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Social media giant Meta Platforms (NASDAQ: META) is set to release first-quarter fiscal 2024 results on Apr 24 after market close.


Meta Platforms ETFs to Buy Ahead of Q1 Earnings

Alphabet and Google CEO Sundar Pichai

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AAPL

GOOG

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MSFT

Sundar Pichai, Google CEO, announces leadership and operational restructuring to accelerate AI development in response to criticism.

Google&#39;s DeepMind to Lead Unified AI Charge as Company Seeks to Outpace Microsoft

Google

Google&#39;s Alphabet Inc announced selective layoffs to reduce costs amidst economic uncertainty. Real estate and finance departments affected. 

Google&#39;s Strategic Job Cuts Reflect Ongoing Cost-Cutting Measures, Affecting Real Estate and Finance Departments

iShares Global Comm Services ETF

Social media giant Meta Platforms (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/meta#NASDAQ">META</a>) is set to release first-quarter fiscal 2024 results on Apr 24 after market close. 
The stock has jumped 22% over the past three months and has outperformed the industry&#39;s decline of 7.8%. The outperformance might continue as Meta Platforms has a strong chance of beating estimates on earnings and saw a positive earnings revision activity, which is generally a precursor to an earnings beat. 
This has put the focus on ETFs &mdash; Communication Services Select Sector SPDR Fund (ARCA:XLC), Fidelity MSCI Communication Services Index ETF (ARCA:FCOM), Vanguard Communication Services ETF (ARCA:VOX), iShares Global Comm Services ETF (ARCA:IXP) and Global X Social Media Index ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/socl#NASDAQ">SOCL</a>) &mdash; with a substantial allocation to this social media giant.
<h3>Earnings Whispers</h3>
Meta Platforms has an Earnings ESP of +0.62% and a Zacks Rank #2 (Buy). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they&#39;re reported with our Earnings ESP Filter. 
Meta Platforms saw a positive earnings estimate revision of 5 cents over the past 30 days for the soon-to-be-reported quarter. Analysts increasing estimates right before earnings &mdash; with the most up-to-date information possible &mdash; is a good indicator for the stock. The current Zacks Consensus Estimate for the yet-to-be-reported quarter indicates substantial year-over-year earnings growth of 63.6%. Revenues are expected to increase 26.6%. Meta Platforms delivered an earnings surprise of 19.71%, on average, in the last four quarters. 
The stock belongs to a top-ranked Zacks Industry (top 22%) and has a VGM Score of B. 
Meta Platforms currently has an average brokerage recommendation&nbsp;of 1.28 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 46 brokerage firms. The current ABR compares to an ABR of 1.29 a month ago based on 45 recommendations. 
Of the 46 recommendations deriving the current ABR, 40 are Strong Buy and one is Buy. Strong Buy and Buy, respectively, account for 86.96% and 2.17% of all recommendations. A month ago, Strong Buy made up 86.67%, while Buy represented 2.22%. 
Based on short-term price targets offered by 40 analysts, the average price target for Meta Platforms comes to $523.35. The forecasts range from a low of $285.00 to a high of $610.00.
<h3>Projections</h3>
On the last earnings conference call, the world&#39;s largest social media platform guided revenues in the range of $34.5-$37 billion for the first quarter.
<h3>ETFs to Watch</h3>
Communication Services Select Sector SPDR Fund (XLC) 
Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media &amp; services and has accumulated $17.5 billion in its asset base. It follows the Communication Services Select Sector Index and holds 22 stocks in its basket, with Meta Platforms occupying the top position at 23% share. About 48.7% of the portfolio is allocated to interactive media &amp; services, while entertainment and media round off the next two. 
Communication Services Select Sector SPDR Fund charges 9 bps in annual fees and trades in an average daily volume of 6 million shares. It has a Zacks ETF Rank #1. 
Fidelity MSCI Communication Services Index ETF (FCOM) 
Fidelity MSCI Communication Services Index ETF follows the MSCI USA IMI Communication Services 25/50 Index. It holds 110 stocks in its basket, with Meta Platforms occupying the top position at 27.8%. 
Fidelity MSCI Communication Services Index ETF has amassed $1 billion in its asset base and trades in an average daily volume of 106,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook. 
Vanguard Communication Services ETF (ETF:VOX) 
Vanguard Communication Services ETF also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 116 stocks in its basket, Meta Platform takes the top spot with a 22.4% share. Interactive media &amp; services is the top sector, accounting for 51% of the portfolio, while movies &amp; entertainment, cable &amp; satellite, and integrated telecommunication services round off the next three. 
Vanguard Communication Services ETF has AUM of $4 billion and trades in a good volume of 148,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook. 
iShares Global Comm Services ETF (ETF:IXP)&nbsp; 
iShares Global Comm Services ETF provides global exposure to companies in media, entertainment, social media, search engine, video/gaming and telecommunication services by tracking the S&amp;P Global 1200 Communication Services 4.5/22.5/45 Capped Index. It holds 65 stocks in its basket, with Meta Platforms taking the top spot at 21.4% share. Interactive media &amp; services dominates the fund&#39;s return at 54.8%, followed by integrated telecommunication services (16.4%). 
iShares Global Comm Services ETF has amassed $268.3 million in its asset base while trading at an average daily volume of 12,000 shares. The expense ratio is 0.42%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook. 
Global X Social Media Index ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/socl#NASDAQ">SOCL</a>) 
Global X Social Media Index ETF provides investors access to social media companies around the world and has amassed $139.9 million in its asset base. It tracks the Solactive Social Media Total Return Index, holding 45 securities in the basket. Meta Platforms occupies the second position with 10.3% of the assets. 
Global X Social Media Index ETF charges 0.65% in annual fees and sees lower trading volumes of roughly 10,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook.
<a href="https://www.zacks.com/stock/news/2259362/meta-platforms-etfs-to-buy-ahead-of-q1-earnings?cid=CS-BENZ-FT-etf_news_and_commentary-2259362">To read this article on Zacks.com click here.</a>

