Buy Portugal Telecom Right Now

Aug. 7.14 | About: Portugal Telecom (PT)


Portugal Telecom just had a favorable news event.

Yet, the ADR is still trading at about the same level as the Portuguese market's close.

It thus makes sense for you to buy this ADR right now as the likelihood of being rewarded right away - tomorrow - is high.

You should be out there today buying Portugal Telecom (NYSE:PT) at $1.86, $1.87, $1.88. I'll quickly explain why.

Portugal Telecom was one of the many Portuguese stocks which got slaughtered due to the failure of Banco Espírito Santo. In the case of Portugal Telecom, things were made worse because Banco Espírito Santo was a major shareholder and used the influence on its management to make it buy 900 million EUR in Rio Forte commercial paper just months before Rio Forte ultimately went bankrupt.

In light of this, Portugal Telecom stock got slammed hard. Such irresponsible management is certainly not awarded any trust by investors, anywhere. Portugal Telecom got slammed not just because it lost 900 million euros in value/liquidity, but also because of the willingness of present management to lose that money.

In little more than 1 month, Portugal Telecom lost around 53% of its value, or around 1,400 million EUR in market cap. 900 of those millions could have been due to the loss of the entire 900 million investment in commercial paper, but most of the remaining is clearly due to a management discount being applied to the stock due to the willingness to throw away shareholder cash.

It so happens that the main executive in charge of Portugal Telecom during this episode, Henrique Granadeiro, has just quit minutes ago. This means that the management discount being applied to Portugal Telecom will be substantially reduced when the market opens tomorrow.

But that's where it gets interesting. Portugal Telecom is also quoted in the U.S. markets through ADRs, and the ADRs are still reflecting today's Portuguese market close, and not tomorrow's reaction. PT at $1.86 with EUR/USD at 1.345 is the same as Portugal Telecom at 1.3932 whereas it closed at 1.3740 in Portugal. Both the open and regular trading are likely to be reasonably higher than that, come tomorrow.


You have the chance to buy Portugal Telecom after a favorable news event, at the prices prevailing before the favorable news event.

Disclosure: The author is long PT. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I bought on the news - I will sell tomorrow given the logic explained in the article.