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Spokane, Washington  Est. May 19, 1883
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At&T; Rewards Steady Investors Shares Held Since Breakup Have Outperformed Market


They’re not the sort of investors who monitor the market on the Internet. They don’t dog the Dow, short the spread or shadow the Fed. For many of them, “portfolio adjustment” is just a fancy term for rearranging the shoebox.

But a dozen years after AT&T broke apart, hundreds of thousands of people who held on to their original telephone company stock have - deliberately or not - proven themselves the equals of many highly paid professional money managers.

And all they had to do was take in the mail.

Not that that was such a picnic. In the months and years after Judge Harold Greene ordered AT&T split up, shareholders were deluged with mail: Prospectuses, proxies, redemption offers - it never ended.

“It’s a chore, the amount of paperwork I get,” says Luann Thornell, who inherited 15 shares of AT&T in the early 1980s. “Every quarter you get your statement for all of them, every year your large annual reports … that’s quite a mound of paperwork to digest.”

For an estimated 700,000 or so individual investors, it’s nonetheless turned out to be a very healthy diet. Since Ma Bell broke apart in 1984, an untouched portfolio of her spinoffs - and the spinoffs’ spinoffs - has produced investment results that most Wall Street pros would strain hard to match.

On Jan. 1, 1984, more than 3 million AT&T shareholders were given new stock: For every 10 shares of Ma Bell they owned, they received one share in each of seven new regional phone companies, or “Baby Bells.”

If they haven’t sold any of it since, their investment has grown more than 600 percent. Those who reinvested their quarterly dividends in additional shares did even better, getting compounded growth as much as 900 percent.

Say, for instance, you had 100 shares on Dec. 31, 1983 - the day before Judge Greene’s decision took effect - your stock then was worth $6,150. If you haven’t touched it since, today you have 550 shares in 10 different companies, whose total market value at the beginning of May was $25,600.

If you took all your dividends in cash, your total market return has been 608 percent - or about 16 percent compounded annually. By comparison, the Standard & Poor’s 500 index, a widely used benchmark for stock-market returns, has grown 14.5 percent per year.

If you reinvested all the dividends - a practice the Bell companies encouraged for years by offering a 5 percent discount on shares purchased that way - the returns have been really spectacular: a portfolio today worth more than $50,000, and compound annual growth of around 18.5 percent, according to telecommunications stock analyst Dave Otto.

Since most professional money managers don’t consistently match even the S&P index, Philadelphia investment adviser Ted Aronson thinks ‘old’ AT&T shareholders deserve a bow.

“This would be an absolutely spectacular record, which would place in competition with the best money managers in the U.S.,” Aronson said. “It would easily rank in the top 10 percent of all professionals, if not higher.”

Not bad for a people whose investment approach, based on anecdotal evidence, often falls somewhere on the spectrum between mildly disinterested and totally oblivious.

“We call this stuff shoebox stock, because its been owned for so long, the certificates are stuffed in a shoebox somewhere,” said Otto, an analyst for Edward D. Jones Co. in St. Louis. “We have a lot of customers who have owned AT&T and now the Baby Bells since the ‘70s, and have no plans to get rid of them now.”

And why not? For more than a generation, telephone company stock was as typical a part of the American home as Ovaltine or the Saturday Evening Post. Safe, steady and respectable, it was to be saved and passed on with the Wedgewood.

“This stock in some families has become a member of the family,” says William LeFevre, a veteran Wall Street analyst who counts an almost-intact portfolio of prebreakup AT&T shares among his most cherished investment properties.

“I married a woman who once worked for the phone company,” LeFevre said. “These things are like her kids.”

LeFevre can take pride in recalling that he himself put his mouth where his money was; in 1983 he was widely quoted urging then-current AT&T shareholders to hang on.

“My advice to holders of AT&T stock is very simple,” LeFevre told financial writers then. “Sit tight. Don’t do anything. Wait. There’s plenty of time to decide what to do later.”

That turned out to be the right call, although even LeFevre now admits that keeping track of all the dividing and multiplying Bell companies has become too big a problem even for him.

“I used to calculate something called the ‘Humpty Dumpty’ value,” he said. “What would it be worth if you put it all back together? I wouldn’t attempt it now; it’s too complicated,” he said.

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