Sundar Pichai,&nbsp;Google's&nbsp;CEO, has announced a significant restructuring of the company's leadership and operational divisions to accelerate its&nbsp;<a target="_blank" href="https://www.benzinga.com/news/23/12/36135857/why-is-google-parent-alphabet-stock-soaring-today" rel="noreferrer noopener">artificial intelligence (AI) development</a>.&nbsp;
This move is in response to criticisms that the company is lagging behind competitors like&nbsp;Microsoft Corp&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MSFT#NASDAQ">MSFT</a>).&nbsp;
<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="750" height="650" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/19034024/newplot-19.png" alt="" class="wp-image-299375" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/19034024/newplot-19.png 750w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/19034024/newplot-19-300x260.png 300w" sizes="(max-width: 750px) 100vw, 750px" /></figure>
The reorganization will see all AI-related teams, including the development of the Gemini chatbot, consolidated under the DeepMind division led by Demis Hassabis.
This consolidation encompasses research, model development, computing resources, and regulatory compliance teams, the Financial Times&nbsp;<a target="_blank" href="https://www.ft.com/content/26d39c4a-a6c7-4703-8184-271fde7f717e" rel="noreferrer noopener">reported</a>.
In a communication to employees, later shared in a blog post, Pichai detailed the consolidation of models, research, and responsible AI teams under Google DeepMind, the company's premier AI division.&nbsp;
The move aims to unify efforts on Google's AI models, Gemini and Gemma, by combining resources from Google Research and DeepMind into a single team.
Additionally, Pichai introduced a new unified Platform and Devices team, merging hardware, software, and AI initiatives, including projects like Android, Chrome, search, and photos headed by Rick Osterloh.&nbsp;
Bloomberg reports that the restructuring also includes the formation of a central Trust and Safety team dedicated to the rigorous testing and evaluation of AI systems.
This shakeup aims to streamline Google's structure, enhance its product innovation pace, and facilitate quicker decision-making processes.&nbsp;
Hiroshi Lockheimer will transition from overseeing Android to focusing on new projects, with Sameer Samat replacing him.
This overhaul marks the most significant changes at&nbsp;Alphabet Inc&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOG#NASDAQ">GOOG</a>) (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOGL#NASDAQ">GOOGL</a>), Google's parent company, since integrating its DeepMind and Google Brain AI units the previous year. It signifies a considerable expansion of Hassabis's influence over Google's AI endeavors.
Google seeks to overcome recent challenges, notably the controversy surrounding&nbsp;<a target="_blank" href="https://www.benzinga.com/news/23/12/36154624/whats-going-on-with-google-parent-alphabet-stock-friday" rel="noreferrer noopener">Gemini's image generation</a>.&nbsp;
It&nbsp;led to criticisms of its AI capabilities compared to rivals like OpenAI,&nbsp;Meta Platforms Inc&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/META#NASDAQ">META</a>), and Anthropic.&nbsp;
<a target="_blank" href="https://www.benzinga.com/news/24/04/38278168/googles-growth-ignited-by-ai-and-premium-video-ads-analyst-predicts-brighter-future" rel="noreferrer noopener">Analysts have flagged</a>&nbsp;Alphabet's strategic investments in cloud, hardware, and AI as&nbsp;key&nbsp;drivers for its multi-year growth. These investments counter the narratives around competitive threats, underscoring Google's strong foundation in its core businesses.&nbsp;
Alphabet's focus on AI and the continued evolution of CTV will foster a positive reassessment of its shares.
<a target="_blank" href="https://www.benzinga.com/analyst-ratings/analyst-color/24/03/37830193/google-and-apples-potential-ai-partnership-sparks-analyst-optimism-could-reinforce-" rel="noreferrer noopener">Analysts also highlighted</a>&nbsp;the potential collaboration between&nbsp;Apple Inc&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AAPL#NASDAQ">AAPL</a>) and Google&nbsp;could&nbsp;significantly enhance iOS features by incorporating advanced Gen-AI capabilities, including a more sophisticated version of Siri and new AI services like chatbots and image generators.
GOOGL stock gained 50% in the last 12 months. Investors can gain exposure to the stock via&nbsp;Vanguard Communication Services ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOX#NYSE">VOX</a>) and&nbsp;IShares Global Comm Services ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IXP#NYSE">IXP</a>).
Price Action:&nbsp;GOOGL shares closed higher by 0.35% at $156.01 on Thursday.
Also Read:&nbsp;<a target="_blank" href="https://www.benzinga.com/news/24/04/38322252/amazon-analyst-predicts-lead-in-ai-revolution-with-strategic-cost-efficiency-and-tech-innovations" rel="noreferrer noopener">Amazon Analyst Predicts Lead in AI Revolution with Strategic Cost Efficiency and Tech Innovations</a>
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo via Shutterstock

Google's DeepMind to Lead Unified AI Charge as Company Seeks to Outpace Microsoft

