10 Best Communication and Media Stocks To Buy According to Hedge Funds

04. AT&T Inc. (NYSE:T)

Number of Hedge Fund Holders: 70

On June 11, BNP Paribas upgraded AT&T Inc. (NYSE:T) from an “underperform” rating to a “neutral” rating. In its latest quarterly earnings report announced on April 24, AT&T Inc. (NYSE:T) reported a normalized earnings per share of $0.55, surpassing expectations by $0.02. The company posted revenue of $30.03 billion, which missed forecasts by $498.06 million. In Q1 2024, the count of hedge funds holding stakes in AT&T Inc. (NYSE:T) rose to 70 from 66 in the previous quarter, based on Insider Monkey’s database of 920 hedge funds. These stakes collectively amount to around $2.91 billion in value. Steve Cohen’s Point72 Asset Management emerged as the largest stakeholder among these hedge funds during this period.

Miller Value Income Strategy made the following comment about AT&T Inc. (NYSE:T) in its Q3 2023 investor letter:

“Our third-largest holding at quarter end was AT&T Inc. (NYSE:T), a leading provider of communications and connectivity services in the US. At $15/share, the stock trades at the same price it did almost thirty years ago. The share price is much less interesting to us in relation to where it has traded in the past than in relation to how much cash the company generates and what management is doing with it. At just over 6x earnings, the stock trades near its lowest price-to-earnings (P/E) multiple ever, also representing close to its largest-ever P/E discount to the stock market. The business converts most of its earnings to free cash flow, implying a forward free cash flow yield north of 15%. Just under half of free cash flow is going toward the dividend (7.5% yield), while much of the balance is going to debt paydown. In other words, if the stock does not fall below its lowest-ever valuation, investors clip a rock-solid 7.5% in cash, while owning a growing portion of a very steady business as management reduces debt outstanding. A discounted cash flow model will suggest that intrinsic value for shares begins with a “2,” suggesting the stock is undervalued on an absolute basis. The lack of volatility in the underlying fundamentals also makes it unique when compared to many other things we own, which reduces the probability of permanent capital impairment and argues for a significant weight in the portfolio.

AT&T looks particularly attractive when compared to some of the larger names dominating the S&P 500. Compare the stock to Apple, for instance, whose revenues and profits are likely to shrink this year, even as it trades at 29x this year’s earnings estimate. The ongoing return to rationality and capital accountability, along with extreme valuations in the megacap tech stocks, have us more excited about our portfolio’s prospects than we can remember for quite some time. As always, we remain the largest investors and welcome any questions or comments.”