Telefonica - good to go or stay away?

[tooqk4u22]

Telefonica is so beaten up because of Europe and some other issues including moderately high leverage, slowing growth, and speculated dividend cut (even a big cut would still produce a good yield at current levels).

Anybody have any thoughts. 

[arebelspy]

My thought is a general one, not to do with Telefonica in particular.

Here goes, and no offense intended.

Do you know something everyone else doesn't know?  If not, if you're basing your analysis on public information, what makes you think it isn't already factored into the price?

[astadt]

I own them, though im not trying to make a quick buck but recognize that they are a huge company that should continue to do well for years and years (and I get a 10% yield)

[tooqk4u22]

arebelspy - no offense taken but you are either saying the market is rigged by insiders (which ins some degree i think it is) or you are saying the market is completely rational (which is not the case).  Companies can be over or undervalued at any time for any number of reasons - if that were not the case then Warren Buffett would not be where he is today.

I generally invest in indexes but that is just being a sheep and beleiving in the premise that over time markets rise and dollar cost averaging smoothes out the ride a bit.  However, I do invest in individual stocks when per my analysis a company is undervalued. 

For Telefonica I am on the fence even at these levels as said because of the high leverage and slowing growth in Europe offset by growth in Latin America that combined has produce stable and modestly growing cash flow.  I feel that the company is undervalued by a couple of dollars because of the risk Europe keeps bringing to the table with Spain directly impacting Telefonica and the biggest risk is to the companies abilitiy to refinance its debt over the next few years. 

I guess another way to say my view is that if Europe would just pause (no good news/no bad news) for an extended period of time then I think the company is undervalued. 

[grantmeaname]

If he's coming from the same school of thought as most mustachians (see A Random Walk), he's not arguing that they're totally rational, but that they're efficient. That is, if it's undervalued the price will soon correct and if they're overvalued, well, the price will soon correct. Burton Malkiel's analysis has pretty much proved that this is the way the stock market functions, without meaningful exceptions exploitable by fundamental analysis (or any other technique).

[Mr Mark]

A lot of good analysis has shown it's extremely unlikely you or anyone else can beat the market over time. We as investors also tend to make poor, short-term biased, financial decisions, based on perceived patterns or a tiny and incomplete bit of 'research'.

But if you already have a huge stash, and you want to gamble/speculate/try to beat the market, hey, go for it. But I'd cap any such activity at 5% of my total stash (max). The place to address such 'market intuition' is at the asset allocation level. Maybe boost Emerging Markets % or Dividend aristocrats. Hell, have 5% in commodities & precious metals if you want. Ensure your bond exposure matches your espectations for interest rates.

Generally I think short-term trading and positions in individual companies (or bonds) are too risky and low return/high fee to be a key part of a mustacian portfolio allocation, IMHO.

The real 'tricks' to asset allocation investing are:
- use low fee mutuals or ETFs.
- decide a high level asset allocation and within each part [stock/bonds/cash/real estate/commodities] have a sub-allocation plan.
- rebalance that % asset allocation blend every 366 days (this is the bit that forces sell high - buy low)

[smedleyb]

Telefonica is so beaten up because of Europe and some other issues including moderately high leverage, slowing growth, and speculated dividend cut (even a big cut would still produce a good yield at current levels).

Anybody have any thoughts.

Damn straight it's been beaten down.  Yield is through the roof, valuation is cheap, lot of risk has been priced out -- I say buy when there is blood on the streets.  And the Spanish market has been bloodied beyond recognition.  Banco Santander (STD), Telefonica (TEF), even the Spanish ETF (EWP) represent easy ways to play the Spanish market.  I say invest what you can afford to lose, but scrunch your nose and buy the panic.   

[elysianfields]

Folks, much of TEF's business isn't even in Spain, but rather Latin America.  Argentina is a significant investment risk - the government just nationalized YPF, an oil company owned by Spanish firm Repsol - but that's only a small part of TEF's business.

If he's coming from the same school of thought as most mustachians (see A Random Walk), he's not arguing that they're totally rational, but that they're efficient. That is, if it's undervalued the price will soon correct and if they're overvalued, well, the price will soon correct. Burton Malkiel's analysis has pretty much proved that this is the way the stock market functions, without meaningful exceptions exploitable by fundamental analysis (or any other technique).

