We recently published a list of 10 Most Buzzing Stocks To Buy Now. In this article, we are going to take a look at where AT&T Inc. (NYSE:T) stands against the other buzzing stocks.
Stock Market Volatility
September and October tend to be the most volatile months for the stock market, particularly during election years. This was recently discussed by Sam Stovall, the chief investment strategist at CFRA Research, who expects the volatility to stay until the end of October.
Stovall says that while the S&P 500 recovered all its 2022 bear market losses by January this year, and reached 22 new all-time highs by March, equities have digested some of these gains and experienced sector rotation away from 2023 high flyers into more defensive areas of the market. Hence, the year started great, but the markets are declining once again. The S&P 500’s average volatility in October 2023 was 35% higher than the average for the remaining 11 months of the year.
Investors are concerned that the Fed will be slower to lower interest rates while inflation remains sticky and GDP growth begins to cool. Stovall expects three 25-basis point cuts this year, followed by another four in 2025. He thinks that while a 50 basis point cut is rare since it only ever happened twice, in 2001 and then 2007, it is still not unlikely given that the economy is worse than expected.
According to Stovall, investors need to be prepared for this increased volatility as the market digests the Fed’s actions and the potential impact on the economy. The market will likely remain uncertain until the Fed can find the right balance between slowing down the economy and stopping inflation, without causing a recession.
Tom Lee, Fundstrat Global Advisors managing partner and head of research, is of a similar idea, suggesting that investors should remain cautious over the next 8 weeks, due to both uncertainty surrounding elections and the September cuts. He says that the stock market may experience a 7-10% pullback, considering there have already been two 7% corrections this year.
Lee thinks at least a 5% pullback can be anticipated, but if it’s only 1-2%, then that’s negligible. But despite the recommended caution for the 8 weeks starting September, he thinks the volatility does not translate into a tough full-year. He views this pullback as a buying opportunity, believing that the market has not yet reached its peak for 2024.
As Lee encourages investors to be ready to buy the dip, we are here with a list of the most buzzing stocks to buy now.
Note: All price/volume data is as of September 6.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A person in the field using their smartphone to connect to wireless communication services.
AT&T Inc. (NYSE:T)
Volume: 52.499 million
Average Volume (3-Month): 32.828 million
Number of Hedge Fund Holders: 71
AT&T Inc. (NYSE:T) is the world’s third-largest telecommunications holding company by revenue and the second-largest wireless carrier in the US behind Verizon but ahead of T-Mobile. Its portfolio spans wireless, wireline, and broadband services, both domestically and internationally.
It has nearly 28 million consumer and business locations with fiber and remains on track to pass more than 30 million fiber locations by the end of 2025.
It’s a compelling investment due to its focus on modern connectivity solutions, expanding its 5G and fiber networks, and offering superior broadband speeds and reliability.
The company has strong pricing power which allows it to generate healthy revenue and maintain profitability. 71 hedge funds hold it currently. As of June 30, the highest stake holder was Citadel Investment Group with a value of $518,594,606.
However, in Q2 2024, there was a decline of 0.4% in the company’s year-over-year revenue. The earnings per share still managed to stay at $0.57.
Consumer Wireline in Mexico drove more than 80% of the total revenue offset by continued declines in Business Wireline. Mobility service revenues grew by 3.4%. It delivered 419,000 postpaid phone net adds in this quarter.
Postpaid phone average revenue per user was up 1.4% year-over-year. Broadband revenues grew 7% due to strong fiber revenue growth of 18%. It also added 239,000 AT&T Fiber, and 139,000 AT&T Internet Air subscribers in Q2.
For the full year, broadband revenue growth guidance is more than 7%. The mobile business is performing well and is expected to grow in the remaining 2024. The focus on selling both mobile and internet services is driving strong returns on investment, making it a top buzzing stock.
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.”
Overall T ranks 9th on our list the most buzzing stocks to buy. While we acknowledge the growth potential of T as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than T but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
