nojin bearish on telstra

'High dividends are typically a poison bait used by companies
like Telstra to lure misguided investors into bad investments !!!'

http://www.invest4profit.com.au/free_example9b.asp

Rule # 2
Invest For Growth ... NOT Dividends

Let's start at the absolute beginning.

I always begin by assuming current share prices are correct.
I say that as the market is a very efficient pricing mechanism.

I also have the objective of making money.

In this light, there is just one bridge to use - i.e. a trend.

If you seek to make money in the market, you need to sell at a
price higher than the price you bought at.

For the fans of join-the-dot, the bridge between is a trend.

It's yet another reason to focus long term - as I say in Rule #1.
It takes time for trends to unfold.

Here's the all important message.

If the subject is share prices, rest assured, there is only one
driver of trends that is sustainable - i.e. rising profits !!!

Hence, as an analyst and strategist, my foremost concern is
a company's earnings, and most importantly, the earnings for
each of the next 3 years.

So, which companies should you invest in ???

If you seek to maximise your returns, I suggest to invest in the
companies growing their profits in the fastest manner, as they
are likely to be the companies whose share prices rise most !!!

Before we look at an example, let's assume that share prices
are fair and correct, as they usually are.

Now, looking forward 12 months, if company XYZ grows profit
by 100%, it is reasonable to expect the share price will double,
assuming that prices are still fair and correct.

In other words, the bridge to profit was the growth in earnings.

Let's look at a different type of example.

Let's look at a company NOT growing profits fast - i.e. Telstra.

Over the next 2 years, even on optimistic best case scenarios,
... it is VERY unlikely Telstra can surpass profit growth of 4%.

I therefore conclude the share price will be within 4% in 2008.
... i.e. with 4% of the last close.

FYI - that is the best case scenario.

I'm actually bearish on TLS based on the last close of $3.63.
I suspect $2.95 is the next target, but even so, that's irrelevant.

My point is: TLS will NOT grow earnings in a notable manner,
... so why would the share price rise in a notable manner ???

Forget the big dividend on offer in T3.

Share prices are based on normalised recurring profits, NOT
on dividends. Dividends play NO part in the valuation process.

High dividends are typically a poison bait used by companies
like Telstra to lure misguided investors into bad investments !!!

Compared to a 50% capital return, Telstra's dividend is quite
minor, and rest assured, there are numerous companies that
are on track to grow their profits by 50% in the next 12 months.

Ideally, the objective is to invest in these companies.

I will say it again - share prices can only rise in a sustainable
manner, and hold a bullish trend, IF earnings are rising.

My objective is to find the companies growing their profits in the
fastest and surest manner.

I'm recommending a company now that fits the bill to perfection.

It has no earnings now, but in 2008 they should hit $60m profit.

I believe this company is currently priced on a 08 P/E of just 2.3.
In my opinion that qualifies as a bargain for long term investors.

I may be proven wrong, but it looks like a profoundly compelling
opportunity to at least double your money, perhaps even triple it.

Best of all, if it unfolds as planned this should transpire by 2008.

Now, there are some who will say this type of stock is risky, but
.. they're the same knuckleheads touting T3 due to the dividend.

Profit growth IS the ONLY reliable driver of rising share prices !!!

I therefore advise my clients to invest for growth, NOT dividends.