Add to Your AT&T Long Position

It would be a mistake to part with this winner now. Adding more shares is the smarter play.
By Richard Saintvilus ,

You would have to go all the way back to September 2001 to find the last time shares of AT&T (T) - Get Report  were trading at their current level. But it would be a mistake to part with this winner now. In fact, adding more shares is the smarter play.

Not only has telecom giant, which is up 26% year to date, crushed the S&P 500I:GSPC  index's 2.18% rise, AT&T stock has delivered climbed more than 21% over the past 12 months. Is 4.42% annual dividend yield doubles the 2% yield of the average stock in  the S&P 500 index. 

AT&T shares closed Tuesday at $43.35, making yet another 52-week high at $43.89 and surpassing my $40 price target. In early trading Wednesday, it was at $42.55. Even with the stock's strong run -- a 42% gain from its 52-week low of $30.97 -- AT&T shares are still attractively priced at 15 times this year's earnings estimates of $2.86 per share, which is two points below the price-to-earnings ratio of the average stock in the S&P 500 index.

Technically, the stock is just as attractive.

Take a look at the chart, courtesy of TradingView. 

The chart shows how AT&T has been one of the best-performing stocks since the middle of May, rising almost 11% just in the past 30 days. The stock had bounced between $39.55 and $38.32 before the shares broke out, affirming consolidation. The stock is now well above all three key moving benchmarks: the 20-, 50- and 100-day averages. AT&T  is testing resistance at $43.47 (the red line). Now $45.50, 5% higher, is the next target.

AT&T's fundamentals and its strong dividend could support the stock from any near-term declines. A fall in share price now would likely be temporary. Plus, investors are in "risk-off" mode, and stocks like AT&T look like safe havens from market volatility, encouraging buying beyond company-specific events. 

Regardless of what the market does, AT&T's momentum looks sustainable. Investors who are waiting for a better entry price risk paying more for the shares. If you currently own AT&T, adding a little bit more to your long-term position could pay off. 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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