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Questor is The Telegraph’s stockpicking column, helping you decode the markets and offering insights on where to invest.
Sometimes we’re better off sticking to what we know. It’s a lesson that’s often hard-won, especially in the corporate world. To that end, the experience of AT&T during the 2010s is something of a parable.
During the decade, the company made two ill-fated mega-acquisitions aimed at taking the US telecoms giant into the TV business: the $67bn (£53bn) acquisition of DirecTV in 2014, followed by the $109bn purchase of Time Warner in 2016. The logic for the “transformative” acquisitions boiled down to AT&T selling content to its telecoms customers.
It turned out they weren’t interested. Even worse, AT&T’s deal splurge coincided with a period of intense disruption for the pay-TV industry as Netflix and other streamers rewrote the rule book.
In 2020 a new boss, John Stankey, was appointed at AT&T. Stankey was promoted internally and was himself heavily involved in the media deals. Whether despite or because of this history, his approach to managing the company has been very different from what went before.
In 2022, AT&T spun out what was by then named WarnerMedia to merge it with Discovery. A 30pc stake in DirecTV was sold to private equity group TPG in 2021, and a $7.6bn deal to sell it the rest is expected to complete in the first half of this year.
While executing this about-turn, Stankey has also focused on developing the core telecoms business. Rather than looking for big acquisitions to spend the company’s cash on, which had been a key plank in the group’s strategy for long before the Time Warner and DirecTV deals, more emphasis is being put on returning excess cash to shareholders and paying down debt.
The company appears fixed on this course given a pledge in December to return $40bn to shareholders over the three years to the end of 2027 split evenly between dividends and buybacks. British investors need to fill in the correct forms to minimise dividend withholding tax on shares, which can be bought through most brokers.
Stankey’s strategic pivot has begun to bear fruit. It has also attracted the world’s best investors to AT&T’s shares in droves. The company is backed by a total of 26 of the world’s top fund managers, identified by financial publisher Citywire as among the best 3pc globally.
Not only does the strength of this backing give AT&T Citywire’s top AAA-rating, reflecting a high level of smart-money interest, but the company also ranks as the third-most popular company with top managers in Citywire’s database of about 6,000 stocks backed by elite investors. That ranks AT&T ahead of Nvidia, Amazon, Tesla and Apple, and only behind Alphabet and Microsoft.