As the stock market continues to head south, I believe it’s time to go back to the tried and true, at least for a small portion of your portfolio.
By tried and true, I mean the big blues–those trustworthy, stalwart blue chip stocks that can play defense in your portfolio while providing some income and upside appreciation potential.
One that instantly comes to mind is telecom giant AT&T (T).
Right now, T shares trade slightly above their 52-week lows and sports a yield close to 5%. Shares are likely to get a substantial boost next week when Apple’s new 3G iPhone hits shelves on July 11th (see also, “The iPhone Winner and Loser.“)
When you consider that it took two years to sell one million iPods, but just 74 days to sell one million iPhones, having iconic AT&T in your portfolio should settle your nerves.
The Next Generation of Dedicated Consumers
Like many others, I believe the new iPhone will be a big success for AT&T. Apple’s core customer base is generally immune to economic uncertainties: They are wealthy, employed and fiercely loyal to the iPhone. I can’t fathom an iPhone user jumping ship to go and buy RIM’s (RIMM) next generation Blackberry Thunder (see also, “iPhone vs. BlackBerry: Consumers Speak Out.“) Not to mention, AT&T has this exclusive corner in the telecom mark place locked-up.
Literally.
The new iPhone will be locked to work only on AT&T’s network which comes with a cell phone plan that charges extra for e-mail and Web capabilities (for $400, AT&T will even let customers buy an iPhone without a service contract. I guess when you have the corner niche in the global telecom industry you can write your own rules…or break them however you want.)
There’s no question that T is a defensive stock with some very legitimate upside potential.
The only yellow flag I can see is that AT&T plans on subsidizing the iPhones they sell under contract in hopes to make the money back through service fees over the life of the contract. I’m not necessarily opposed to this; in fact it may be a smart idea for the latest generation of the smart phone.
AT&T shares trade for about ten times fiscal ’09 earnings estimates, and less than two times book value and sales. That’s pretty cheap in my book and will protect investors on the downside. Most importantly, in these troubled times, Ma Bell’s balance sheet is in great shape with nearly $2 billion in cash.
Leave it Ma Bell to help us all get a good night’s sleep.
Georges Yared is recommending to his GameChangers subscribers to load up on shares of Apple before the new iPhone is released Friday! Get Georges Yared’s specific buy instructions on Apple and all of his recommended GameChangers when you become a Charter Member today! You’ll also get immediate access to Georges’ special report “Golden Apple: Why Apple’s Set to Soar” AND the brand new GameChangers issue that was just released!
