Even Warren Buffett has bad days

It’s at times like these when it can be easy to lose interest in the stock market.

— Nothing seems to be going up.

— Plenty of stocks seem to be going down.

— Markets feel like they are cruising for a fall.

Everywhere you look, pessimism abounds.

Trump. North Korea. Nuclear weapons. European elections. Australian house prices. Turnbull. Shorten.

This headline in yesterday’s Australian Financial Review said it all…

“3 reasons to worry about the Australian sharemarket”

Stop me if you’ve heard them all before…

— The lofty expectations already baked into US stocks as reporting season starts.

— The first round of voting in the French election, and the possibility of a Frexit, something that would be a greater market concern than Brexit.

— Australian consumer price index (CPI) data is due for release on April 26th. A low read on inflation could support share prices, as it will keep interest rates on hold. On the other hand, increasing inflation could put interest rate rises on the table, something that could batter the share market.

If you only ever invested when the coast ahead seemed clear, the last time you’d likely have piled into the market was in 2007… right at the peak of the market, and just before the GFC.

To compound the situation, the same people probably sold out in March 2009, right when the market bottomed.

All of which reminds me of the Peter Lynch quote…

“The key to making money in stocks is not to get scared out of them.”

Peter Lynch ran the Magellan fund for Fidelity Investments in the US for a 13-year period during which his annual average return was a remarkable 29 per cent.

Yet, a study by Fidelity found the average investor in the fund during Lynch’s tenure actually lost money.

It’s almost unfathomable. Yet true. In short, instead of staying the course, people were scared out of stocks.

Making emotional investment decisions kills your returns. As does chasing performance, into and out of one fund, one sector, one asset class. Think about that the next time you’re tempted to buy gold.

Even the very best investors have bad years. They sometimes have bad days. Warren Buffett, the world’s wealthiest investor, had a bad day yesterday, his Goldman Sachs shares falling 5 per cent and his IBM shares down 5 per cent in after hours trading.

My guess is this is all water off a duck’s back for Buffett. Sure, a net worth of $US74 billion helps ease the pain. But he’d have never got to anything remotely like that figure by chopping in and out of shares based on one quarter’s results, or in advance of the upcoming CPI data, or because of the potential result of a European election.

As humans, we’re wired to worry. We worry even more about money. When it comes to money, the pain of loss is about three times greater than the pleasure of gains.

And believe me, there have been some losses.

Speaking of losses, the Telstra Corporation Ltd (ASX: TLS) share price has collapsed over 20 per cent so far in 2017.

I’ve been bearish on Telstra for a while now, saying a dividend cut was on the radar, something that could seriously torpedo the Telstra share price. And that was before the bombshell announcement from TPG Telecom Ltd (ASX: TPM) that the low-cost provider was entering the mobile market.

Today the Telstra share price trades around $4, a price at which the boffins at Deutsche Bank are saying is time to buy.

According to a report in The Age, the Deutsche analysts write that while Telstra will be hurt by the entry of TPG to the mobile market, it will be somewhat mitigated by Telstra’s superior network, its loyal customers, that TPG will be targeting value-conscious customers, and TPG’s lack of a store network to drive subscriber growth.

Maybe. But as our own Scott Phillips recently tweeted…

Scott’s got a foot in both camps, liking both Telstra and TPG Telecom, especially at these prices.

On the other hand, Andrew Page, our resident dividend expert, has found an entirely different angle to play the telco space.

Like others in the sector, its share price has been smashed, falling around 25 per cent in the last month.

But where others are fearful, Andrew smells a bargain… so much so that he just named the company as one of his 3 Best Buys Now Stocks in a brand new report, exclusively available to subscribers of his Motley Fool Dividend Investor advisory service.

It’s a gutsy call, for sure. But when you look beyond the headlines — and see a growth stock trading on a forecast P/E of less than 10 times earnings, and a forecast fully franked dividend yield of over 4.3 per cent — you can see the attraction.

For investors willing to take a risk, looking to snap up a bargain in these volatile times, looking for a beaten down stock that’s now paying a very attractive fully franked dividend, Andrew’s telco “best buy” might be worth a look.

I might even grab some myself.


Attention investors: The Motley Fool's dividend expert Andrew Page has just released his #1 dividend stock for 2017. Chances are you've never heard of this little company, yet it's a fast-growing consumer favourite - with the shares up 155% in just the last five years! Even better, it's throwing off loads of cold, hard cash. As we speak, these shares are trading on 4.2% dividend yield, fully franked (6.0% gross). Making it a 'best bet' for growth AND income... No credit card required.

Simply click here to discover the name, code and a full investment analysis in our brand-new FREE report, "The Motley Fool's Top Dividend Stock for 2017."

Of the companies mentioned above, Bruce Jackson has an interest in Telstra.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.