Maybe "the market" is inefficient but individual stocks aren't.  I think there's a degree of efficiency but investors are human after all, and therefore subject to overreacting one way or another.

For just a single counter-example, why is Adams Express (ADX), a closed-end mutual fund, selling at a 14.2% discount to its net asset value?  If the markets were rational, people would arbitrage the fund against its component holdings.

Getting back to TEF, this telecom is a big cash cow in some growing economies, has a nice yield and good growth prospects, so I'm long TEF.

Cheers,

Elysian

[CuencaSolo]

I'm watching Telefonica hoping for a typhoon.  When the Spanish financial crisis gets worse, or the Argentine government seizes the telephone company they own control of without compensation, the stock might overreact downward.

What I'm not clear about is taxation on those nice dividends.  Spain takes a 25% withholding tax on dividend income paid to foreign investors.  Would I avoid that by buying the ADR in New York, or is the tax already taken out when you get dividends there?  If it is taken out, do you get a confirmation of foreign taxes paid so you can credit it against the US 15% dividend tax?  I'd appreciate a word from a US investor experienced in owning European stocks.  (I'm a US taxpayer with brokerage accounts in the US and Europe, so I have flexibility, I just don't quite know what I'm doing yet.)

[astadt]

I got an unscheduled dividend from TEF a few days ago for .3387.

Anyone know what that was all about? Im not complaining btw.

[tooqk4u22]

It was the script shares.

[Mr Mark]

Telefonica is so beaten up because of Europe and some other issues including moderately high leverage, slowing growth, and speculated dividend cut (even a big cut would still produce a good yield at current levels).

Anybody have any thoughts.

Damn straight it's been beaten down.  Yield is through the roof, valuation is cheap, lot of risk has been priced out -- I say buy when there is blood on the streets.  And the Spanish market has been bloodied beyond recognition.  Banco Santander (STD), Telefonica (TEF), even the Spanish ETF (EWP) represent easy ways to play the Spanish market.  I say invest what you can afford to lose, but scrunch your nose and buy the panic.

Interesting to see the stock is down another 20% since the post, more than offsetting a year's yield after 3 months...     http://www.google.com/finance?client=ob&q=NYSE:TEF

[arebelspy]

Yeah, your quote is from the same person spouting nonsense about the Facebook IPO, who was thinking of pulling the trigger around 30, then revised to low 20s when it kept dropping.

His investment style appears akin to gambling.  Specifically betting on the longshot ponies that are "due."

As I pointed out, there's likely a reason it's priced low and tanking, and unless you know something the market doesn't, it doesn't seem like a good idea to buy.

And, as always, further proof that no one should take investment advice from anyone giving it away free online (myself included).

YMMV, and thanks for the followup post Mr Mark.

[smedleyb]

Telefonica is so beaten up because of Europe and some other issues including moderately high leverage, slowing growth, and speculated dividend cut (even a big cut would still produce a good yield at current levels).

Anybody have any thoughts.

Damn straight it's been beaten down.  Yield is through the roof, valuation is cheap, lot of risk has been priced out -- I say buy when there is blood on the streets.  And the Spanish market has been bloodied beyond recognition.  Banco Santander (STD), Telefonica (TEF), even the Spanish ETF (EWP) represent easy ways to play the Spanish market.  I say invest what you can afford to lose, but scrunch your nose and buy the panic.

Interesting to see the stock is down another 20% since the post, more than offsetting a year's yield after 3 months...     http://www.google.com/finance?client=ob&q=NYSE:TEF

Interesting that you fail to mention Banco Santander and the Spanish ETF EWP, which are flat from when I posted what I did.  But when the intent is to attack rather than engage in dialogue, we shouldn't be surprised when the data gets cherry-picked.

Oh, and Arabelspy, you want to degrade me, go ahead.  But I challenge you right now to prove in the Facebook IPO where I spouted nonsense.   

(and remember folks, Arabelspy is allowed to "time" markets -- hence his incessant purchasing of Las Vegas real estate because "it's cheap"; but anyone else who attempts to time any other market is obviously a fool and a charlatan -- hence my 100% cash position in my long term account because stocks are "expensive").

Furthermore, I will put out a challenge to Arabelspy and Mr. Mark -- I will bet you both any amount that over the next 5 years, buying Spanish stocks here and now will considerably outperform the S&P. 

