Is it time to get out of Telstra? Can I invest in India through an exchange traded fund? What do the brokers think of Car Group (formerly carsales.com)? When do CBA and CSL report their earnings?
Question 1: I am a long suffering shareholder of Telstra (TLS), having bought most of my holding in the tranche that went at $7.40 (I also bought smaller quantities is the other tranches that went at $3.30 and $3.60). I have watched it go up and down over the years but have never taken any action. Is it finally time to get out?
Answer: I would be inclined to hold your position. I don’t think Telstra is “going to shoot the lights out” and it certainly won’t get back to $7.40, but it is a pretty defensive stock with low volatility paying a reasonable dividend yield of almost 4.5% (fully franked).
Telstra turned the corner about 18 months back when it grew its earnings for the first time in more than a decade. Through a program of product simplification and cost elimination, and with the help of a return to pricing rationality in the mobiles market, Telstra in 2024 is a different beast to that of a few years’ back. It has also separated its businesses into distinct groups, and although it has said that it is going to keep Telstra Infra Co (the company within Telstra that owns and runs all the infrastructure), spinning this out at some stage can’t be ruled out. The broker analysts are generally positive on the stock. According to FN Arena, the consensus target price is $4.37, about 9.5% higher than the last ASX price of $4.00. The range of targets is a low of $4.00 through to a high of $4.75.
Telstra is due to report its first half earnings on 15 February. Bottom line: I would only sell Telstra and book the loss if I had something really interesting to get into.
Question 2: I hear positive things about the potential for India. Is there an exchange traded fund (ETF) that invests in Indian companies?
Answer: Yes, Betashares has the India Quality ETF, ASX code IIND. It tracks the performance of an index (before fees, expenses, and taxes) comprising a diversified portfolio of quality Indian companies. A constructed index from Solactive, it selects 30 of the highest quality Indian companies based on a combined ranking of the following key factors – high profitability, low leverage, and high earnings stability. Performance of the fund has been ok – 15.9% over the last 12 months to 31 December and 9.8% pa over the last 3 years. The management fee is 0.80% pa.
One thing I don’t understand is that there has been a divergence between the performance of the index and the performance of the fund. When investing in something where the index is put together, ultimately, the investment is only as good as the methodology that goes into constructing the index.
Question 3: Car Group (CAR), the old Carsales.com, has been a top performer in my portfolio. What do the broker analysts think it is worth?
Answer: The broker analysts like the stock, but think it is expensive. According to FN Arena, there are 3 “buy” recommendations, 2 “neutral” recommendations and 1 “sell” recommendation. The “sell” is on valuation grounds. The consensus target price is $30.85, 7.7% lower than the last ASX price of $33.43. The range of individual targets is a low of $25.00 up to a high of $35.30. On multiples, CAR is currently trading on 40.9x forecast FY24 earnings and 35.3x forecast FY25 earnings.
CAR is scheduled to report its earning on Monday 12 February.
Question 4: When do CBA and CSL report their profits?
Answer: CSL reports its half year profit on Tuesday 13 February (before the market opens). CBA will report its first half profit the next day, Wednesday 14 February (again, before the market opens).
