With the S&P/ASX 200 (INDEXASX: XJO) up over 3% in just one month, I can all but guarantee there are many investors out there, who are beginning to think their portfolio is becoming overvalued.
The ASX has been pushed higher once again by the big banks, supermarket giants and Telstra Corporation Ltd (ASX: TLS), which is up 5% in the same period.
Telstra, which is often considered one of the safest stocks on the market, has been the recipient of investors' ongoing search for dividend yield. As they struggle with interest rates as low as 2.5% on term deposits and savings accounts.
So is Telstra still a safe bet today?
As noted above, Telstra is often considered one of the safest blue chip stocks on the market. But following an enormous rise in the telco's share price from 2011 (when it traded as low as $2.70) till now, I believe its shares have become expensive.
Now, that doesn't mean Telstra isn't the fantastic business it was yesterday; but as seasoned investors know, no stock is a buy at any price. Indeed, at over $5.60 per share, I believe it's not a buy. However, I wouldn't rush out to sell it either.
Though shareholders must be willing to accept some volatility in Telstra's share price and make provisions for when prices do drop. Such as keeping an adequate cash balance. I believe Telstra's dominant position in many markets – such as mobiles, fixed broadband, pay-TV and more – combined with huge profit margins and free cash flows, will enable it to grow into a stronger and more efficient business over time.
