ASX 200 weekly wrap: Telstra shares a buy, upside for BHP shares, avoid CBA, CSL, Afterpay and more…

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Despite a week of tariffs, Trump tweets, trade wars, tax backflips and an Aussie dollar below 74 cents, the ASX 200 index has fallen just 8 points over the past 5 days.

The Telstra (ASX:TLS) share price continued its dramatic decline, falling fell as low as $2.60 this week, its lowest point since late 2010. Telstra shares have now fallen 40 per cent over the past 12 months, making them the biggest loser over that period in the ASX 200 index.

While mindful that many investors before me have tried and failed to pick the bottom for Telstra shares, I reckon at around $2.60, they could be pretty close to a buy.

Telstra shares are ending the week trading at around $2.62.

Over the next 15 months, Telstra shareholders will receive the FY18 final dividend of 11 cents per share, plus FY19 full year dividends of what could be 20 cents per share, all fully franked.

Dividends of 31 cents on a Telstra share price of $2.62 gives investors a 15 month income return of 11.8 per cent, or almost 17 per cent when grossed up for franking credits.

Although attractive on a dividend basis, I wouldn’t be holding Telstra shares for the long term. Competition is already intense, and that’s before the entry of TPG Telecom (ASX:TPM) into the mobile market. TPG mobile launches its $0 data-only plans later this year.

But for income, Telstra shares could be worth a nibble at these prices.

For the latest Telstra share price, chart and news, click here.

The BHP Billiton (ASX:BHP) share price is having a decent end to the week, its shares trading at close to $34.

A broker note from Macquarie this week put a share price target of $38 on BHP shares, implying almost 12 per cent upside from here.

Mining shares are notoriously capital intensive, but with commodity prices riding high and large acquisitions seemingly off limits under the frugal leadership of CEO Andrew Mackenzie, BHP is gushing cash, something that can go towards an increasing dividend and share buybacks.

BHP shares are trading on a forecast fully franked dividend of 4.7 per cent, or 6.7 per cent when grossed up for franking credits.

I’d be a buyer of BHP shares for modest capital appreciation and a decent fully franked dividend.

For the latest BHP asx share price, chart and news, click here.

The Commonwealth Bank of Australia (ASX:CBA) share price has fallen back a little from last week’s high, now trading around $73.20.

Still, that’s a decent recovery for the CBA share price, as earlier this month it fell as low as $67.22.

Despite CBA shares looking cheap, and trading on a dividend yield of 5.9 per cent, I’m not a buyer.

With property prices falling, and consumers up to their eyeballs in debt, the risks for bank shares are to the downside.

Last month, Schroder Equity Opportunities Fund warned that sustainable bank profits are likely to be some 25 per cent below current levels when normalised bad debts and an educated guess at penalties are taken into account.

I much prefer tailwinds to headwinds, so am happy to give Commonwealth Bank shares a miss.

For the latest CBA share price, chart and news, click here.

The CSL Limited (ASX:CSL) share price has jumped 36 per cent higher over the past 12 months, helping propel the ASX 200 index around 7 per cent higher over the same period.

Last week CSL shares were close to the magical $200 mark, only to drop back a little this week to around the still magical but not quite as high $193 level.

CSL is now the 4th largest ASX 200 company, behind the aforementioned CBA and BHP, with Westpac (ASX:WBC) shares taking 3rd place.

From a valuation perspective, CSL shares are not cheap, trading at over 40 times earnings. But then again, after a recent profit upgrade, CSL expects FY18 profits to be 27 per cent higher than the previous year.

CSL shares are up 13 per cent since I named them as one of 5 ASX blue chip shares for 2018 and beyond.

For the latest CSL share price, chart and news, click here.

Stocks of the week

The Afterpay Touch (ASX:APT) share price jumped 8 per cent higher on Friday to $9.30 after Goldman Sachs lifted the Afterpay share price target to $11.15.

Goldman made the move after upgrading its assessment of the company’s potential in the lucrative U.S. market.

Afterpay shares have soared 244 per cent higher in the past 12 months, making them the best ASX 200 performers in that period, just beating out fellow ASX tech stock Appen (ASX:APX). Appen shares are up a lazy 232 per cent in the last 12 months.

Afterpay shares are popular amongst a number of top performing fund managers. The current valuation is off the charts, as is the current growth rate. The shares are volatile, the potential enormous. Buy them now and check back in 5 years.

Australian Pharmaceutical Industries Ltd (ASX:API) shares were the best performing on the ASX 200 this week, soaring 23 per cent after the owner of the Priceline pharmacy chain bought Clearskincare Clinics for $127.4 million.

It seems there’s money in beauty!

I’m not a fan of retail businesses, and Priceline has had its challenges over the past year or so. The API share price is down 14 per cent in the last 12 months.

Vita Group (ASX:VTG) could be a “backdoor” way to play the beauty angle. Vita is mostly known for its Telstra retail shops, but last year it bought Clear Complexions for $9.5 million, marking the company’s entry into the $1 billion per annum Australian non-invasive medical aesthetics (NIMA) market.

As an added bonus, Vita shares trade on a double digit fully franked dividend yield.

Next Week

Saturday marks the end of the 2017-18 financial year.

The RBA meets on Tuesday to hold interest rates at 1.5 per cent for the umpteenth month in a row.

Most economists think rates will remain on hold until well into 2019, something that, by comparison, will keep making dividend shares look attractive.

For 2 ASX dividend shares with big growth potential, click here.

Thanks for reading, and have a great weekend. If you are looking for more investing advice and shares to buy from The Capital Club, like our Facebook page

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