- 6x FCF gives you a high margin for error.
- Decent business in a decent industry.
- Management is a risk, but they're starting to do the right thing for shareholders.
Seeking Alpha doesn't support short form articles so alas I have to publish this as a blog post, but good opportunities happen quickly and can be explained succinctly so here it is...
If you want an asymmetric return opportunity, buy T.
The stock is cheap at 6x FCF.
Sentiment couldn't be more negative and the recent move in the stock suggests meaningful capital market capitulation.
T operates in an oligopoly market with slow moving share trends and stable growth characteristics. Business returns on equity are decent for the carriers (low double digit) which suggests this shouldn't be a bad investment if management can stop doing stupid things with the company's capital (maybe that's too much to ask).
Management divesting non-core assets means the Board and management are finally starting to do the right thing for shareholders. If it lasts, the stock should work.
Dividend post spin should be ~7% which will support shares and put some money in your pocket while you wait for capital appreciation on your investment.
Potential return CAGR over the next 5 years should easily be >15%.
Analyst's Disclosure: I/we have a beneficial long position in the shares of T either through stock ownership, options, or other derivatives.
Full disclosure, my cost basis in T is $23. I just recently initiated a position in the stock.
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