Alphabet Inc&#8217;s&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOG#NASDAQ">GOOG</a>) (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOGL#NASDAQ">GOOGL</a>)&nbsp;Google&nbsp;has commenced another round of employee layoffs, underscoring a strategic move towards cost reduction amidst the tech industry&#8217;s prevailing economic uncertainties.&nbsp;
The company confirmed that this latest series of job cuts is selective and not widespread across the organization, allowing those affected to pursue other internal opportunities.&nbsp;
Reuters reports that this action follows a pattern of reductions within Google and the broader tech and media sectors throughout the year, stoking concerns that downsizing trends might persist as firms navigate financial instability.
The spokesperson elaborated that these measures were part of efforts initiated in the latter half of 2023 to streamline operations, eliminate redundancy, and better align resources with the company&#8217;s primary product initiatives.&nbsp;
Reports indicate that the real estate and finance departments are among the sectors within Google experiencing these job cuts.&nbsp;
Functions within finance, such as Google&#8217;s treasury, business services, and revenue cash operations, have been identified explicitly as areas undergoing restructuring.&nbsp;
Furthermore, Google&#8217;s finance chief, Ruth Porat, told employees that the company&#8217;s restructuring strategy includes expanding its growth into international hubs like Bangalore, Mexico City, and Dublin.
Earlier in the year, Google&nbsp;<a target="_blank" href="https://www.benzinga.com/news/24/01/36661058/google-announces-major-job-cuts-in-ad-sales-shifts-focus-to-ai-and-automation" rel="noreferrer noopener">reduced its workforce</a>&nbsp;across various departments, including engineering, hardware, and assistant teams, as part of its increased focus on developing its artificial intelligence capabilities.&nbsp;
<a target="_blank" href="https://www.benzinga.com/news/24/04/38278168/googles-growth-ignited-by-ai-and-premium-video-ads-analyst-predicts-brighter-future" rel="noreferrer noopener">Analysts flagged the company&#8217;s</a>&nbsp;sustained growth through its dominance in mobile search, YouTube, and programmatic advertising alongside strategic investments in cloud, hardware, and AI.&nbsp;
Analysts expect Alphabet&#8217;s shares to be re-evaluated as the market gains confidence in Google&#8217;s AI advancements and the potential for growth in the CTV sector.
In January 2023, Alphabet divulged&nbsp;<a target="_blank" href="https://www.benzinga.com/news/24/01/36675299/google-announces-layoffs-at-youtube-and-other-divisions-to-enhance-operational-efficiency" rel="noreferrer noopener">plans to downsize</a>&nbsp;its workforce, comprising 6% of its global employees.
GOOG stock climbed over 49% in the last 12 months. Investors can gain exposure to the stock via&nbsp;IShares Global Comm Services ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IXP#NYSE">IXP</a>) and&nbsp;The Communication Services Select Sector SPDR Fund&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLC#NYSE">XLC</a>).
Price Action:&nbsp;GOOG shares traded higher by 0.24% at $157.25 premarket on the last check Thursday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock

Google's Strategic Job Cuts Reflect Ongoing Cost-Cutting Measures, Affecting Real Estate and Finance Departments

Late Tuesday,&nbsp;several&nbsp;Alphabet Inc.&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOG#NASDAQ">GOOG</a>) Google employees were reportedly arrested and placed on administrative leave following staging 10-hour sit-ins at offices in New York and Sunnyvale, California, to protest the $1.2 billion cloud contract with Israel.
The pro-Palestinian employees, who are affiliated with a group called No Tech For Apartheid, posted several videos and live streams of the protests, which included the moment they were issued final warnings and arrested by local police for trespassing,&nbsp;<a target="_blank" href="https://nypost.com/2024/04/17/business/google-employees-arrested-placed-on-leave-after-protest-over-israel-contract/" rel="noreferrer noopener">reported&nbsp;</a>New York Post.
The protesters demanded the company&#8217;s withdrawal from the $1.2 billion &#8220;Project Nimbus&#8221; contract — in which Google Cloud and Amazon Web Services provide cloud-computing and artificial intelligence services for the Israeli government and military.
Read:&nbsp;<a target="_blank" href="https://www.benzinga.com/news/24/04/38278168/googles-growth-ignited-by-ai-and-premium-video-ads-analyst-predicts-brighter-future" rel="noreferrer noopener">Google&#8217;s Growth Ignited by AI and Premium Video Ads, Analyst Predicts Brighter Future</a>
Notably, the workers took over Google Cloud CEO Thomas Kurian&#8217;s office in Sunnyvale by wearing traditional Arab headscarves.
The police arrested a total of nine protesters, and the employees who participated in the protest are already facing disciplinary action.
As per the report, a Google spokesperson said the protests &#8220;were part of a longstanding campaign by a group of organizations and people who largely don&#8217;t work at Google.&#8221;
&#8220;Physically impeding other employees&#8217; work and preventing them from accessing our facilities is a clear violation of our policies, and we will investigate and take action.&#8221;&nbsp;
The report quoted an NYPD spokesperson, who said the protest &#8220;involved approximately 50 participants&#8221; in total and confirmed &#8220;four arrests were made for trespassing inside the Google building.&#8221;
Investors can gain exposure to the stock via&nbsp;ETF Opportunities Trust T-Rex 2X Long Alphabet Daily Target ETF&nbsp;(BATS:<a class="ticker" href="https://www.benzinga.com/stock/GOOX#BATS">GOOX</a>) and&nbsp;IShares Global Comm Services ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IXP#NYSE">IXP</a>).
Price Action: GOOG shares are up 0.94% at $157.46 on the last check Wednesday.
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Several Google Employees Arrested In Protest Over $1.2B Israel Contract: Report

Alphabet Inc&#8216;s (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOG#NASDAQ">GOOG</a>) (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOGL#NASDAQ">GOOGL</a>) Google has committed $1 billion to enhance digital connectivity between the U.S. and Japan by introducing two new subsea cables, Proa and Taihei. 
What Happened: The new cables aim to bolster connectivity between the U.S. and Japan, and with several Pacific island nations and territories, Reuters reports.
This development follows a joint funding agreement between the U.S. and Australia last October to support subsea cable projects in the Pacific, indicating a broader collaborative effort with allies to create more secure and resilient networks.
The strategic importance of the Pacific region has escalated, with the U.S. and China vying for influence through various infrastructure and military partnerships.&nbsp;
Also Read: <a href="https://www.benzinga.com/news/23/03/31353916/meta-backed-undersea-cable-project-reportedly-delayed-by-china-over-spying-fears" target="_blank" rel="noreferrer noopener">Meta-Backed Undersea Cable Project Reportedly Delayed By China Over Spying Fears</a>
Why It Matters: This initiative aligns with President Joe Biden and Japanese Prime Minister Fumio Kishida&#8216;s efforts to strengthen ties between the two nations. Biden met with Kishida in the Oval Office at the White House on April 10.
Biden emphasized the significance of telecommunications for national security, advocating for U.S. leadership in the sector to control global information flows.
Google&#8217;s investment includes plans for the Proa cable to link the U.S., Japan, the Commonwealth of the Northern Mariana Islands (CNMI), and Guam.&nbsp;
The Taihei cable will connect the U.S., Japan, and Hawaii, and an additional interlink cable is planned to connect Hawaii, CNMI, and Guam.&nbsp;
Google is partnering with Japanese companies like KDDI and Arteria Networks, the Philippines-based Citadel Pacific, and the CNMI to enhance regional digital infrastructure.&nbsp;
These subsea cables, crucial for internet functionality, transmit 99% of the world&#8217;s data traffic.
A&nbsp;<a target="_blank" href="https://www.benzinga.com/news/21/08/22504711/google-facebook-announce-new-subsea-cable-apricot-to-improve-internet-connectivity-across-asia-pacif" rel="noreferrer noopener">March 2021 report</a>&nbsp;indicated that&nbsp;Meta Platforms Inc&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/META#NASDAQ">META</a>) is funding two new transpacific subsea cables connecting Singapore to the western coast of the U.S., with Google participating in one of the projects.&nbsp;
In 2024, Alphabet&nbsp;<a target="_blank" href="https://www.benzinga.com/markets/equities/24/02/36948285/alphabet-is-reportedly-eyeing-external-funding-for-gfiber-internet-expansion" rel="noreferrer noopener">reportedly collaborated with</a>&nbsp;the Chilean government to establish the first undersea cable connecting South America with the Asia Pacific region.
In 2023, Google launched its&nbsp;<a target="_blank" href="https://www.benzinga.com/news/22/10/29181028/google-makes-its-data-center-debut-in-japan-marking-its-third-in-the-continent" rel="noreferrer noopener">first data center</a>&nbsp;in Japan.
GOOGL stock gained over 48% in the last 12 months. Investors can gain exposure to the stock via&nbsp;Vanguard Communication Services ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOX#NYSE">VOX</a>) and&nbsp;IShares Global Comm Services ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IXP#NYSE">IXP</a>).
Price Action:&nbsp;GOOGL shares traded higher by 0.30% at $156.60 premarket on the last check Thursday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image: Shutterstock

