A Contrarian Value Investor Bought Up AT&T Stock, Sold Apple, Microsoft and Amazon

Contrarian value investor Tocqueville Asset Management in aggregate made some big changes to its overall investments in well-known large-cap stocks.

Tocqueville bought substantially more AT&T stock (ticker: T) in the fourth quarter, while slashing positions in Apple (AAPL), Microsoft (MSFT), and Amazon.com stock (AMZN). The firm disclosed the stock trades, among others, in a form it filed with the Securities and Exchange Commission.

Tocqueville bought 279,733 additional shares of telecom and media giant AT&T, raising its holdings to 691,149 shares. AT&T stock surged 36.9% in 2019, topping the 28.9% rise in the S&P 500 index. But shares have slipped 1.8% so far in January through Friday’s close, compared with the index’s 3.1% gain. Earnings were mixed for AT&T at times, but we think the company may have been a winner at CES this year.

In response to a request for comment on the transaction, Peter D. Shawn, a Tocqueville portfolio manager, wrote in an email that AT&T stock “was purchased primarily based on its valuation and its cash-flow characteristics, which we believe support its dividend yield.”

AT&T stock’s dividend yield stands at 5.4%.

“We also believe there is some optionality that may come from management’s renewed focus on capital allocation brought about by the current activist campaign,” Shawn said. “On top of that, we think the market is skeptical about the potential for creating value from its [direct-to-consumer] business around HBO Max and improving mobile revenue in 5G, so there is opportunity in those efforts, as well.”

Tocqueville also sold 285,936 Apple shares, 515,114 Microsoft shares, and 42,368 Amazon shares, lowering its respective holdings in those companies to 422,996 shares, 890,663 shares, and 46,595 shares.

Apple stock had surged 89.0% in 2019, while Microsoft and Amazon shares rose 55.3% and 23.0%, respectively. For 2020 year to date, the three stocks are up 8.5%, 6.0%, and 1.0%, respectively. Barron’s has noted that analysts remain bullish on both Apple and Microsoft stock. Barron’s is bullish on Amazon stock, which we see as a “free-cash rocket ship.”

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Regarding the reduced positions in Apple, Microsoft, Amazon stock, Shawn wrote that “all three are great businesses that we continue to hold but they have been very strong performers for several years. They were trimmed largely because they were approaching our near-term valuation targets and are now certainly much less contrarian.

“We were fortunate to be able to purchase positions in those businesses at moments in time when their shares were out of favor for one reason or another and while the decisions were made by different portfolio managers the time likely came to take some off the table. Apple, for instance, has essentially doubled over the past year and its shares now trade at the highest multiples they have in many years. This likely reflects that investors have come to increasingly recognize its growing services business as well as improved prospects for device sales with new models, particularly as 5G takes hold and as the China trade disputes calmed down.”

Inside Scoop is a regular Barron’s feature covering stock transactions by corporate executives and board members—so-called insiders—as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.