I rarely like to write in hindsight for obvious reasons - it is always easy to see things after the event. But the headlines of last week in the media that the Australian Future Fund had sold down its stake in Telstra caught my attention.
There were no specifics as to when this started and finished - or if in fact it is finished. The report said that the fund sold 684.4 million of its Telstra shares to institutional investors at $3.47 a share, a 5 per cent discount on Friday's closing price.
So we see the market mark the stock down immediately:
Chart 1
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At the time of this writing, TLS is down to $3.36. So it is not only the retail shareholders that are unhappy about Telstra but also Institutions who thought they had bought a bargain. No such thing, even for the Instos.
Even though the Future Fund has stated it will not sell down further for 180 days, the possibility still hangs over the head of TLS.
But note below how when the market made a rally off the March lows TLS plunged even further:
Chart 2
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Guess who could have been selling then?
Telstra has had what one could call a very checkered history in recent times. The Future Fund was between a rock and a hard place in that as our sovereign fund it should show greater commitment to Australia's leading Telco provider. But the Future Fund was never really happy about holding TLS and David Murray was never going to take Sol Trujillo's nonsense.
But for many other reasons it has always been a very sad story:
Chart 3
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One of the great benefits about being a 'non-institutional investor' is that we are not subject to controls - e.g., having a holding based on the local share index.
And I guess many retail shareholders have now ridden the stock to its long deep low and tolerated perhaps a nominal holding from various tranches sold to 'Australians' as the government sold it off.
To me, patriotism plays no part in my investment decisions. If good, I buy; if it fails, I sell. Anything else is too complicated for me.
Enjoy the ride.
Tom Scollon
Chief Analyst
Trading Tutors Team
