This January sell-off has the same characteristics of every sell-off. Everything gets sold, regardless of the quality of the investment. In addition, it’s pretty clear that much of the selling is due to hedge fund quantitative strategies selling short everything in sight. This does provide investors with the kind of opportunity that only comes when bids are limited, and those with a patient, long-term horizon can score big gains.
When good stocks get sold, and they are either out of favor or just unloved in general, the opportunity becomes even greater. We screened the Merrill Lynch research database for top companies that are not only unloved, but that pay solid dividends. We further screened for stocks that were rated Buy and found four that could have solid upside and total return potential.
AT&T
This stock was just added to the prestigious Merrill Lynch US 1 stock list. AT&T Inc. (NYSE: T) is the world’s largest provider of pay TV, with TV customers in the United States and 11 Latin American countries. In the United States, the AT&T wireless network has the nation’s self-described strongest 4G LTE signal and most reliable 4G LTE.
The company also helps businesses worldwide serve their customers better with mobility and highly secure cloud solutions. With shares trading at a very cheap 11.9 times estimated 2016 earnings, AT&T continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic, but increased device financing plans.
AT&T reiterated 2015 guidance for double-digit revenue growth and continued consolidated margin expansion. Management expects capital spending to increase sequentially, and they also estimate that free cash flow could be better than $4.5 billion. Third-quarter wireless subscriber additions came in higher than many Wall Street estimates, and DirecTV saw positive video additions where many expected losses.
The company says it is working with Salesforce.com to connect Internet of Things data from AT&T’s solutions into Salesforce’s Customer Success Platform. By connecting AT&T M2X into Salesforce’s Service Cloud, companies can automatically create and route service requests, cases or tickets through pre-built workflows.
AT&T investors receive a huge 5.69% dividend. The Merrill Lynch price target for the stock is $40, and the Thomson/First Call consensus price target is $37.16. Shares closed Wednesday at $33.74.
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