[tannybrown]

It's an interesting idea: most people would agree that trying to time the stock market produces more losers than winners.  Does that wisdom carry over to the real estate market? 

[smedleyb]

It's an interesting idea: most people would agree that trying to time the stock market produces more losers than winners.  Does that wisdom carry over to the real estate market?

Fuck man, I agree with that statement.

But I also know panic, and Spanish markets are in the throes of panic. 

Like they say, buy when there is blood on the streets. 

Or if you're Arabelspy or Mr. Mark -- impugn the integrity of any poster who doesn't subscribe to the idea that markets are totally random and efficient.   

[astadt]

Telefonica is so beaten up because of Europe and some other issues including moderately high leverage, slowing growth, and speculated dividend cut (even a big cut would still produce a good yield at current levels).

Anybody have any thoughts.

Damn straight it's been beaten down.  Yield is through the roof, valuation is cheap, lot of risk has been priced out -- I say buy when there is blood on the streets.  And the Spanish market has been bloodied beyond recognition.  Banco Santander (STD), Telefonica (TEF), even the Spanish ETF (EWP) represent easy ways to play the Spanish market.  I say invest what you can afford to lose, but scrunch your nose and buy the panic.

Interesting to see the stock is down another 20% since the post, more than offsetting a year's yield after 3 months...     http://www.google.com/finance?client=ob&q=NYSE:TEF

I'd be worried if I didnt have a nearly infinite timeframe to hold or if I had more than .3% of my total holdings in it. I have less. Its a gamble and its fun to watch and chat about and predict what will happen with it. 

Why are people so against having fun with investing?

Im not planning on increasing my position in TEF but I wouldnt be against it. I have a DRIP going with it and those fat dividends have been buying more and more as its gone down. Could it keep going down? It sure could but again I absolutely understand the risks and have mitigated them within my core holdings and other strategy.

I say we tone down the negativity and make our points logically and let people decide whats best for them.

[skyrefuge]

Why are people so against having fun with investing?

I would say primarily because there are people new to investing at this forum, who, influenced by stupid mainstream financial reporting, will see these threads and be further influenced to believe that stock-picking is a Mustachian-approved way to invest, when really, it's not.  It's kind of like having a thread debating the merits of a Hummer H2 vs. a Cadillac Escalade here; maybe it's entertaining, but quite against the ideals of this site, and many newbs are not likely to realize the discussion is "for entertainment purposes only".  Or heck, not only newbs; even MMM admits that its difficult to fight the temptation to try to "beat the market", even though he knows he'll almost surely fail.  And since individual posters are, like gamblers, likely to report only biased results that highlight their wins and ignore their losses, it can be a misleading lure to the weaker ones amongst us.

[astadt]

Why are people so against having fun with investing?

I would say primarily because there are people new to investing at this forum, who, influenced by stupid mainstream financial reporting, will see these threads and be further influenced to believe that stock-picking is a Mustachian-approved way to invest, when really, it's not.  It's kind of like having a thread debating the merits of a Hummer H2 vs. a Cadillac Escalade here; maybe it's entertaining, but quite against the ideals of this site, and many newbs are not likely to realize the discussion is "for entertainment purposes only".  Or heck, not only newbs; even MMM admits that its difficult to fight the temptation to try to "beat the market", even though he knows he'll almost surely fail.  And since individual posters are, like gamblers, likely to report only biased results that highlight their wins and ignore their losses, it can be a misleading lure to the weaker ones amongst us.

Point taken... that wasnt that hard was it.

Maybe the moderators should sticky a post on the investor section covering indexing and mustianian advice so to not confuse the newbies.

Though i dont feel too bad for people who sole use information given by random, completely anonymous people as the basis of their financial planning... seems pretty dangerous. But with that Kids, I'll say it again, Picking individual stocks is dangerous and akin to gambling, dont do it if you dont want to suffer the consequences .

[arebelspy]

I have no comment other than to reiterate my earlier stance.

no one should take investment advice from anyone giving it away free online (myself included).

[smedleyb]

Why are people so against having fun with investing?

I would say primarily because there are people new to investing at this forum, who, influenced by stupid mainstream financial reporting, will see these threads and be further influenced to believe that stock-picking is a Mustachian-approved way to invest, when really, it's not.  It's kind of like having a thread debating the merits of a Hummer H2 vs. a Cadillac Escalade here; maybe it's entertaining, but quite against the ideals of this site, and many newbs are not likely to realize the discussion is "for entertainment purposes only".  Or heck, not only newbs; even MMM admits that its difficult to fight the temptation to try to "beat the market", even though he knows he'll almost surely fail.  And since individual posters are, like gamblers, likely to report only biased results that highlight their wins and ignore their losses, it can be a misleading lure to the weaker ones amongst us.