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Google Invests $1B In Subsea Cables To Strengthen US-Japan Digital Connectivity

BofA&nbsp;analyst Justin Post reiterated a Buy rating on&nbsp;Alphabet Inc&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOG#NASDAQ">GOOG</a>) (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOGL#NASDAQ">GOOGL</a>)&nbsp;Google&nbsp;with a price target of $173.
<a target="_blank" href="https://www.benzinga.com/news/24/03/37771653/apple-in-talks-with-google-to-license-gemini-ai-models-for-future-iphones-report" rel="noreferrer noopener">According to reports</a>,&nbsp;Apple Inc&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AAPL#NASDAQ">AAPL</a>) is discussing licensing the Gemini AI platform with Google for integration into the forthcoming iOS 18 software update.&nbsp;
This collaboration is set to enrich iOS with advanced Gen-AI features, including an enhanced version of Siri, Apple&#8217;s digital assistant, alongside its proprietary AI tools designed for local device operation; Apple&#8217;s potential partnership with Gemini would introduce more sophisticated generative AI services such as chatbots or image generators, to its ecosystem, the report added.
Also Read:&nbsp;<a target="_blank" href="https://www.benzinga.com/analyst-ratings/analyst-color/24/03/37817531/apples-ai-focus-could-boost-revenue-by-6-but-may-pose-this-near-term-headwind-says-" rel="noreferrer noopener">Apple&#8217;s AI Focus Could Boost Revenue By 6% But May Pose This Near-Term Headwind, Says Munster Amid Google Licensing Rumors</a>
The negotiation between Apple and Google is yet to be finalized, leaving room for Apple to turn to other AI providers like OpenAI or Anthropic. This move by Apple follows&nbsp;Samsung Electronics Co., Ltd.&#8217;s (OTC:<a class="ticker" href="https://www.benzinga.com/stock/SSNLF#OTC">SSNLF</a>) announcement that its Galaxy G24 series smartphones will incorporate Gemini to power various AI features within apps such as text messaging, notes, voice recorder, and keyboard.
A deal between Google and Apple on AI could also have significant regulatory implications.
The analyst said it may present a positive development for Alphabet in the context of ongoing Department of Justice (DoJ) search distribution trials and Federal Trade Commission (FTC) AI inquiries.&nbsp;
He added that an agreement suggests that despite legal challenges, Apple and Google foresee continued collaboration in mobile technology licensing and that regulatory scrutiny won&#8217;t hinder AI licensing advancements.
The financial terms of the potential licensing deal have yet to be disclosed, but he expected that Apple would compensate Google with a technology licensing fee.&nbsp;
The analyst said such a deal would validate Google&#8217;s AI technology and reaffirm its status as a leading AI provider amid recent AI image generation controversies. Furthermore, he added that a successful agreement could signal enduring cooperation between Google and Apple, affecting their search distribution partnership.&nbsp;
Following the news, Google&#8217;s stock saw a significant uptick, emphasizing the positive market response to the potential collaboration.&nbsp;
However, there remains a risk that Apple may partner with other AI technology providers.
The GOOG stock gained over 44% last year. Investors can gain exposure to the stock via&nbsp;Vanguard Communication Services ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOX#NYSE">VOX</a>) and&nbsp;IShares Global Comm Services ETF&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IXP#NYSE">IXP</a>).
Price Action:&nbsp;GOOG shares traded lower by 0.42% at $147.86 on the last check Tuesday.
Also Read:&nbsp;<a target="_blank" href="https://www.benzinga.com/analyst-ratings/analyst-color/24/03/37787317/apples-partnership-with-google-the-missing-piece-in-tim-cooks-ai-strategy-says-wedb" rel="noreferrer noopener">Apple&#8217;s Partnership With Google The &#8216;Missing Piece&#8217; In Tim Cook&#8217;s AI Strategy, Says Wedbush&#8217;s Dan Ives</a>
Disclaimer:&nbsp;This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo via Shutterstock

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Google And Apple's Potential AI Partnership Sparks Analyst Optimism, Could Reinforce Google's Leadership in AI Technology

