Since the beginning of May, we have seen many Wall Street favorites getting awfully cheap. With all the selling going on, some of the names we've expected to stand up against selling, haven't fared as well as others. Names like McDonald's (MCD), Coca-Cola (KO), and Johnson & Johnson (JNJ) have all trended lower as money has flowed out of the stock market for the fourteenth straight week. Safe havens aren't what they used to be, as gold is trending lower and treasury notes failing to yield any significant amount. However, there are some names that not only have held up these past weeks, but have actually gone up.
I'm talking about the two telecom giants AT&T (T) and Verizon (VZ), as well as the retail king Wal-Mart (WMT). While other names have done good such as Disney (DIS) and Monster (MNST). And this may have been on other outside news, like takeover targets or earnings. Though Wal-Mart is trading higher now because of its recent earnings report, it is a strong company that has handled the selling very well until it reported. Some may have an issue with having two telecom companies, claiming the holding is not diverse. My suggestion would then be to swap Verizon for Disney, or add a name like Colgate Palmolive (CL) instead. Colgate is another name that has performed rather well, in the red by a hair, since the beginning of the month.
Click to enlarge
Above: 1 month chart of T (Courtesy: E*Trade)
Here we have AT&T with an overlay of the SPY, in orange, an ETF that tracks the performance of the S&P 500. As you can see, AT&T has not only outperformed the S&P, which is down approximately 6% this month, but is up nearly 3%. AT&T has a market cap of $198B and has a quarterly dividend of $.44 or yields approximately 5.20%.
Above: 1 month chart of WMT, (Courtesy: E*Trade). Orange tag indicates dividend, red tag indicates earnings report.
Wal-Mart has performed exceptionally well. Like AT&T, Walmart is out performing the S&P, but by a whopping 16%. This is mainly because Wal-Mart reported earnings on May 17, which has propelled the stock higher ever since. However, I would like to point out that before that, Wal-Mart was positive for the month of May, but not by a whole lot. Wal-Mart has a market cap of $222.5B and a quarterly dividend of $.3975, or a yield of approximately 2.43%.
Above: 1 month chart of CL, (Courtesy: E*Trade.com).
Instead of charting Verizon, I decided to do Colgate Palmolive, and I did this for the reader. Verizon has a nearly identical chart as AT&T, and while I planned to showcase the two of them, I felt it would be most beneficial to show Colgate. Colgate has only risen about 1% for the month of May, but is outperforming the S&P by about 7%. Colgate Palmolive has a market cap of $47.2B and pays a quarterly dividend of $.62 or a yield of approximately 2.51%. Note: Verizon has a market cap of $117.7B and pays a quarterly dividend $.50 or a yield of approximately 4.83%.
For all of those who question putting two telecoms in your portfolio citing lack of diversification, and can only chose one, I would chose AT&T. Personally, and especially in the short term, I have no problem putting them both in there, diversified or not. But many have issues with it. AT&T has a higher yield and I personally like it more. With the lack of safe havens, money has been flowing into higher paying dividends stocks more and more over the last few weeks. It's a good place to park your money while waiting out the storm.
Since May has started we've had a some days in the green, but have mostly spent our time selling off each day. Tuesday's stellar gains were quickly washed away with the sell-off on Wednesday, and we likely won't see too much movement either way until June. In June, we have the Fed meeting, as well as the Greek elections. Until then, we will just be living off the next European headline that comes out, buying one day, selling the next and vice versa. Do yourself a favor and avoid the headaches we saw last fall, grab some companies with a solid yield and low movement.