The purpose of today’s letter is to share our thoughts on how AT&T can improve its business and realize a historic increase in value for its shareholders. Elliott believes that through readily achievable initiatives – increased strategic focus, improved operational efficiency, a formal capital allocation framework, and enhanced leadership and oversight – AT&T can achieve $60+ per share of value by the end of 2021. This represents 65%+ upside to today’s share price – a rare opportunity for any company, let alone one of the world’s largest.

Eoin Treacy's view

There is increasing appetite for the companies that were left behind in the big 2020 surge. That’s being driven by the expectation for economic revival which will help to repair earnings potential and also by the rotation away from the stocks leveraged investors have been active in.

In the telecommunications/media sector AT&T has been a wall flower but its 6.8% percent yield is attractive and its status as a dividend aristocrat suggests they will do whatever is necessary to sustain and grow it.

What was particularly interesting above Elliott’s letter is they were rumoured to have sold their holding soon after they sent the letter. That seems unusual and suggests there are other factors at play. Perhaps the activists were worried about the fallout from the collapse of other media companies last week. In any case the share has base formation completion characteristics.

The rotation into the dividend growth portion of the tech sector also potentially favours unloved companies like IBM or Cisco Systems.