Shocker: Why Didn't Verizon Communications and AT&T Plunge Today?

AT&T and Verizon are beset on all sides today, as smaller rivals stole their customers and continued plotting a combined assault. But the Dow stocks hardly moved.

May 1, 2014 at 2:00PM

This market is insane. T-Mobile (NASDAQ:TMUS) just reported stellar subscriber additions, leaving both Verizon (NYSE:VZ) and AT&T (NYSE:T) eating dust. The scrappy wireless carrier is gearing up for a merger with Sprint (NYSE:S), which would finally add a third national carrier with the scale to compete against Big Red and Ma Bell. And yet investors in the two giant telecoms blissfully ignored the pile of fresh threats, trading both stocks roughly in line with the Dow Jones Industrial Average (DJINDICES:^DJI) today.

To make any sense of this strange nonreaction, you'd have to assume that AT&T and Verizon investors have accepted this new reality and aren't surprised by any new bumps in the road.

And maybe that's the case. After all, Sprint and T-Mobile have absolutely demolished their bigger rivals' returns over the last year. There's even a simple rule of thumb you can memorize: major carriers trail the Dow, while smaller networks tend to beat it. See if you can't sing that ditty to the Michael Jackson melody of your choice.

T Chart

T data by YCharts.

But even that pragmatic explanation doesn't really hold water. After all, both Sprint and T-Mobile investors have enjoyed at least a 6% surge in less than two days here, while the majors simply traded sideways along with the Dow.

If these news items were important enough to add nearly $4 billion to the two mini-majors' combined market cap, in a market that is often seen as a zero-sum game with every winner matched to a corresponding loser, how come the two Dow members also added more than $1.1 billion to their combined market value?

Let's be clear. T-Mobile is busy stealing customers from both AT&T and Verizon. Sprint is running fewer daring trick plays, but has the financial backing to make things happen. Put these two together, and sparks should fly. Verizon and AT&T would be the ones getting burned, if and when that happens.

Tmus And Sprint
This window display is the stuff of nightmares for Verizon and AT&T. Don't let these symbols move any closer!

Maybe the Dow's telecom investors are choosing to ignore this latest flurry of threatening developments, and above all else, pretending that the brewing T-Mobile and Sprint merger won't pass regulatory review anyhow.

That may very well be the case, since there are no sure bets when you're relying on courts and regulatory bodies to make the right decision. But this is also nothing like AT&T's failed T-Mobile takeover in days past. The old deal would have reinforced an established industry giant, while this one promises to reinvigorate the wireless market with high-stakes competition.

The ostrich solution won't work this time, guys. Verizon and AT&T shares should have fallen hard today and they didn't. Count your blessings and start thinking about other places to park the cash you've invested in AT&T and Verizon.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned, either. Try any of our Foolish newsletter services free for 30 days.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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