squiggly lines on a chart only adds to my conviction that he will be proven wrong.
Investing is about putting the odds in your favour. I can’t guarantee we’ll get through 2013 without a crash, but I can guarantee the odds are strongly in my favour.
Seems I’m not the only one putting the prospect of a stock market crash firmly to one side…
In U.S. trade last week the volatility index, know as the VIX or the fear index, fell to its lowest level since June 2007.
Fear is dead.
At the same time, equity mutual funds recorded their second highest inflows on record, with $22 billion flowing into equity funds around the world.
Long live the bull.
Never fear…I’ll be back
Volatility may be low today, but rest assured, it shall return.
The VIX is currently trading at 13.5, but just before Christmas it was at 22 and in June last year at 26.
I’ll let you into a little secret…when, in 2013, the VIX spikes up again to above 20, it’s time to buy shares.
Just buy something.
Perhaps it’s more of your favourite holdings. Perhaps it’s something you’ve always wanted to buy, but the shares have always looked too expensive. Or perhaps you spot something that’s been beaten so far down that it just screams buy.
If the VIX spikes up above 25, it’s a time to buy even more.
If it gets to anything like the dizzying heights of 50, or even more, as it did during the height of the GFC, back up the truck and fill your investing boots.
Fear keeps most investors, including the so-called professionals, out of the market at precisely the time they should be buying.
Worse, not only don’t they buy, they sell, often when fear is at its peak and the market is at its lowest.
It’s utter madness, of course, but it happens time and time again.
You may have spotted Motley Fool Share Advisor Investment Analyst Scott Phillips on Sky Business News over the Christmas break.
Between Scott and myself, we’ve got around 40 years of investing experience under our belts. Crashes, booms, busts…we’ve seen just about everything the market can throw at an investor, and come out the other side, smiling and wealthier.
Our Foolish purpose is to help the world invest better. If you learn just two things from us, let them be…
1) Invest for the long-term.
2) Don’t let your emotions rule your investing.
The great dividend dash
All of which brings me nicely onto an article in The Australian Financial Review titled “Focus on yield stocks as interest rates stay low”.
Glenn Hart of boutique fund manager Antares Capital, is an advocate for yield stocks.
Judging by the performance of the Antares’ Dividend Builder Fund, a top performer last year, returning 26.5% over the year to November, he’s no Johnny-come-lately to the attractions of dividend paying shares.
And, also as judged by Mr Hart’s comments in the AFR, there may be more gains ahead…
“If you want to earn a decent return, it is an unpalatable decision people are going to have to make, and that is to take on higher volatility…Equities are still reasonably attractive, albeit very volatile.”
Doesn’t sound too much like a share market crash is just around the corner, does it?
Or that despite the run up in favoured dividend stocks including Telstra (TLS.AX), Westfield Group (WDC.AX) and Wesfarmers (WES.AX), that the great dash for dividends might be coming to a screaming halt.
More than you can ever have imagined…
If there’s one thing I’ve learnt in 25 years of investing, it’s that markets, and individual stocks, can and do move further than you can ever have imagined, both up and down.
Think back to early 2011, when Telstra shares were languishing at $2.70, despite them, at the time, trading on a dividend yield of over 10% – and that’s before franking credits!
It was unthinkable to most investors that two years later, shares in this lumbering giant — its fixed line business shrinking, and the National Broadband Network (NBN) threatening to wreak havoc on its finances and competitive position — would be trading some 65% higher, dividends on top.
Long-time Motley Fool readers might recall, in August 2011, we called Telstra our “…number one ASX 20 pick for the long term as it provides excellent cash returns, limited downside and reasonable upside potential.”
The rest, as they say, is history.
Telstra…stranger things have happened
With the RBA set to cut interest rates even further in 2013 — potentially as low as 2% — who’s to say Telstra shares, currently still yielding over 6%, fully franked, couldn’t hit $5 or even higher?
Stranger things have happened…
If you’re not in the mood for a beverage, but you are in the market for high-yielding ASX shares… Get three “Rock-Solid Dividend Stocks” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!
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Bruce Jackson has an interest in Telstra and Wesfarmers . The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).