T stock as readers know, entered my portfolio last year. I am not a big follower of telecom stocks but T Stock (AT&T Stock) interests me partly because of the sheer size of the company and because of the trading range making Put Selling fairly easy.
Statistically speaking, AT&T Inc has a mixed bag when it comes to their financials. For example book value of the company is $17.81 which is excellent compared to where T Stock is trading. The cash flow is a respectable $3.81 but the PE is high at 47.4 times earnings, yet the price to sales is reasonable at 1.6 times although it would be nicer to see it down around 1.0 times. The profit margin is 3.67% which is low for telecoms and the return on investment is downright poor at 1.97%. The dividend though is highly attractive at $1.76 or 4.94% as of Oct 15 close at 35.21. Market cap is huge at 205.5 billion and revenue is 127.4 billion.
VZ Stock versus T Stock
On the other hand Verizon Communications (Stock symbol VZ) is also interesting and I do believe has slightly better statistics. Cash flow is $9.85 which is much higher than T Stock, but book value is less at $12.69. The PE is 44.50 times earnings which is pretty much in line with T Stock. Price to Sales though is better at 1.1. Profit margin is also much better at 10.18% and return on investment is also better at 7.91%. The dividend is $2.06 or 4.62% based on the close on Oct 15 of $44.50. Market cap is almost half that of AT&T at $127.1 billion but revenue is quite good at 113.1 billion.
Not Interested in owning T Stock or VZ Stock
But neither of these makes for a compelling long-term stock trade. Both have declining revenues and declining market share. I would not want to tuck these shares away in any portfolio for more than a few months at a time. But when it comes to Put Selling, both make for an interesting trade. I could only pick one as I do not want more than 1 Telecom stock so I picked T Stock. If T Stock should break their trading range, then I would drop it from my Put Selling strategy.
Put Selling The Decline In T Stock
T stock and VZN Stock both commenced declining with downgrades of both companies by analysts back on Oct 5. Since then both companies’ stock have been in decline.
T Stock was downgraded by analysts on Oct 5 as was VZ Stock
T Stock Trading Range
I have not been following VZ Stock this past year but I have followed T Stock. The stock was in a nice uptrend until Oct 5 and has now broken two support levels and fallen through the 50 day and 100 day moving averages. Today it hit and bounced off the 200 day moving average. These are long-term averages. While T Stock bounced off the 200 day today, it has done a lot of technical damage in a very short time period.
T Stock Put Selling Resumed
I was glad to begin put selling T Stock again. The last time I was put selling against T Stock was July 24 when I sold the September $33 naked puts. With the decline in T Stock I am once more selling the $34 and $32 put strikes. As long as the stock stays above $34 I will probably add the $33 strike as well and conclude my Put Selling with a 3 step ladder, namely $32, $33 and $34 T Stock put strikes.