When markets are running scared, it may be prudent to look at companies making new highs. Chances are there’s something going on with the underlying business that explains why they’re bucking the trend. And chances are that trend will continue.
There are always a few companies making new 52-week highs, even in a challenging market. The past few months have also seen a rotation towards more value-oriented and defensive stocks moving higher.
One such play is telecom AT&T (T). The company hasn’t had much respect in recent years, as management looked to diversify the company’s operations – and then spun off those assets instead.
Today, however, the core telecom business is faring well. Earnings have beat expectations. And shares are even up over the past year, during the market’s worst year since 2008.
Action to take: While shares are trending up, they’re still fairly close to book value. And the stock is trading for about 8 times earnings, a reasonable price for the slow-growth telecom business. Chances are the company can continue to keep moving higher from here. Plus, at current prices, shares yield about 5.8 percent.
For traders, the April $20 calls are an at-the-money trade. Last going for about $1.10, a continued move higher in shares could leverage that move into a mid-double-digit return in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.