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An Insider’s Trust Loves AT&T Inc. (T)

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According to a filing with the SEC, a trust connected to AT&T Inc. (NYSE:T) Board member Michael McCallister purchased 9,000 shares of stock on July 30th at an average price of $35.44 per share. Economic theory holds that investors- including company insiders- should prefer to diversify, while insider purchases increase an individual’s company-specific risk. As a result we generally take insider purchases as a sign of confidence in the company, and in fact studies generally show a small outperformance effect for stocks bought by insiders (read our analysis of studies on insider trading).

Operating revenues were up only slightly in the second quarter of the year for AT&T Inc. (NYSE:T) versus a year earlier, and were therefore outstripped by higher costs. As a result net income was down slightly compared to the prior year period and is now about flat year to date against their levels from the same point in 2012. Wireline results have been weak, and only somewhat offset by revenue growth in wireless as smartphones offered by Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), and others continue to increase market penetration. Currently the stock is valued at 14 times expected earnings for this year (and a forward P/E of 13).

AT&T Inc.Of course, most AT&T Inc. (NYSE:T) investors are in it for the dividend- 5.1% on an annual basis at current prices and dividend levels. As might be expected for a large telecommunications company, AT&T Inc. (NYSE:T) also offers little exposure to the overall economy as shown by the stock’s beta of 0.3. Management has steadily raised dividends for years, including through the recent financial crisis and recession. In the first half of 2013 cash flow from operations ticked up slightly to nearly $18 billion, with about half of that going to capital expenditures. Combined with issuing long term debt, the company was able to pay its dividend and buy back over $9 billion in stock.

Insider Monkey tracks insider trading activity and also follows quarterly 13F filings from hundreds of hedge funds and other notable investors. We’ve found that the information in these filings can be useful in developing investment strategies; for example, the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year (learn more about our small cap strategy). Our database is also useful in tracking interest in individual stocks such as AT&T Inc. (NYSE:T). Billionaire Ken Fisher’s Fisher Asset Management reported a position of more than 7 million shares in the stock as of the end of the first quarter of 2013 (find Fisher’s favorite stocks). D.E. Shaw, managed by billionaire David Shaw, owned 2.4 million shares (research more stocks D.E. Shaw owns).

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