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AT&T awaits possible toll from iPhone competition

AT&T awaits possible toll from iPhone competition

Q Can you tell me anything good about my AT&T Inc. shares?

A AT&T’s world did not end recently when Verizon Wireless became the second carrier of Apple’s popular iPhone.

It remains one of the two pre-eminent U.S. wireless carriers, and, unlike Verizon Communications, it owns 100 percent of its wireless subsidiary. Verizon Wireless is a joint venture of Verizon Communications and U.K.-based Vodafone.

It is the dominant local phone company in 22 states, providing phone lines, high-speed Internet and business services. It also has a cash-generating directory business.

To become less dependent on the iPhone, it is offering more smart phones and tablets based on the Android mobile phone platform. It recently unveiled a new social gaming platform based on Android. It also has been adding connected devices such as Global Positioning Systems and digital book readers to its lineup.

Nonetheless, it faces the challenges of slowing overall growth and the continued criticism of dropped calls on its system. Meanwhile, its fixed-line local and long-distance service is being hurt by additional competitors and by customers switching to cell phones.

Shares of AT&T recently were down 4 percent this year.

The company’s fourth-quarter profit of $1.09 billion was down about 60 percent from a year earlier due to an accounting change and severance costs. Wireless revenue was up 10 percent in a quarter, in which it gained 400,000 new contract customers, down from 1.3 million a year earlier.

Consensus analyst rating on AT&T stock is “buy,” according to Thomson Reuters, consisting of seven “strong buys,” 14 “buys” and 16 “holds.”

The financial impact of the loss of iPhone exclusivity will be closely monitored throughout 2011. CEO Randall Stephenson acknowledged that he expected a “rocky” beginning of the year. One interesting consideration: Verizon’s new iPhone 4, like the AT&T iPhone 4, is not recommended by Consumer Reports due to potential dropped-call problems.

AT&T has offered incentives to keep customers from switching to Verizon, such as unlimited calls to any cell phone for customers in some calling plans and an increase in iPhone data for others. It has raised early termination fees as well.

Q Why haven’t my holdings of Schneider Small Cap Fund done better?

A It is a bold and volatile fund seeking out-of-favor stocks. It also requires a significant commitment, since its minimum initial investment is $20,000.

Arnie Schneider, who has managed the fund since launching it in 1998, has about one-fifth of its holdings in energy stocks.

The $101 million Schneider Small Cap Value Fund (SCMVX) recently was up 23 percent over the past 12 months and had a three-year annualized return of 4 percent. Both results ranked in the lowest two-fifths of small value funds. But its strong 10-year annualized return of 12 percent ranked in the upper 10 percent of its peers.

“Schneider Small Cap Value will have some pretty dicey stocks from time to time that can get hurt badly in a rough patch, so it is not for someone who can’t stomach some volatility,” said Katie Rushkewicz, mutual fund analyst with Morningstar Inc., noting that it was hit harder than its peers in the 2008 market downturn. “Schneider knows what he is doing and has done a good job, but he can take you on a wild ride.”

Less predictable than the average small value fund, it sets target prices and often makes significant bets on sectors, turnaround plays and changes in company managements. That emphasis on deep discounts is why Rushkewicz believes it should be only a small part of an individual’s portfolio.

Schneider founded Schneider Capital Management Co. He and his team of six analysts emphasize fundamental research on companies with market capitalizations between $500 million and $1.8 billion. The fund has no ties to any benchmarks.

This “no-load” (no sales charge) fund has a 1.15 percent annual expense ratio.

[Thanks: http://www.chicagotribune.com]

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