Investors have increased their defensive bets in recent weeks, as growth plays have stalled out. Some defensive stocks have been heading higher for some time already.
It’s likely that defensive stocks will continue to take over the market lead as investors give growth stocks time to adjust to the rapid changes over the past few years. Investors can likely see both reasonable capital gains and income from defensive stocks now.
That includes companies like AT&T (T). The telecom giant is up nearly 60% over the past year, trending higher like a growth stock. Earnings and margins have been improving, and the company CEO sees further gains ahead, plus the company is looking to pay down its debts.
Meanwhile, with shares trading at 18 times earnings, it’s a reasonable valuation to the overall market. AT&T’s industry positioning in the oligopoly telecom space can make for attractive and steady returns in uncertain times.
Action to take: Value and momentum investors may like shares here. So too might income investors, given AT&T’s current dividend yield of 4.2%. Even after its big rally higher over the past year, shares are essentially flat over a five-year basis, and likely have more room to run.
For traders, the June $28 calls, last trading for about $0.91, look attractive, and could see mid-to-high double-digit returns on a continued rally into midyear.
Disclosure: The author of this article has a position in the company mentioned here, but does not intend to further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.