On Tuesday March 6th the market finally put on the brakes and offered buyers an opportunity to pick up a few shares of companies on their watch list. Even though I’ve been investing in cash for the last few months I did have some cash set a side for the purchase of any stocks that might meet my buy criteria. What is The Stoic Investor looking at these days? VOD and PEP are high on the list of new additions I would like to add to my portfolio. ATRI and NPK are a couple of small caps that have experienced quite a bit of price depreciation in the past few weeks that I would like to add as well. However, none of these were actually my buy candidate on Tuesday. Nope, I went with a company I already own. The hated or loved: TEF.
I’ve listed in a previous post why I’m an investor in TEF for the long-term. Those reasons still stand and with it dipping to a new low on Tuesday I picked up a few more shares. This represents my second purchase of TEF shares and I was able to add 215 shares at a price of 16.36. TEF now represents my second largest holding and unless there is another substantial drop in its price I will probably hold steady with the 575 shares I now own.
TEF is either a value play or a train wreck waiting to happen. Although it has substantial debt that makes it less appealing even for a telecom, it has a geographical diversification that I find appealing in a rapidly growing region, South America. It is my belief that the market is punishing TEF for its domestic market, Spain, and the 22.8% unemployment experienced in that country and discounting the growth prospects in its largest market. Combine a horrible economic picture in its home market with substantial debt and a recent dividend cut and you have a stock that is taking a beating in the market. Clearly it is not without risk and will likely suffer more in the short-term. In the long-term I believe that TEF will turn the corner and provide me with price appreciation as well as a nice dividend. Only time will tell…
The Stoic Investor 
I had a question about TEF when they pay a dividend is there a withholding for taxes?
Piamba… Thanks for stopping by. Yes, my understanding is that there is a Spanish withholding tax of 19% for dividends paid out by TEF.
I bought in the dip this week too, I bought 500 shares of Atlantic Power (AT) at $14.03. I’ve been watching it for a little while and think even though the stock is pretty boring and they didn’t have a great Q4 2011, they made some good partnerships that will continue to allow them to keep the high divi and move up the stock price. But as you say, only time will tell!
MSS– Congrats on the addition to your portfolio, looks like it is growing quite nicely 🙂 There is nothing wrong with a boring stock especially if it makes you money.
Thanks, Heska Corp is also on my radar after the article on Seeking Alpha, but I don’t know if I missed the boat. It was around 10 early last week, and has climbed to around 12 after the article. I’m keeping a close eye on it.
MSS– One thing I’ve learned in my short investment career is that most stocks will come back around to the price you want if you are willing to be patient, not all, but many. I think finding the quality investments that you are comfortable with and then just watching them is very valuable to your long term progress. Wish you the best.
Interesting buy. TEF is a bit too risky for my taste, but I agree that the market may be unfairly punishing it due to worries about Spain and its Eurozone neighbors. If all the sovereign debt issues get sorted out, then TEF may indeed rebound nicely.
Regarding the other stocks you listed: As you know, I just bought VOD, so I view it favorably. I am watching PEP for the time being as the company goes through a “transitional” year (according to the CEO). Its announced dividend increase of 4% for 2012 is on the low side, so I may just wait and see how the restructuring goes. NPK has caught my eye in the past, but the meager quarterly dividend coupled with the large (but variable) special dividend is not especially to my liking. I must confess that I’d never heard of ATRI before (its low yield likely kept it off my radar), but I see it has had a nice string of dividend increases over the past several years.
Deedubs– I’ve been watching both ATRI and NPK for over a year now. I wish I had picked up ATRI the other day when it was down to 199, its already bounced back to 210 😦 I like both due to their sound management team and that they carry no debt. NPK may be facing some headwinds, but it has been around a long time so I think it will do fine. True, the NPK dividend is variable and only paid yearly. Neither of these bother me. I can respect a managment that tell its investors that you will be rewarded as we are rewarded. They cut the dividend this year, in line with the lower earnings, and will likely increase the divi when earnings are up again. If an investor is really dependent on consistent and frequent dividend payments, NPK is probably not a great choice. Of the two I’m more partial to ATRI. It has a very boring, but necessary product line and the company can crank out the cash.
Interesting choice! You already know my thoughts on TEF, so I won’t bore you with them again but I do wish you the best of luck. I hope it rebounds strongly for you, and am confident it will in time. The debt is really the only scary aspect about the company and further cuts to the dividend may be needed to address that.
I agree with you on VOD and PEP. Attractive at these prices, and I may add to VOD soon. PEP is already a large holding for me, but if it wasn’t I would buy at these prices. It looks good, long-term.
Best wishes!
Hey DM, I think between our opposing views on TEF we would make great analysts on the company 🙂 I hope it rebounds nicely too. I think it will take things finally turning around in the EU as a whole for that to happen and to determine if I’m right on why the company is being traded so low these days. The debt is worrisome to me as well, but I’m hoping that with the recent dividend cut that the company will wake up and see that it needs to get the debt situation to more acceptable levels.
PEP is very high on the list for my next purchase. If I can fund a Roth IRA for 2011 PEP will likely go there.
You and DM should do a point-counter point post on TEF. The eye watering yield would have my alarm bells ringing so loudly I’d never look closely enough to see the debt. 🙂
very curious on the 19% Spansih tax withholding. are you able to recoup that or is it lost $$?
Nice blog, BTW. I’m off to poke around a bit more.
jlcollinsnh– Thanks for stopping by and the compliment! I like your idea, that would be a an interesting post. I actually enjoy discussing TEF with DM because our views are so different. Honestly, I learn more from those with opposing views than I do to those who agree with me. Respectful debate is indeed enriching.
jlcollinsnh— Oops, forgot to address your TEF question. Sorry about that. Honestly, I’m not sure. I think that you are able to claim the Foreign tax credit if you itemize your deductions. This is a whole new animal for me so I’m probably not going to answer with any authority until I actually file my 2012 taxes next year.
actually, you don’t even have to itemize. the FTC is right on your 1040, line 47 this year, I think
your 1099-div should give you the number.
I was more wondering if the Spanish government offered any tax forgiveness on dividends paid to non-Spanish nationals. I doubt it….:)
Thanks for the tips jlcollinsnh. I agree with you, I don’t think the Spanish gov’t will give me a break. TEF is my first foray into owning a foreign stock and I just started my position back in Jan. Jury is still out if it will end up being a good choice or not. Hopefully in Jan. of 2013 I can write up a good one year review. Keep your fingers crossed for me.
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