Weekly Market Report - How should you play T3

Investors in Telstra 3 will have to decide this month if they will pay the final installment of $1.60 per share. Given that investors have already paid $2.00 for the first installment, the second installment due by 29 May will bring the total investment to $3.60. The question, however, is should investors pay the second installment or take their money and run?

Currently T3 shares are trading at $3.02 and based on an initial purchase price of $2.00 this represents a gain of 66.26% excluding dividends. When the second installment is paid the T3 shares convert to ordinary Telstra shares which are currently trading at $4.62, therefore the investors profit in T3 will drop to around 28.33% excluding dividends.

Given that investors may be sitting on some tax losses due to the recent market pull back, it may be wise tax planning for investors to realise their profits in T3 to offset these losses. Of course investors also need to take into account the effect of receiving the bonus offer of 1 extra share for every 25 T3 shares held if you pay the second installment.

These bonus shares will add 4% to the investment which may or may not be worth receiving depending on the individual’s tax position. My advice, if you hold T3 shares, is to pay a visit to your accountant now rather than wait until the last minute as it may prove very worthwhile.


So what can we expect in the market?

For the regular readers of this report, you will remember I previously reported that for the market to be bullish it needed to rise above 5697 in the next one to two weeks, which it did on 23 April rising to 5712 points. Over the next 5 trading days the market pulled back from this level leaving the 23 of April 2008 as the only day in which the All Ordinaries Index closed above the level predicted.

The positive news is that even though the market found resistance at this level, it has not fallen away but instead traded sideways. This suggests that the recent bearish sentiment in our market is abating and that the bulls are gaining momentum. Given this, I expect in the next few days to see the market move through this level again and for it to continue rising over the next month.

While it is likely this will present an opportunity to enter a number of the larger blue chip stocks, I would strongly suggest that any entry be a staged approach rather than placing all your investment capital in the market at once.

This report was by Dale Gillham , chief analyst of share investment company Wealth Within.

Other Bloggers: I will hosting the 87th edition of the Festival of Stocks this week. If you would like to submit a relevant article please use this submission form. All entries must by be in before May 5th 2008.