AT&T offers more than the iPhone
Question: Can you tell me anything good about my AT&T Inc. shares?
Answer: AT&T’s world did not end last month when Verizon Wireless became the second provider of phone service to Apple’s popular iPhone.
It operates one of the two preeminent U.S. wireless carriers, and, unlike Verizon Communications, it owns 100% of its wireless subsidiary. Verizon Wireless is a joint venture of its namesake parent and Britain’s Vodafone.
AT&T is the dominant local phone company in 22 states, providing phone lines, high-speed Internet and business services. It also has a cash-generating telephone directory business.
To become less dependent on the iPhone, it is offering more smart phones and tablets based on Google’s Android mobile phone platform. AT&T also recently unveiled a new social gaming platform based on Android.
Nonetheless, it faces the challenges of slowing overall growth and continued criticism of dropped wireless calls. Its fixed-line local and long-distance service is being hurt by new competitors and by customers switching to using only cell phones.
In 2010, the company’s earnings jumped 64% to $19.9 billion, while revenue rose 1.4% to $124 billion.
Facing competition for iPhone customers, Chief Executive Randall Stephenson has said he expects a “rocky” beginning to 2011.
AT&T’s stock is down 5% this year.
The company has offered incentives to keep customers from switching to Verizon, such as unlimited calls to any cell phone for customers under some calling plans. Analysts who rate AT&T shares have given it seven “strong buy” ratings, 14 “buys” and 16 “holds,” according to Thomson Reuters.
Question: Why haven’t my holdings of Schneider Small Cap Value done better?
Answer: A bold and volatile portfolio that focuses on out-of-favor stocks, this fund requires a significant commitment: a minimum initial investment of $20,000.
Managed by Arnie Schneider since he launched it in 1998, the fund has about one-fifth of its holdings in energy stocks.
The $102-million portfolio is up 26% in the last 12 months, with a three-year annualized return of 4.7%. Those results rank in the bottom two-fifths and bottom 10%, respectively, of small-cap value funds. But its 10-year annualized return of 12% puts it in the top 10%.
“Schneider Small Cap Value will have some pretty dicey stocks from time to time that can get hurt badly in a rough patch, so it is not for someone who can’t stomach some volatility,” said Morningstar Inc. analyst Katie Rushkewicz. “Schneider knows what he is doing and has done a good job, but he can take you on a wild ride.”
The fund makes significant bets on individual sectors, so-called turnaround plays and changes in company managements. That emphasis on deep discounts is why Rushkewicz believes it should be only a small part of an individual’s portfolio.
The fund’s annual management expenses total 1.15% of assets. There is no sales charge for buying shares of the fund.
Andrew Leckey answers questions only through the column. Write to him at email@example.com.