This is a horrible analogy, and it's a subtle form of ad hominen that goes against the spirit of dialogue and discussion astadt is attempting to advance.

It's also insulting, as if most mustachians are some dimwits who believe everything the read on the internets and need to be sheltered by brave defenders of the faith such as yourself! 

Index funds are the right choice for most of us and the majority of our funds -- I give you that.

But come on, we also buy stocks because they hold the possibility of making us a shitload of money over a small amount of time, in ways that real estate or bonds never in a million years could.

I've made 2000% over the past 14 years; and i got 80% if that on two trades.  Bragging?  Hardly.  Maybe I turned $200 into $4000K; maybe it was 100K into 2 million?  Who gives a shit.  The point is put your goddamn Vanguard prospectus down and embrace risk to make some big money.

High risk, high reward.  I say invest only what you can afford to lose.  And if you want an easy 4.5%, go buy a fucking munincipal bond fund.

[grantmeaname]

If your concept of investing is a fun way to piss away your fun money, that's totally fine, and if you want to advise others to gamble with 2 or 3% of their portfolio, that's totally fine too, though I'll disagree.

If you tell everyone that investing in stocks is only okay with money you're fine with totally losing, or that municipal bonds are a great place for their 'stache, that's not fine.

And if you tell everyone that they can make 2000% in a decade and change by trying to time the market, you're delusional. (Not to mention your argument that the fact that one of your golden picks went down is irrelevant because the other two stayed level. Seriously, can you hear yourself?)

[smedleyb]

If your concept of investing is a fun way to piss away your fun money, that's totally fine, and if you want to advise others to gamble with 2 or 3% of their portfolio, that's totally fine too, though I'll disagree.

If you tell everyone that investing in stocks is only okay with money you're fine with totally losing, or that municipal bonds are a great place for their 'stache, that's not fine.

And if you tell everyone that they can make 2000% in a decade and change by trying to time the market, you're delusional. (Not to mention your argument that the fact that one of your golden picks went down is irrelevant because the other two stayed level. Seriously, can you hear yourself?)

Here's a question for you: how long have you been investing in stocks?

[arebelspy]

Here's a question for you: how long have you been investing in stocks?

I thought you said to discuss the argument, not attack the poster?

/eyeroll

[grantmeaname]

That was before I started discussing the argument. Or, as a wise man once said, "I think a real dialogue would benefit all in this forum. Save the lame insults for another site."

[Mr Mark]

Telefonica is so beaten up because of Europe and some other issues including moderately high leverage, slowing growth, and speculated dividend cut (even a big cut would still produce a good yield at current levels).

Anybody have any thoughts.

Damn straight it's been beaten down.  Yield is through the roof, valuation is cheap, lot of risk has been priced out -- I say buy when there is blood on the streets.  And the Spanish market has been bloodied beyond recognition.  Banco Santander (STD), Telefonica (TEF), even the Spanish ETF (EWP) represent easy ways to play the Spanish market.  I say invest what you can afford to lose, but scrunch your nose and buy the panic.

Interesting to see the stock is down another 20% since the post, more than offsetting a year's yield after 3 months...     http://www.google.com/finance?client=ob&q=NYSE:TEF

I'd be worried if I didnt have a nearly infinite timeframe to hold or if I had more than .3% of my total holdings in it. I have less. Its a gamble and its fun to watch and chat about and predict what will happen with it. 

Why are people so against having fun with investing?

Im not planning on increasing my position in TEF but I wouldnt be against it. I have a DRIP going with it and those fat dividends have been buying more and more as its gone down. Could it keep going down? It sure could but again I absolutely understand the risks and have mitigated them within my core holdings and other strategy.

I say we tone down the negativity and make our points logically and let people decide whats best for them.

Hey, I was just stating the facts. Touchy?

And I stick by my earlier responses to the original post on why, "logically" it is not a good way to invest - but it's your money, and if you want to gamble, go for it. 

[smedleyb]

So, should we just change the name to "buy mutual funds and just shut the fuck up about everything else" forum? lol!!!

