ASX Shares Selling IP's to invest in Telstra Shares (TLS)

Perhaps I've got this all wrong, but I'll try to explain and if anyone wants to reply, please go ahead....

I've been reading the LIC threads, and one thing I've sort of realised is that people talk about NTA. I presume the NTA is the actual value of all the assets owned by the company. So, if the NTA of a share is below its share price, then you are buying at a bargain. So if the Telstra share price plumetted so much today, would its NTA be well above the $3.87 it closed at today? Wouldn't that be a bargain? Does anyone know its current NTA?

Maybe I've got it all wrong......

 

Telstra is a company - not a LIC.
LIC's have NTA and to the best of my knowledge - companies don't.

 

TLS NTA currently is $0.45 at $3.85 a share vs. something like FMG which has a NTA of $4.13 against a share price of $5.56.

 

Yeah wrong

NTA of LIC ; sum of market value of shares + cash / shares on issue

Closest thing to NTA for company like TLS would be book value ; basically liquidation value of its assets.

 

There are not many companies on the ASX that trade below NTA. Back when Benjamin Graham wrote his classics on value investing, it was very slow and hard work to read through financial statements - they had to be obtained via post, then one had to read through all the pages... now, we have Internet and data crunching capabilities that speed it up almost instantaneously.

The other thing with NTA is if the company is liquidated, will you actually get the dollar value prescribed to the NTA by accounting standards? If your NTA is comprised largely of shares in mining start ups, that NTA could fall quite quickly.... Cash is very safe - providing it's under the control of competent management.... but, if a company is burning through cash every quarter, you can't prescribe too much value to the cash on the balance sheet if it's depleting quickly!

The best way to value companies is generally based on the cash they throw off every year versus what is an acceptable return.

For an acceptable return, you need to keep in mind that the Australian government offers bonds which are essentially risk free.. same with cash in the banks with an Authorised Deposit Institution (ADI) up to a certain limit ($250k?) as the Government will make good any losses.

Current yields are 2-3%. Given investing in companies is higher risk, we want to be compensated for this extra risk. If I am going to start up a business and I only earn a 2-3% return on my capital, why would I even bother? I'd just stick my money in the bank..

Historically over the long-term if you just bought an index fund, you would have earned ~10% per year. So before investing money, it's important to consider if it can overcome the hurdle of 10% per year IMO.

There are many companies trading on the ASX right now on yields of 2-3%. This is madness. When interest rates rise (it is a case of when, not if, whether it be 5 years or 10 years..) people will be able to stick their money in a term deposit and earn ~5% a year without any risk. So unless the company has grown its cash flows significantly, there will most likely be a decline in the share price.

 

The writing has been on the wall about Telstra's dividend for a long time. Should not come as a surprise to anyone. If it is a surprise, then you're probably better off seeking GOOD QUALITY professional advice before investing in shares.

 

Should have kept the house may as well put the proceeds in the bank. TLS share price down $2.00 and it has had about $2 in earnings. The link is BS depreciation is real and expensive. An Example I bought shares in VGS for 5c doubled up after 500% increase, became GNC. Shareholders, fat overpaid CEO's making piles of money, $10 a tonne, but becoming inefficient and unviable for users. Earnings went up share price went up, earning many multiples on purchase price @ $ 17 I bailed out Ron Greentree and other,CEO's bailed out. Advisors, Financial planners telling people look at great yields get some of dat ! But all that was left was a run down uncompetetive system which required huge capital injection. Many delivery site were losing money and closed down. I bought some houses with the profits. Mortgauged them to lease a GNC testing stand and weigh bridge leased some land across the road to put in bunkers hired an efficient manager who would out load and in load on demand instead of a few hours a week could handle grain for less than half the cost of Graincorp . Eventually leased GNC silos and sheds. built up a buisiness by leaving funds in the company, much more tax efficient too. 400k investment became perhaps $1.6m in 15 years by reinvesting. $1.6 m of GNC became 400k .