The U.S. telecommunications industry is experiencing a volatile period following a detailed investigation conducted by the Wall Street Journal revealing that telecom companies, such as AT&amp;T Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/T#NYSE">T</a>), Verizon Communications Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VZ#NYSE">VZ</a>), Telephone and Data Systems Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TDS#NYSE">TDS</a>), Frontier Communications Parent Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/FYBR#NASDAQ">FYBR</a>) and others neglected more than 2,000 lead-containing cables across the country that were installed under the old Bell System <a href="https://www.benzinga.com/government/23/07/33158334/toxic-lead-covered-cables-from-at-t-verizon-and-other-telecoms-are-hazardous-wsj">and are now decaying.</a>
Environmental researchers, collaborating with Journal reporters, conducted tests on water and sediment samples from various locations. Shockingly, eight out of 12 tests showed elevated levels of lead contamination.
<h2 class="wp-block-heading">Lead-Cabling Controversy Hits Telecoms Stocks: Analysts React</h2>
The market impact was swift and severe. Analysts, including <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/07/33256330/at-t-verizon-plummet-to-multidecade-lows-toxic-lead-investigation-sparks-telco-sell">Citigroup&#8217;s Michael Rollins</a>, wasted no time downgrading the affected stocks due to the environmental threat. 
On Monday, shares of AT&amp;T plummeted to their lowest value since 1993, dropping 7%. Although there was a slight recovery attempt on Tuesday&#8217;s opening, AT&amp;T ultimately closed flat. 
Verizon shares also experienced a significant decline, hitting their lowest point in over a decade on Monday with a 7.5% drop, followed by a marginal 2.4% rebound on Tuesday. TDS saw the most notable recovery on Tuesday, surging 9% after an 8.4% decline on Monday.
<h2 class="wp-block-heading">Telecom Companies Respond to Lead Cable Concerns:</h2>
In response to the Wall Street Journal&#8217;s investigation, the telecom companies and USTelecom, a group representing the broader industry, defended their practices. 
They emphasized that they provide safety training and protective gear to workers to handle lead properly. 
AT&amp;T said in a press release that it does not consider lead-sheathed cables to be a public health concern, citing scientific literature. The company also criticized the testing methodologies used by the newspaper and questioned the credibility of one of the testing companies due to a conflict of interest.
TDS acknowledged the presence of a limited amount of lead cabling in its network and said it is identifying the next steps to address the issue while complying with applicable laws. Verizon did not issue a PR on the matter.
<h2 class="wp-block-heading">5 ETFs With The Highest Exposure To Telecom Stocks</h2>
Among the exchange-traded funds that show a concentration of holdings in telecommunication stocks affected by the lead-cabling crisis, Benzinga found:
<figure class="wp-block-table"> 
<table>
<thead>
<tr>
<th>ETF Name</th>
<th>T (weight %)</th>
<th>VZ (%)</th>
<th>TDS (%)</th>
<th>FYBR (%)</th>
</tr>
</thead>
<tbody>
<tr>
<td>iShares U.S. Telecommunications ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IYZ#NYSE">IYZ</a>)</td>
<td>4</td>
<td>11.8</td>
<td>0</td>
<td>2.5</td>
</tr>
<tr>
<td>iShares Trust &#8211; iShares Global Comm Services ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IXP#NYSE">IXP</a>)</td>
<td>2.59</td>
<td>3.55</td>
<td>0</td>
<td>2.3</td>
</tr>
<tr>
<td>SPDR S&amp;P Telecom ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XTL#NYSE">XTL</a>)</td>
<td>3</td>
<td>3.1</td>
<td>3.5</td>
<td>3</td>
</tr>
<tr>
<td>Vanguard Communication Services ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOX#NYSE">VOX</a>)</td>
<td>3.8</td>
<td>4.4</td>
<td>0.1</td>
<td>0</td>
</tr>
<tr>
<td>Invesco S&amp;P 500 Equal Weight Communication Services ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/RSPC#NYSE">RSPC</a>)</td>
<td>4</td>
<td>4.1</td>
<td>0</td>
<td>0</td>
</tr>
</tbody>
</table>
</figure>
Also Read: <a href="https://www.benzinga.com/news/23/07/33253034/whats-going-on-with-verizon-shares">What&#8217;s Going On With Verizon Shares</a>
Photo: Shutterstock

Sector ETFs

Specialty ETFs

First Trust Morningstar Dividend Leaders Index Fund

FYBR

iShares Dow Jones US Telecommunications Sector Index Fund

RSPC

VLUE

Telecom Stocks Under Pressure As Toxic Lead Cable Concerns Discourage Buyers: 5 ETFs To Watch

