Moving Back into the Mother of All Blue Chips

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

This week’s Alpha Algorithm revisits a previous blue-chip recommendation, AT&T, Inc. (T). Last time, you booked an 11.26% gain on this stock after it hit its stop price on a market pullback. And it has only gotten more popular among the Alpha strategies since then.

Founded in 1983 and based in Dallas, Texas, AT&T Inc. provides telecommunications and digital entertainment services through four segments: Business Solutions, Entertainment Group, Consumer Mobility and International. The company, formerly known as SBC Communications Inc., changed its name to AT&T, Inc. in November 2005.

AtT YTD graph

 AT&T (T) versus the S&P 500 Year to Date

8 Top Investment Strategies Betting on AT&T, Inc. (T)

1. High Quality Stock

The stock exhibits positive fundamentals, including high return on equity, stable year-over-year earnings growth and low financial leverage.

2. Momentum Factor

The stock also is one of the top 120 large- and mid-cap U.S. stocks exhibiting relatively higher price momentum, as measured by a specific factor which has historically driven a significant part of companies’ risk and return.

3. Fundamental Strength

It is a top U.S. stock based on fundamentals measured by book value, cash flow and sales dividends.

4. Dividend Aristocrat

The stock is among those in the S&P 500 that have increased dividends for at least 25 consecutive years.

5. Dividend Dog

It is one of the five highest-yielding stocks among each of the 10 sectors tracked in the S&P 500.

6. High and Steady Dividend

The stock is one of 50 dividend-paying companies from the S&P 1,500 Composite Index that has increased dividends for at least 20 consecutive years.

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7. Small-Cap/Value Tilt

Selected using a multi-factor modeling approach, the stock is a smaller-cap or value stock designed to enhance portfolio risk/return characteristics.

8. Large-Cap Growth and Value

Using a proprietary ranking based on separate models for growth and value, this is a large-cap stock that is part of an index that has historically outperformed its market-cap weighted benchmark.

Recommendation

Buy AT&T, Inc. (T) at market today. Place your initial stop at $34.00.

I am holding off on recommending options for the reasons outlined below.

Portfolio Update

August tends to be a difficult time of the year for stocks, and has proven to be particularly so over the past few years.

This is why I have reduced the number of your option positions to a minimum in recent weeks.

At the same time, the pullback in your some of your positions is setting up some good option opportunities in your portfolio.

In particular, McDonald’s Inc. (MCD) is extremely oversold.

Visa Inc. (V) is exhibiting strong upward momentum, and your remaining options are on their way to recovering strongly.

Sincerely,

Nicholas Vardy

Nicholas A. Vardy

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It was a mixed week for U.S. stock markets, with the Dow Jones down 0.87% and the S&P 500 pulling back 0.56%. The NASDAQ eked out a 0.54% gain. The MCSI Emerging Markets Index ended the week essentially where it started. Big gainers in your Alpha Investor Letter portfolio included Illumina Inc. (ILMN), which jumped 11.21%, Apple Inc. (AAPL), which climbed 8.08%, Google Inc. (GOOGL), which rose 5.61%, and the Market Vectors

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