Sprint Nextel Corporation (S): Is This Stock Still the Best Telecom Opportunity?

Verizon Communications Inc. (NYSE:VZ) is attractive because it is producing growth, has an established spectrum, and is the nation’s largest wireless provider. However, Verizon and AT&T Inc. (NYSE:T) operate a near identical business, although according to both sales and operating margins, Verizon Communications Inc. (NYSE:VZ) does appear to be the cheaper stock.

With this in mind, I like AT&T the best. For one, AT&T Inc. (NYSE:T) pays a dividend of 5% versus Verizon’s 4.1%. Also, AT&T’s margins are lower because it has made the most aggressive investments for future growth, which I like to see in a competitive industry.

Lastly, I really like the move that AT&T Inc. (NYSE:T) is making to acquire Leap Wireless. Not only would Leap add 5 million subscribers, but also a largely unused spectrum with the capability to expand AT&T’s network by 100 million users. Therefore, when looking at two very similar companies, I believe that AT&T Inc. (NYSE:T) has the most short-term catalysts, making it a better investment.

Final Thoughts

In my book Taking Charge With Value Investing (McGraw-Hill, 2013) I guaranteed that a then $2.35 Sprint would exceed $5 by the book’s publication — I was right — but more importantly is that I explain how short-term memory can be good in the investment world, as you must get in, get out, and then forget.

Too often, retail investors want to hold on to their strong performers, and then remain loyal to a fault as the outlook changes with a stock’s price. However, the key to success is to understand that as a stock’s price changes, as does its outlook. With this in mind, Sprint Nextel Corporation (NYSE:S) did what was expected, and proved the logical investor to be correct. But after such large gains, it now appears time for that logical investor to realize that value has run its course, and better opportunities exist elsewhere.

The article Is This Stock Still the Best Telecom Opportunity? originally appeared on Fool.com.

Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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