Meta Platforms Inc&nbsp;(NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/meta#NASDAQ">META</a>) is on a roller coaster&nbsp;revolving around opposition to its metaverse ambitions.
On March 2, Democratic senators urged Meta&nbsp;CEO Mark Zuckerberg to halt the release of its Horizon Worlds metaverse app to teens ages 13 to 17.
The senators highlighted a flaw in Messenger Kids that allowed users to bypass the app&#39;s age restrictions and Meta&#39;s failure to stop ads for tobacco, alcohol&nbsp;and eating disorders from targeting teens. The senators also emphasized data collection on face and eye movement, physiological damage&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/news/23/03/31188362/meta-chief-zuckerberg-faces-opposition-from-democrat-senators-over-metaverse-app-launch-for-teenager" style="background-image:initial; background-position:initial; background-size:initial; background-repeat:initial; background-attachment:initial; background-origin:initial; background-clip:initial; margin-top:0pt; margin-bottom:0pt; color:#4a6ee0" target="_blank">and exposure to abusive behavior</a>.
The Meta Timeline:&nbsp;Meta has already spent billions&nbsp;building out the metaverse. In 2022 alone, the company spent $15.9 billion on its Reality Labs division.&nbsp;
On Monday, Meta reportedly slashed the price of&nbsp;Quest Pro&nbsp;to fend off competition from&nbsp;Apple Inc&#39;s&nbsp;(NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/aapl#NASDAQ">AAPL</a>)&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/news/23/03/31216195/meta-quest-pro-now-available-at-999-is-mark-zuckerberg-planning-ahead-for-apple-mr-headset" style="background-image:initial; background-position:initial; background-size:initial; background-repeat:initial; background-attachment:initial; background-origin:initial; background-clip:initial; margin-top:0pt; margin-bottom:0pt; color:#4a6ee0" target="_blank">upcoming MR headset launch</a>.&nbsp;
The same day, it was reported that Meta iss planning to terminate&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/news/23/03/31230436/meta-layoffs-not-over-yet-zuckerberg-to-reportedly-finalize-plan-to-fire-thousands-more-this-week" style="background-image:initial; background-position:initial; background-size:initial; background-repeat:initial; background-attachment:initial; background-origin:initial; background-clip:initial; margin-top:0pt; margin-bottom:0pt; color:#4a6ee0" target="_blank">thousands more employees based on financial targets</a>. In November, the&nbsp;Facebook&nbsp;and&nbsp;Instagram&nbsp;parent let go of 11,000 employees,&nbsp;or 13% of its workforce.
Arete analyst Richard Kramer downgraded&nbsp;<a class="editor-rtfLink" href="https://www.benzinga.com/quote/META/analyst-ratings" style="background-image:initial; background-position:initial; background-size:initial; background-repeat:initial; background-attachment:initial; background-origin:initial; background-clip:initial; margin-top:0pt; margin-bottom:0pt; color:#4a6ee0" target="_blank">Meta Platforms to Sell from Neutral</a>&nbsp;on Monday.
Meta saw some redemption Tuesday, when the company higlighted its milestone of reaching 2 billion daily active users and issued an update on its&nbsp;progress in&nbsp;AI&nbsp;<a class="editor-rtfLink" href="https://about.fb.com/news/2023/03/facebook-today-and-tomorrow/" style="background-image:initial; background-position:initial; background-size:initial; background-repeat:initial; background-attachment:initial; background-origin:initial; background-clip:initial; margin-top:0pt; margin-bottom:0pt; color:#4a6ee0" target="_blank">endeavors</a>.
The&nbsp;Communication Services Select Sector SPDR Fund&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xlc#NYSE">XLC</a>),&nbsp;Fidelity MSCI Communication Services Index ETF&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/fcom#NYSE">FCOM</a>), and&nbsp;IShares Global Comm Services ETF&nbsp;(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ixp#NYSE">IXP</a>) have an exposure of 12%-21% in the stock. The ETFs gained between 0.85% -1.74% last week.
META Price Action:&nbsp;Meta shares were trading down 1.61% at $181.99 Thursday afternoon.
Photo via Shutterstock.

Social Media

3 ETFs May Bear The Brunt Of Meta's Decisions, From Layoffs To Price Cuts

Later this year, Standard &amp; Poor&#39;s and MSCI, two of the dominant providers of indexes for exchange-traded fund and index funds, will unveil changes to several major sectors as part of alterations to the Global Industry Classification Standards (GICS).
The telecom sector is expected to change in significant fashion as it will be renamed to communication services. That move is expected to impact not only telecom ETFs, but also consumer discretionary and technology funds because some companies currently classified as discretionary and technology stocks are expected to migrate over to the new communication services group.
Those changes are expected to affect scores of popular sector ETFs, including the Vanguard Telecom Services Index ETF (NYSE: <a class="ticker" href="/stock/vox#NYSE">VOX</a>), Vanguard Consumer Discretionary ETF (NYSE: <a class="ticker" href="/stock/vcr#NYSE">VCR</a>) and the Vanguard Information Technology ETF (NYSE: <a class="ticker" href="/stock/vgt#NYSE">VGT</a>).
<h3>
	How Issuers Could Deal With The Changes</h3>
&ldquo;CFRA thinks Vanguard could choose to pay a special dividend to shareholders of VCR and VGT in the form of VOX as a tax-efficient way to distribute the shares of Disney&nbsp;and Alphabet and other such communications services stocks that would need to be removed from the firm&#39;s consumer discretionary and technology sector ETFs,&quot; <a href="https://newpublic.cfraresearch.com/">CFRA Research</a> Director of ETF &amp; Mutual Fund Research Todd Rosenbluth&nbsp; said in a note out last week. &quot;[U]nlike actively managed funds that have discretion on timing of purchases and sales, index based funds automatically add and remove stocks once they enter or leave the chosen index.&rdquo;
<h3>
	Not A New Development</h3>
The idea of ETF-based special dividends as a way of dealing with sector changes isn&#39;t new. When real estate departed financial services, becoming the 11th S&amp;P 500 sector, investors in the Financial Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlf#NYSE">XLF</a>) received shares of the Real Estate Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlre#NYSE">XLRE</a>).
Similarly, Fidelity and iShares could follow a special dividend approach as they have Fidelity MSCI Telecommunications Index ETF (NYSE: <a class="ticker" href="/stock/fcom#NYSE">FCOM</a>) and iShares Global Telecom ETF (NYSE: <a class="ticker" href="/stock/ixp#NYSE">IXP</a>), respectively, which own just telecom services stocks,&rdquo; said Rosenbluth.
<h3>
	New Looks</h3>
Walt Disney Co (NYSE: <a class="ticker" href="/stock/dis#NYSE">DIS</a>) accounts for 4.8 percent of the Vanguard Consumer Discretionary ETF&#39;s weight, while Alphabet Inc (NASDAQ: <a class="ticker" href="/stock/goog#NASDAQ">GOOG</a>) and Facebook Inc&nbsp;(NASDAQ: <a class="ticker" href="/stock/fb#NASDAQ">FB</a>), another stock that could depart the technology sector for communication services, combine for almost 17 percent of VGT&#39;s weight.
Adding those stocks to the communication services fray would bring a fresh look to ETFs like VOX. The Vanguard Telecommunication Services ETF currently allocates over 48 percent of its weight to just Verizon Communications Inc. (NYSE: <a class="ticker" href="/stock/vz#NYSE">VZ</a>) and AT&amp;T Inc. (NYSE: <a class="ticker" href="/stock/t#NYSE">T</a>).
CFRA has Overweight ratings on VGT and VCR and a Marketweight rating on VOX.
Related Links:
<a href="https://www.benzinga.com/trading-ideas/long-ideas/18/01/11023068/another-growth-vs-value-etf-tussle">A Growth/Value Showdown</a>
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/18/01/11017288/high-yield-dividend-etfs-2018-could-be-better">2018 Could Be Better For High Dividend ETFs</a>
Disclosure: The author owns shares of XLF.

