AT&T Inc. (T, Financial) was a highly traded stock on Monday as stocks recovered from the vicious drawdowns last week, in which the S&P 500 lost 6.84% of its value. The stock got a lot of flack last year amid a business restructuring, but it seems as though investors have become optimistic about its prospects once more.
AT&T exchanging hands
Approximately 97.927 million units worth of AT&T stock exchanged hands on Monday amid a highly successful day on Wall Street, with the S&P gaining by 1.89%, the Nasdaq rising 3.29% and the Dow Jones climbing 1.17%. The stock's trading volume exceeded its three-month average by 67%, which is rather significant if you consider that Apple (AAPL, Financial) (the day's most widely traded stock) only traded 16% more than its three-month average.
Growth stock rebound and value pivot
A robust recovery in growth stocks was the broad-based story of the day, with the likes of NIO (NIO, Financial), Fiverr (FVRR, Financial), Plug Power (PLUG, Financial) all gaining by more than 10%. However, these were most likely "buy the dip" exploits and could well fizzle out during the latter stages of the week.
I anticipate value-based investing strategies to trump growth methods this year amid the rising interest rate environment. In addition, there's no doubt that consumer spending has slowed down lately, meaning you're better off backing mature value stocks from here on in as consumer spending will likely be narrowed down to utilities, consumer staples and companies with moats.
We've seen this scenario all play out before for AT&T's stock. Over the past 25 years, the stock has been negatively correlated to the 10-year yield, meaning the stock price has been positively correlated to the rising interest rate environment.
Source: Portfolio Vizualiser
We may well see this pattern unfold again. One of the globe's most significant value exchange-traded funds, the iShares MSCI USA Value Factor ETF (VLUE, Financial), is exceptionally bullish on AT&T stock. The ETF seeks undervalued stocks in the U.S. market, and its largest holding at the moment is AT&T, making up for 7.53% of the vehicle's portfolio.
Valuation
Many are looking past the fact that AT&T's stock is undervalued relative to its five-year average, which is quite astonishing when considering that just about every financial asset is trading at an inflated price. The stock is trading below its five-year price-earnings ratio by 26.56%, and the price-sales and price-to-free cash flow ratios are also trading at discounts worth 17.67% and 18.56%.
Final word
AT&T is trading in high volume, and it's not part of a dip-buying spree. The market's shifting toward high-quality value plays, and AT&T could be at the summit of it this year based on recent evidence.
