Market Overview

I think you’ll love what you hear,
what you’ll see and the opportunities
that will be set before you.
- Jon Najarian

Telecom ETFs Gaining Attention

Telecom ETFs Gaining Attention

The U.S. telecommunications industry is one of the fastest changing industries in the world, as mobile devices have changed the landscape. The high-speed mobile traffic, mostly consisting of the uploading and downloading of high quality pictures and videos by billions of users, has created a rapidly changing space.

Telecom Industry

In order to keep up in the ever-changing industry, where the barrier to entry is massive, the largest companies have only gotten larger and more powerful. In order to expand and produce high-speed networks, billions of dollars are needed to cover these capital expenditures.

Only a few companies within the industry have or are even capable of raising such large amounts of capital. As these massive companies begin to spread high-speed wireless Internet around the globe, their margins will only expand.

Industry Confidence Booster

A favorable vote of confidence for the industry came from Goldman Sachs economist David Kostin last week. Kostin explained that he believes the S&P 500 will increase earnings by 2 percent this year, while the Nasdaq 100 is expected to have earnings growth of 14 percent.

He also highlighted that the telecom industry offers a great hedge against the strong dollar. With more than half of the revenues generated by companies in the S&P 500 coming from overseas, the U.S. telecom companies derive the majority of their revenues domestically.

Highlighted below are three telecommunications ETFs that could outperform, if the U.S. dollar remains strong and Kostin is correct in his analysis.

Related Link: Sichuan Telecom Deploying Entropic-Based MoCA Home Networking Products

iShares Telecommunications ETF

The iShares Dow Jones US Telecom (ETF) (NYSE: IYZ) provides exposure to 24 U.S. companies that provide telephone and Internet products, services and technologies.

The top individual holdings include:

  • Verizon Communications Inc. (NYSE: VZ) with a 9.2 percent holding
  • AT&T Inc. (NYSE: T) making up 8.7 percent
  • Centurylink Inc (NYSE: CTL) coming in at 5.8 percent

IYZ is up 3 percent over the last 12 months, up 6 percent over the last six months and up 7 percent year-to-date. The telecom ETF has an expense ratio of 0.43 percent. The 30-day SEC yield is 2.6 percent.

Vanguard Telecommunication Services ETF

The Vanguard Telecommunication Services ETF (NYSE: VOX) is made up of 29 companies that provide telephone, data-transmission, cellular or wireless communication services.

The top individual holdings include:

  • AT&T, with a 22.2 percent holding
  • Verizon, making up 22.2 percent of the ETF
  • SBA Communications Corporation (NASDAQ: SBAC) coming in at 4.7 percent

Over the last 12 months, the ETF is up 3 percent, as well up 3 percent over the last six months and up 5 percent year-to-date. VOX has an expense ratio of 0.12 percent. The 30-day SEC yield is 3.2 percent.

SPDR S&P Telecom ETF

The SPDR Series Trust (NYSE: XTL) consists of 60 companies in the telecom industry across four sectors, with communication equipment at 62 percent and integrated telecommunications services at 14 percent being the most heavily weighted holdings.

The top individual holdings include:

  • Harris Corporation (NYSE: HRS) with a 2.4 percent holding
  • Infinera Corp. (NASDAQ: INFN) coming in at 2.3 percent
  • Centurylink, totaling 2.3 percent as well

XTL is up 1 percent over the last 12 months, up 8 percent over the last six months and up 4 percent year-to-date. The SPDR ETF has an expense ratio of 0.35 percent. The 30-day SEC yield is 1.3 percent.

Posted-In: David Kostin NASDAQ 100 S&P 500Sector ETFs Trading Ideas ETFs Best of Benzinga


Related Articles (CTL + HRS)

View Comments and Join the Discussion!

Jefferies Downgrades Woodward To Hold

MOKO Announces Exclusive Agreement With BigTeams