I think markets are dymaic, fluid, complex, and wonderful mechanisms.  For those who desire a more nuanced discussion of  stocks -- heck, MMM has referred to us as "advanced" consumers of personal finance -- I can't imagine a better place to have a discussion than right here, right now.

For those convinced markets are dark, impervious, unfathomable beings which you can never understand -- or know of nothing other than the fact that they go up over time (which is still a core presupposition; hello Nikkei?  Hello Dutch Tulips?) -- then buy all means, trash, disparage, ridicule, and mock anyone with a variant viewpoint. 

Today's my day off, and I got nothing but time. 



 

[arebelspy]

So, should we just change the name to "buy mutual funds and just shut the fuck up about everything else" forum? lol!!!

I think markets are dymaic, fluid, complex, and wonderful mechanisms.  For those who desire a more nuanced discussion of  stocks -- heck, MMM has referred to us as "advanced" consumers of personal finance -- I can't imagine a better place to have a discussion than right here, right now.

I'm certainly open to hearing discussion about other investing methods.  Ridiculous claims are different.  Posters who fly off the handle at being "attacked" when called on it is something else altogether.

For those convinced markets are dark, impervious, unfathomable beings which you can never understand -- or know of nothing other than the fact that they go up over time (which is still a core presupposition; hello Nikkei?  Hello Dutch Tulips?) -- then buy all means, trash, disparage, ridicule, and mock anyone with a variant viewpoint. 

It's because we understand the market that we advise index funds. 

Today's my day off, and I got nothing but time.

Oh good.  You can start here:

If your concept of investing is a fun way to piss away your fun money, that's totally fine, and if you want to advise others to gamble with 2 or 3% of their portfolio, that's totally fine too, though I'll disagree.

If you tell everyone that investing in stocks is only okay with money you're fine with totally losing, or that municipal bonds are a great place for their 'stache, that's not fine.

And if you tell everyone that they can make 2000% in a decade and change by trying to time the market, you're delusional. (Not to mention your argument that the fact that one of your golden picks went down is irrelevant because the other two stayed level. Seriously, can you hear yourself?)

[Mr Mark]

Your just keep saying things that we not only disagree with, but things that are wrong.

And if you're going to put words in our mouths, make them good ones!

[tooqk4u22]

Hopefully you all got all of that out of your system.  Sorting through all the comments it is apparent that opinions are formed and a line in the sand is drawn resulting in a breakdown in communication.  I agree with a lot of the points from both sides and believe both sides are correct. 

- it is best to invest in low cost index funds especially if you don't know how, or are willing, to research.  But for this simplicity you get the winners and the losers no matter what but it averages out to an acceptable number - well maybe not for the last decade.

- investing in individual stocks is risky but markets may be efficient but are not always rational - if that were the case 2008 wouldn't have happened and private equity shops would be out of business.  But it is hard and I don't know the magic formula, I have won some and lost some - sometimes on the same stock. My track record on individual stocks however is somewhat better than my dollar cost averaging in index funds, somewhat due to buy and hold strategy so time helps and higher dividends.  I have also put more in if a stock gets beat up if I believe in the company/management/fundamentals and have also sold shortly after buying if it goes up quickly (15%+ in a short timeframe).  At the end of the day it is probably not enough to compensate for the greater risk but then again my individual stocks are only 10-15% of my overall.   

- as for timing the market most people believe in rebalancing your portfolio, which is nothing more than a forced way to time the market so clearly timing matters.

- as for Spain and other eurozone companies i also beleive there is good opportunity in the long term but there may be pain along the way.  Look for large companies that have good franchises, smaller ones may not have the capital to survive, and more than anything else look for those with low debt levels - high debt is the real risk, as it matures it may be difficult for companies to refinance it due to dislocation in the markets or it may be real expensive.  Bad companies will always fail, but too much debt will crater even the best franchises - incidentally I think TEF is a solid company that will face near term pressure on earnings due to reduced demand in europe but its debt load is way to high and makes it far to risky. 

[arebelspy]

Heh, thanks for being calm and rational tooqk4u22.  I think we'll give you the final word on this topic.

My apologies for any negativity on my part.

You're right about the line in the sand. We aren't really making progress, just causing ill will.

I'm going to lock up these threads. Anyone wishing to discuss further can use PMs. Any objections, PM me.

Cheers all!