Nothing in the investment universe moves in a straight line. The market is prone to all sorts of rallies and pullbacks, with a number of sectors and individual stocks sometimes falling when the market is rising.
2021 was an unusual year where most stocks rallied, but a number of stocks traded well off their highs. Some fared even worse, but the new year is a time to reevaluate last year’s laggards as a potential rebound play.
For instance, one the worst performing stocks last year – and for several years – has been AT&T (T). The telecom company went on a buying binge to become a media play, then announced last year they’d be selling off their media assets to focus on becoming a pure-play telecom yet again.
As a result, shares shed 16 percent in 2021, on top of a decline over a 5-year period. That overall drop has brought shares to 7 times earnings, a decent valuation, even for the heavily-regulated telecom sector.
Action to take: Investors may like shares here, as they likely have some upside after getting oversold last year. Shares recently had a dividend of 8.4 percent, but the company has announced that would be cut back.
For traders, a longer-term play for the slower-moving telecom company could yield solid returns. The January 2023 $30 calls, last going for about $0.62 are inexpensive, but the option has a good chance of moving in-the-money on a rebound in shares this year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.