4. AT&T Inc. (NYSE:T)
PE Ratio as of April 3: 8.94
Number of Hedge Fund Holders: 66
AT&T Inc. (NYSE:T) is one of the largest wireless carriers in the U.S. and offers telecommunication and technology services, including Virtual Private Networks, AT&T Dedicated Internet, Ethernet, and more. According to the company’s website, its wireless network covers over 99% of Americans.
On March 29, AT&T Inc. (NYSE:T) announced a quarterly dividend of $0.277, payable by May 1 to the shareholders of record on April 10. As of April 3, the stock has a dividend yield of 6.30%. The stock has a PE ratio of 8.94 as of April 3.
Hedge fund sentiment was positive toward AT&T Inc. (NYSE:T) in Q4 of 2023 as hedge funds with investments in the stock were 66 in the quarter, with positions worth $3.905 billion. This is compared to 52 funds with positions worth $1.746 billion in the preceding quarter. Citadel Investment Group is the top investor in the company as of Q4 of 2023. In the quarter, the firm increased its stake by 139% to 50.767 million shares worth $851.867 million. Additionally, in Q4, Millennium Management also increased its position in the company by 530%, and its position is worth $380.127 million.
Miller Value Partners 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.”
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