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Tom Scollon
Chief Editor
You may have heard me speak of cockroaches before. You see one and you can bank on it that there are more. I liken the theory to companies that have problems. One nasty is declared but you can sense there are more to come.
I speak here of Telstra. However, I should declare at the outset that I am not a fan of the stock and have not been for many years having long sold my shares. It is not a matter of ‘I told you so'. It is just that I have not been able to see any real long term upward momentum in the stock.
Enter centre stage Sol and his three amigos. Another hurricane has hit.
I recall well a company that was hemorrhaging badly and to which I was appointed MD many years ago. And I must confess at the time the temptation was to get all the bad news out on the table and even, dare I say, to over do it. Now I am not suggesting that Sol and his boys are doing anything untoward.
They and many others may think that it is all out on the table. I have news for them; there are still more cockroaches lurking and not even these new ‘Made in America' brooms have seen them all.
The Telstra share price is following a pattern I have seen so many times. It will now recover a little. Maybe back up to $4.50/4.60 and then the next hurricane will hit again. I don't know its name. I don't even know when it will hit but I do know it will hit and hit hard.
And when the stock price recovers to these levels all the exits will be jammed as you, Fund Managers and everyone tries to bail out. Added to the woes will be the short sellers smelling blood. All this will send the price well below $4.00. And even then it will not represent value. Even then it will be still a long way from being at an attractive buy level. It will be a long time before you would be confident enough to suggest to your Mum it would be a great buy. The stock will be motherless for a long time.
Enjoy the ride.
Tom Scollon
Chief Editor
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