1. AT&T Inc. (NYSE:T)
Number of Hedge Fund Holders: 80
AT&T Inc. (NYSE:T), one of America’s largest telecom and media conglomerates, has long struggled with its debt-heavy balance sheet and underwhelming stock performance. When a caller told Cramer they had inherited shares in 2016 and asked for his honest take on the management and future prospects of the stock, here’s what Cramer replied with:
“T&T? Yeah, my nanny Mary always said if you don’t have anything good to say don’t say it, so that’s it.”
Although Cramer was never a fan of the stock until then, AT&T Inc. (NYSE:T) has surged by 62.4% since that comment, defying Cramer’s low expectations.
Although Cramer was never a fan of the stock, he finally came around and praised the company’s impressive run and explained the reasons behind it during an episode that aired on the 28th of March:
“Suddenly AT&T has been making a name for itself as a safe haven in a tough market and we don’t have many of those. When investors feel like the environment’s gotten really treacherous, they like to throw their money into something deemed safe. Telecom fits the safety criteria because it’s more insulated from the cyclical nature of the economy. Things have to get pretty darn bad before you stop paying your cell phone bill, don’t they? And also, because these companies tend to pay pretty good dividends.”
So, what’s changed then to allow AT&T to become a winner this year? Well for starters this is no longer the old AT&T that we think about after spending years trying to diversify away from the phone business, which was ill-fated by the way, they finally decided to stick with what they knew best: phone business. Back in September AT&T told us they’re selling the rest of their stake in Direct TV – what a disaster that was – and that comes on top of the Warner Brothers spin-off a few years ago doesn’t hurt that the whole wireless business has gotten less competitive, and that’s allowing all three of the major carriers to steadily raise prices.
But the main reason AT&T stock got its mojo back is that management held an investor day in December and they laid out a very clear road map with healthy growth expectations. It was a breath of fresh air for investors who might have bought this stock for years for the dividend but have seen those quarterly payouts cut.
“At the end of January, they put up an excellent quarter, good subscription numbers, strong free cash flow growth, and management raised their previous guidance that might seem like a low bar but in a negative market like this one, I think a little consistency goes a long way. But the most recent results indicate that AT&T has really turned the corner here.”
So, here’s the bottom line here AT&T’s mainly roared this year as a higher yielding flight to safety trade, but there are also some company specific positives as the company’s gone a long way to turn itself around. At the very least, the stock’s no longer a value trap, which is why it’s been working this year and why I expect it to keep working as long as people are worried about the state of the economy.”
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