ATT, TSMC -- No-Brainer Buys -- Motley Fool -- March 22, 2023

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All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them. 

Again, all my posts are done quickly. There will be typographical and content errors in all my posts. If any of my posts are important to you, go to the source. 

I've mentioned several times on the blog that I'm always fully invested in the market. I park "uninvested" cash in ATT until ready to buy one of the equities in my "buying bucket." If that makes sense.

But I've never really followed ATT or even considered it a great investment. So, I was very, very surprised when I happened to come across this Motley Fool article. When I posted the article I had not yet read the entire article, but tonight, with more time, read it closely. 

Look at this:

In 2022, this slimmed-down AT&T gained 2.9 million postpaid phone subscribers, while its larger competitor Verizon Communications only gained 201,000 new postpaid phone subscribers. The growth of AT&T's consumer wireline business, which was driven by the expansion of its high-speed fiber networks, also partly offset the slower growth of its business wireline segment.

AT&T expects its annual free cash flow (FCF) to rise by at least $2 billion to over $16 billion in 2023. That flood of cash easily covered its $9.9 billion in dividend payments in 2022 and protects its forward yield of 5.8%. For 2023, analysts expect its revenue to rise 2%, but for its adjusted earnings per share (EPS) to dip 5% as its profits are squeezed by higher pension costs and tax rates.

But excluding those expenses, AT&T's adjusted EPS would likely rise about 1%. Those growth rates might seem anemic, but its stock also looks dirt cheap at 8 times forward earnings. That low multiple should limit its downside potential and make it a good safe haven play as the bear market drags on.

Not exactly a "ringing" endorsement but still ... 

In that same article, TSMC:

TSMC, the world's largest and most advanced chip foundry, is also still a great long-term play on the secular expansion of the semiconductor market. It manufactures the world's smallest, densest, and most power-efficient chips for "fabless" chipmakers like Apple, Advanced Micro Devices, and Qualcomm, and it remains at least one or two generations ahead (in terms of transistor density) of its closest competitors Samsung and Intel.

Anemic action in 2023 ... but then ...

In 2024, TSMC's growth is expected to accelerate again as the macro environment improves, the supply/demand balance is restored, and it accelerates its production of its next-gen 3nm chips. Its continued installation of ASML's top-tier extreme ultraviolet (EUV) lithography systems, which etch the circuit patterns for its smallest chips, should also keep it far ahead of Samsung and Intel.

TSMC stock trades at just 15 times forward earnings, and it pays a decent forward dividend yield of 2.5%. That low valuation and high yield should limit its downside potential until the semiconductor market warms up again.

I follow this sector here.