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John R. Conway
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When I am not trading/investing I enjoy cooking, which is my second passion next to investing. I currently reside in St. Louis, Missouri and I am a graduate of the University of Missouri-St. Louis with a Bachelor of Liberal Studies. I also was in the US Army for eight years in the reserves/in... More
  • 52 week stock high vs. stock heading toward 52 week high. Which one should you pick? 0 comments
    Dec 28, 2011 11:09 AM
    Let's say your interested in a particular sector and you notice there are two best of breed plays in that sector. What do you do If you only want to invest in one of the best of breed plays, that way you won't be too weighted in one sector. Two best of breed stocks that I'm looking at in the same sector is Verizon (NYSE:VZ) and At&t (NYSE:T). Verizon is currently at a 52 week high and At&t is about 6% from it's 52 week high of around 31.94; it's current price is 30.05 (at the time I write this article.) Sometimes investors have to show caution trying to trade stocks currently at 52 week highs, since you might see a short term pullback. Investors also need to watch the stock technical's to make sure the stock doesn't look like a crowded trade. So, the puzzle that confronts traders is when you have 2 stocks that are best of breed, in the same sector, pay over 5% dividends and have good fundamentals/technical's which one should a investor pick?

    Here a few reasons for deciding:

    1) Both Verizon and At&t's charts show both stocks heading in a upward range.
    Verizon broke out of a bullish channel range and now is at a 52 week high. One will see this take place from August to around the end of November and then a breakout above it's upper channel range in December and now at it's 52 week high


                   


    When looking at At&t's chart below



    While Verizon's chart from August was in a upward channel formation, At&t's was in a parallel formations from August and broke above 29.5, but still has more room to hit 52 week high of around 31.5

    2) Both stocks pay over a 5% dividend

    3) Both At&t and Verizon are market leaders in their respected sectors, have large market capitalization and there is no sign that another player will come in and directly compete.

    4) When looking at At&t's chart it can by hypothesized that the T-mobile deal likely stalled the stock for a period of time since At&t was waiting for regulatory approval (which we now know this deal will not take place.)

    5) Big cap/Big dividend stocks are in favor now. Weather you like Verizon or At&t, I believe both stocks are solid value plays.

    I currently like both At&t and Verizon, but I only want to play one in this field. Now that the T-mobile deal is over I believe At&t can now focus on itself. Note: there was no large sell off as maybe anticipated. In my opinion Verizon was the play to make when At&t was going through the challenge of trying to acquire T-mobile, which possibly lead Verizon to its 52 week high.

    In my opinion I would wait for a small pullback in Verizon before placing a trade now that the T-mobile deal is kaput. However, if you believe that At&t will make a run for it's 52 week high there is still some more room to make this trade. I currently prefer At&t to Verizon on the notion I would want to be in a stock that is heading toward its 52 week high then one that is already at its 52 week high.

    Look for a article to follow and thank you for reading. Comments are appreciated. Thanks....






     
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