The optimism on Wall Street that marked the end of last week has all but gone on fading hopes that the Fed might ease its stance on inflation. While stocks responded positively to data suggesting cooling inflation and leading to hopes that the Fed would slow its pace of rate hikes, robust economic data have raised concerns that Fed will continue increasing rates for some time.

Fed officials have been prompt with their rebuttal to such suggestions, prompting fears that it might be long before interest hikes start easing.

Furthermore, a string of job cuts at various tech companies and earnings forecasts by many companies are symptoms of deep-rooted pain on main Street and signs that the going might get more challenging in the year ahead. However, amid this general bearishness in the broad market, a few companies have been best placed to execute their growth plans efficiently and consistently create value for their shareholders.

Fundamentally strong stocks Microsoft Corporation (MSFT) and AT&T Inc. (T) have become a haven for investors seeking impressive risk-adjusted returns over the long run.

Microsoft Corporation (MSFT)

Being one of the global technology behemoths, MSFT needs no introduction. The company operates through three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.

On November 16, MSFT and Lockheed Martin Corporation (LMT) announced a landmark expansion of their partnership to help power the next generation of technology for the Department of Defense (DOD).

The agreement would span four critical areas: Classified Cloud Innovations; Artificial Intelligence/Machine Learning (AI/ML), Modeling and Simulation Capabilities; 5G.MIL Programs; and Digital Transformations. Both companies expect to infuse immersive experiences and other advanced commercial technologies into the most capable defense systems.

On November 14, MSFT announced the Microsoft Supply Chain Platform, which would help organizations maximize their supply chain data estate investment with an open approach. It would enable organizations to make the most of their existing investments to gain insights and act quickly.

Furthermore, MSFT declared a quarterly dividend of $0.68 per share in September, reflecting a 10% sequential increase. The dividend is payable on December 8, 2022. MSFT pays $2.72 annually as a dividend, representing a yield of 1.13% at the current price, better than the 4-year average dividend yield of 1.06%. The company raised its dividend for 18 consecutive years.

For the first quarter of the fiscal year 2023 ended September 30, MSFT’s total revenue increased 10.6% year-over-year to $50.12 billion, while its operating income grew 6.3% from the year-ago value to $21.52 billion.

Analysts expect MSFT’s revenue for the fiscal year ending June 2023 to come in at $212.95 billion, representing an increase of 7.4% year-over-year, while the company’s EPS is expected to increase 3.5% year-over-year to $9.53. The company has an impressive earnings surprise history since it surpassed the consensus EPS estimates in three of the trailing four quarters.

The stock is currently trading above its 50-day moving average of $238.65, indicating a bullish trend. It has gained 1.6% over the past month to close the last trading session at $241.68.

MSFT’s POWR Ratings reflect its promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.

MSFT has a grade of B for Stability and Quality. Within the Software – Business industry, it is ranked #9 of 53 stocks.

Click here for MSFT’s additional POWR Ratings for Growth, Value, Sentiment, and Momentum.

AT&T Inc. (T)

T is a global provider of telecommunications, media, and technical services worldwide. The company operates through two segments: Communications; and Latin America. Its offerings include wireless communications, data/broadband, Internet services, video services, local exchange services, long-distance services, telecommunications equipment, managed networking, and wholesale services.

On November 1, T paid its quarterly dividend of $0.2775 per share on the company’s common shares; Series A dividend of $312.50 per preferred share, or $0.3125 per depositary share; and Series C dividend of $296.875 per preferred share, or $0.296875 per depositary share. The company pays $1.11 as dividends annually, which translates to a yield of 5.86% at the current price.

On August 8, T announced that it delivered ‘FirstNet and Family,’ a simplified experience that gives America’s first responders the best of 2 networks – public safety of the FirstNet network and the AT&T commercial network – to keep their worlds connected. This should help T continue to witness growing demand from various agencies and organizations.

For its fiscal 2022 third quarter ended September 30, 2022, T’s revenues came in at $30 billion. Excluding the impact of U.S. Video separation in July 2021, standalone operating revenues for T were up 3.1% from $29.1 billion in the year-ago quarter. Its income from continuing operations increased 26% year-over-year to $6.3 billion. As a result, the company’s adjusted EPS grew 3% year-over-year to $0.68.

The stock has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. It has gained 25.3% over the past month to close the last trading session at $18.95 and is currently trading above its 50-day and 200-day moving averages of $16.85 and $18.49, respectively.

T has an overall rating of B, which equates to Buy in our POWR Ratings system. It has a grade of B for Value and Quality.

T is ranked #4 of 19 stocks in the Telecom – Domestic industry. Click here to access the additional ratings for T’s Stability, Growth, Sentiment, and Momentum.

MSFT shares were trading at $240.05 per share on Friday afternoon, down $1.63 (-0.67%). Year-to-date, MSFT has declined -27.96%, versus a -15.75% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...

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