After falling some 6% in the month of September, the S&P/ASX 200 (INDEX^: XJO) (ASX: XJO) has bounced back, in a big way, led by our biggest and best blue-chip stocks.
Even telco heavyweight Telstra Corporation Ltd (ASX: TLS) hasn't been immune from the market's vicissitudes. In just the past month alone, Telstra shares are up 8.22%, compared to a 6% return from the S&P/ASX 200.
At time of writing, shares are changing hands for $5.72. Meaning, it need only climb another 4.9% to meet the psychological – but otherwise unimportant – level of $6.00 per share.
The recent price swing, coupled with a continued low interest rate environment, make it unlikely many investors will be betting against it.
Way back in June 2001 was the last time Telstra traded above $6.00. That means, it has taken over 14 years for the share price to recover. In the 2001 calendar year, Telstra fell 37.5% and continued its downward trajectory until late 2010.
Should you buy Telstra Corporation Ltd?
Whilst many investors are unlikely to be bearish on Telstra in the current environment, I believe today's market price is overdone, to say the least. Although it has all the characteristics of a great defensive investment, it's not a buy today.
Telstra could (no one really knows) reach $6.00 per share by Christmas. However, if your investment case is based upon historical performance, momentum and simple valuation metrics such as dividend yields, dividend cover, beta levels and P/E ratios, I say "good luck" because you'll need a lot of it.
Make no mistake, in the share market, there is no substitute for thorough and objective research and analysis.
Here's a better dividend idea than Telstra…