Long Ideas

XLRE

How ETFs Could Look After Sector Changes

S&amp;P Dow Jones Indices, a leading provider of financial market indices, and MSCI Inc., a leading provider of research-based indexes and analytics, announced today that as a result of their annual review of the Global Industry Classification Standard (GICS&reg;) structure, the Telecommunication Services Sector is being broadened and renamed as Communication Services to include companies that facilitate communication and offer related content and information through various media. The renamed Sector will include the existing telecommunication companies, as well as companies selected from the Consumer Discretionary Sector currently classified under the Media Industry Group and the Internet &amp; Direct Marketing Retail Sub-Industry, along with select companies currently classified in the Information Technology Sector.

S&P Dow Jones Indices Announces In 2018 Will Rename Telecommunications Services Sector 'Communication Services' to Include Some Media Cos. Currently In Consumer Discretionary Sector

The <a href="http://www.benzinga.com/topic/telecommunications">telecommunications sector</a> fell heavily on Tuesday, as Verizon Communications Inc. (NYSE: <a class="ticker" href="/stock/vz#NYSE">VZ</a>) warned that fourth-quarter profit <a href="http://finance.yahoo.com/news/u-telecom-shares-tumble-verizon-165105569.html">may take a dive</a> on price wars in its wireless business.

	This news sent shares of Verizon down more than 4 percent, and also impacted the stock price of competitors AT&amp;T Inc. (NYSE: <a class="ticker" href="/stock/t#NYSE">T</a>) and Sprint Corporation (NYSE: <a class="ticker" href="/stock/s#NYSE">S</a>).

	This recent news was also felt throughout the numerous ETFs that offer diversified access to these voice and data companies.

	<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/news/14/06/4602052/what-is-t-mobile-doing-with-etfs">What Is T-Mobile Doing With ETFs?</a></bzrelatedlink>
<h3>
	Vanguard Telecommunication Services</h3>

	The Vanguard Telecommunication Services ETF (NYSE: <a class="ticker" href="/stock/vox#NYSE">VOX</a>) is the largest ETF dedicated to this industry with over $800 million in total assets.

	VOX tracks 30 stocks with a focus on traditional telephone, wireless, Internet and other data transmission businesses. As the industry behemoths, Verizon and AT&amp;T make up 45 percent of the underlying holdings in VOX based on their large market capitalization.

	So far this year, VOX has struggled to break out of a choppy consolidation, and more recently has fallen close to the <a href="http://www.investopedia.com/articles/active-trading/041814/four-most-commonlyused-indicators-trend-trading.asp">flat line</a> in 2014. This ETF is sitting on a meager gain of just 0.77 percent this year vs. a 17 percent gain in the broader Technology SPDR (ETF) (NYSE: <a class="ticker" href="/stock/xlk#NYSE">XLK</a>).
<div id="preview-wrapper">
<div id="file-preview">
		<a href="https://www.benzinga.com/imce?app=nomatter%7Cimceload%40imceInline.load#" title=""><img alt="vox.png" height="284" src="https://www.benzinga.com/files/u79448/vox.png" width="460" /></a></div>

<h3>
	iShares Global Telecom</h3>

	Another ETF in this industry that can be used to express a global view is the iShares S&amp;P Global Telecommunicat. (ETF) (NYSE: <a class="ticker" href="/stock/ixp#NYSE">IXP</a>). This fund tracks 47 telecom companies around the world with exposure to both foreign, developed and emerging markets.

	In fact, the United States makes up only 34 percent of the underlying stock allocation in IXP. Other top country allocations include the United Kingdom, Japan and Canada.

	This global focus has one benefit that manifests in a larger dividend yield than its U.S.-based VOX competitor. The current 30-day SEC yield on IXP is 4.59 percent, while VOX currently offers a 3.19 percent dividend.

	Of course, if stock prices continue to fall, further incremental increases in these dividend paying stocks will be seen. Telecommunication companies are widely regarded as stalwart income producers because of their steady cash flows and inelastic demand.
</div>

2 Telecommunications ETFs Respond To Industry Price Wars

In a market environment that has put a premium on playing defense, it is not surprising that telecommunications has been one of the top-performing sectors. Within the S&amp;P 500, telecommunications is the smallest sector weight at just under 3.3 percent, but that diminutive status belies the stellar returns offered by the likes of AT&amp;T (NYSE: <a class="ticker" href="/stock/t#NYSE">T</a>) and Verizon (NYSE: <a class="ticker" href="/stock/vz#NYSE">VZ</a>).

Year-to-date, the two Dow components have jumped 23.1 percent and 10.5 percent, respectively. Given the commanding weights AT&amp;T and Verizon have in domestically-focused telecom ETFs, it is no surprise those funds have been stalwarts as well.

Telecom ETFs with a global bias have been a different story and following a recent rally for global telecom issues, iShares Global Chief Investment Strategist Russ Koesterich said it might be time to lighten the load. In <a href="http://isharesblog.com/blog/2012/08/09/global-telecom-stocks-lose-luster/?utm_content=sf5487107&amp;utm_medium=spredfast&amp;utm_source=twitter&amp;utm_campaign=BlackRock&amp;sf5487107=1">a recent blog post</a>, Koesterich said his neutral stance on international telecoms is based on valuation.

"As discussed in previous posts, while I believe that investors should emphasize dividends in their portfolios, this does not mean paying any price for income," wrote Koesterich. "Telecom still provides a rich yield, but the cost of generating that income stream has risen. The sector as represented by the S&amp;P Global Telecommunications Sector Index now trades at approximately 1.8x price-to-book (P/B), a premium to its average valuation over the past five years. The stocks also appear increasingly expensive based on price-to-earnings (P/E), with the sector trading at 15.4x earnings, a hefty premium to its history."

The The iShares S&amp;P Global Telecommunications Sector Index Fund (NYSE: <a class="ticker" href="/stock/ixp#NYSE">IXP</a>) features a 30-day SEC yield of almost five percent and the $576.4 million fund allocates 29 percent of its weight to AT&amp;T and Verizon. 

