VZ vs T
VZ has been one of my stars.  Up almost 50% in a short period.  It has also been a tremendous performer relative to T.  My bet was (and still is) that we are moving to a wireless world FULL time and the growth will continue to be robust.  VZ and T own most of the infrastructure and so are poised to be the owner's of the pipeline, so to speak.  S also has a large amount of spectrum and in particular at  the 4G, high performance area.

The bet has worked but I was very fortunate that VZ in particular has run away from T - outperforming by 20% in the last year.  If I were picking right now, I would probably go with T because the valuation metrics are now solidly in their favor.  P/E 14.7 vs 19.2, Price/Book 2.3 vs over 4.  Price to sales is still slightly in favor of VZ but the dividend yield for T is 4.8% vs 3.8%.

So, it seems that a switch into T is reasonable.  In the theoretical world, that would be the end of the argument.  However, taxes will be an issue because I do not believe VZ is going to tank so I need to get out immediately.  I just believe that T is a better value right now and can outperform over time.  If I were institutional size in my positions, then I could enter into a "swap" whereby I would pay someone VZ returns and they would pay me S returns for a set period.  This would allow me to get the economic advantage of owning T without paying taxes on my gains in VZ (really just deferring because I would pay taxes on any gains whenI eventually do sell).

For us individual investors, we can utilize the options market in a similar way.  The downside is it involves many transactions and thus commissions.  But I will discuss it anyway (this can get a bit technical especially with the tax implications, but remember, I am not a CPA or tax expert!)

By selling a call and buy a put at the same strike price, one effectively sells the underlying position.  The opposite trading would be the economic equivalent of buying the underlying asset.  At the expiration, there would be a gain or loss commensurate with the position and taxes would be paid on the gains there.  By using an option longer than 1 year, the gains (losses) would be long term.  Except for the case where the options are classified as section 1256 and then the gains(losses) are automatically split into 60% long term and 40% short term regardless of holding period.

There you have it.  I will be looking at that type of structure for my swap into T on my position.  Probably putting too fine a point on it, but at least it's entertaining for me and I do think T is a better value right now.