Here’s the Real Reason Why I Bought AT&T Stock

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Big, boring AT&T (NYSE: T ) recently made a splash, selling its minority stake in streaming video site Hulu . AT&T stock gained 0.7% on the news.

Source: Shutterstock

Thanks to its Time Warner deal, the telecom giant received a 9.5% stake in Hulu, which it sold earlier this week for $1.43 billion. That values the streaming firm at around $15 billion.

Source: Shutterstock

Of course, those happiest about the sale are Disney (NYSE: DIS ) and Comcast (NASDAQ: CMCSA ). They own approximately 60% and 30% of Hulu, respectively.

The divestment has several positive consequences for T stock. For years, critics have complained that the debt of the telecom firm is excessive. The sale was a small, but important, step towards streamlining the massive company and lowering its debt.

Following the Time Warner buyout, AT&T owns a very enviable content portfolio. This includes among many other brands, HBO. During last year's Emmys , HBO was the only network whose performance was comparable to that of Netflix (NASDAQ: NFLX ).

Therefore, it only makes sense that AT&T would dump Hulu and focus on its own streaming endeavors. That strategy will be meaningfully positive over the longer term for the T stock price.

However, is that enough to get me excited about AT&T stock? I think the move demonstrates management's seriousness about resolving the company's pressing financial issues. Still, the sale of the Hulu stake alone won't make or break anyone's approach toward AT&T stock.

Two months ago, I mentioned to readers that I was very interested in the company, enough to buy shares of AT&T stock . There were three main reasons for my decision: the company's network moat, 5G and content streaming, and the high dividend yield of T stock. The T stock price has moved higher since then.

But I'm bullish on AT&T stock for a much more fundamental reason.

AT&T Stock Is Part of the U.S. Government

Take a look around the internet and you'll find a common criticism of AT&T stock. It's the d-word I mentioned before, and I'm not talking about dividends. Rather, I'm referring to the excessive debt load that threatens to undermine everything that the company's management has planned.

If AT&T was a "normal" company, I would certainly be worried. After all, carrying nearly $170 billion of debt isn't anything to make light of.

Moreover, a number of analysts have pointed out that better investments than AT&T stock exist. There's a telecom firm that has better growth metrics, higher earnings potential, and a stable balance sheet. Those are true statements, but very few companies have the practical, structural stability of AT&T.

Specifically, AT&T is essentially a branch of the U.S. government. Want proof? Look at the multi-billion dollar federal contract that the company won to develop a nationwide broadband network for emergency responders. That's a highly sensitive responsibility that no other telecom firm has come close to matching.

But this bullish thesis on T stock goes beyond national-security concerns. In order for us as a country to stay competitive in this century, we must invest vigorously in artificial intelligence and other automated technologies. To actualize this technological potential, the U.S. requires a viable telecom network.

The digitalization of everything, or the Internet of Things, obviously requires data transfers across wireless networks. So however one may feel about AT&T, its infrastructure and vast networks are pivotal to our digital and automated success.

Thus, I don't think the traditional metrics used to assess publicly-traded companies work with AT&T stock. That's because the government won't let it fail because AT&T is almost part of the government.

Keep Expectations for T Stock in Check

Generally speaking, I believe that AT&T stock is a safe investment. However, that doesn't mean investors can't lose money on T stock. Therefore, I don't recommend that people buy T stock with reckless abandon.

What I'm trying to convey is that AT&T stock isn't your average, everyday investment, since it has $170 billion of debt. But our country is indebted to the tune of $22 trillion. Both numbers are significant, but they don't automatically spell doom.

AT&T's balance sheet looks awfully risky. However, AT&T is one of those companies that are too big and important to fail. So as long as you keep your expectations in check, T stock should do very well for you.

As of this writing, Josh Enomoto is long AT&T stock.

More From InvestorPlace

Compare Brokers

The post Here's the Real Reason Why I Bought AT&T Stock appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.