IXP is up almost eight percent year-to-date. However, the iShares Dow Jones U.S. Telecommunications Sector Index Fund (NYSE: <a class="ticker" href="/stock/iyz#NYSE">IYZ</a>), which also devotes about 29 percent of its weight to AT&amp;T and Verizon, has surged 14.5 percent this year. IYZ has a 30-day SEC yield of 3.14 percent.

The dominance of domestic telecom ETFs does not end with the rivalry between IXP and IYZ. The Vanguard Telecom Services ETF (NYSE: <a class="ticker" href="/stock/vox#NYSE">VOX</a>), which features an expense ratio of just 0.19 percent, is up 14.3 percent this year. VOX allocates almost 45 percent of its weight to Verizon and AT&amp;T. 

Despite a robust dividend yield of 6.2 percent, the SPDR S&amp;P International Telecommunications Sector ETF (NYSE: <a class="ticker" href="/stock/ist#NYSE">IST</a>) is the laggard of the group with a year-to-date gain of just 0.13 percent. 

Compounding the woes for global telecoms is mediocrity profitability as Koesterich points out.

"Based on return on assets (ROA), telecom companies are also less profitable relative to their history than other sectors," the iShares strategist wrote. "In other words, while most segments of the market are experiencing above-average profitability, this is no longer true for global telecom companies in aggregate. Mediocre profitability is also evident on a relative basis; comparing the return-on-equity (ROE) of the sector at 11.2% to the global sector average of 21.2% also suggests that telecom stocks now look less compelling as compared to other sector plays."

For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

Short Ideas

Dividends

Global

Intraday Update

SPDR S&P International Telecommunications Sector ETF

Time to Hang Up on Global Telecom ETFs?

Thanks to ample global macroeconomic headwinds and elevated broader market volatility, investors have sought shelter with the utilities sector in 2012. Looking solely at performance, normally slow-moving utilities ETFs have impressed in recent months as the Utilities Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlu#NYSE">XLU</a>) and the Vanguard Utilities ETF (NYSE: <a class="ticker" href="/stock/vpu#NYSE">VPU</a>) have both returned more than five percent. The iShares Dow Jones U.S. Utilities Sector Index Fund (NYSE: <a class="ticker" href="/stock/idu#NYSE">IDU</a>) is not far behind with a gain of 4.9 percent.

Those returns may indicate the easy money in utilities has already been made and that investors should approach this sector, prized for its low beta ways, with caution. In a <a href="http://isharesblog.com/blog/2012/07/24/us-utilities-don%E2%80%99t-overpay-for-yield/?utm_content=sf5234453&amp;utm_medium=spredfast&amp;utm_source=twitter&amp;utm_campaign=BlackRock&amp;sf5234453=1">recent blog post</a>, iShares Global Chief Investment Strategist Russ Koesterich says "...some segments of the market – such as US utilities — are looking expensive and should likely be avoided."

Koesterich has a point regarding the valuations for utilities, which have <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/06/2675202/sneaky-high-some-sector-etfs-now-surprisingly-pricey">previously been highlighted as rich</a>. 

On June 18, XLU sported a price/earnings ratio of 15.4, which was towards the higher end of the historical average for high-quality utilities stocks. That is roughly what XLU's <a href="https://www.spdrs.com/product/fund.seam?ticker=XLU">current forward P/E is today</a> and the fund's weighted average P/E for reported earnings is close to 16.2. 

The P/E ratio for the iShares Dow Jones U.S. Utilities Sector Index Fund based on the latest 12 months worth of earnings is even more elevated at close to 19, <a href="http://us.ishares.com/product_info/fund/overview/IDU.htm">according to iShares data</a>.

"Investors have pushed US utility stocks up too far as US utilities currently look even more expensive than they were back in January. US Utilities are currently trading at nearly 15x earnings, versus an average since 1995 of around 14.5x," Koesterich said in the blog post. "And the stocks are even more expensive when you compare their valuation to the broader market. As a regulated industry, utilities typically trade at a discount to the broader market. Since 1995, US utilities have traded at an average discount of roughly 25% to the S&amp;P 500. Today, however, US utilities are currently trading at a more than 8% premium, the largest since late 2007."

Koesterich notes the premium "can't be justified" because utilities are not as profitable as some investors perceive the sector to be. Rather, "return on earnings for US large cap utility companies is currently 10.5%, the lowest level since 2004," he said. 

Translation: Utilities stocks and ETFs have benefited from investors flocking to sectors sporting above-average yields. XLU and IDU do deliver on that front with 30-day SEC yields of about 3.5 percent each.

One of the yield alternatives to utilities highlighted by Koesterich was the iShares High Dividend Equity Fund (NYSE: <a class="ticker" href="/stock/hdv#NYSE">HDV</a>). HDV has gained 3.3 percent in the past month, outperforming IDU and XLU along the way. Plus, HDV has a 30-day SEC yield of 3.6 percent.

Investors willing to take on sector risk might consider the iShares S&amp;P Global Telecommunications Sector Index Fund (NYSE: <a class="ticker" href="/stock/ixp#NYSE">IXP</a>), Koesterich said. IXP is up almost three percent in the past month while its U.S.-focused equivalent, the iShares Dow Jones U.S. Telecommunications Sector Index Fund (NYSE: <a class="ticker" href="/stock/iyz#NYSE">IYZ</a>) has added nearly two percent. The 30-day SEC yields on the two ETFs are 4.4 percent and 3.3 percent, respectively.

Broad U.S. Equity ETFs

iShares Trust Dow Jones US Utilities Sector Index Fund

Koesterich Cautious on Utilities (XLU, IDU)

The number of investment options that bear the label "safe haven" is shrinking amid Europe's worsening sovereign debt crisis and other global macroeconomic headwinds. Even gold, historically one of the premier safe haven options, has been tightly correlated with the euro and has behaved like a risk asset for much of 2012. 

With cash instruments and U.S. Treasuries producing little in the way of yield, investors would do well to consider investments that are not quite, but almost safe havens, iShares' Global Chief Investment Strategist <a href="http://isharesblog.com/blog/2012/06/13/nowhere-to-hide-consider-%E2%80%9Csemi-safe%E2%80%9D-havens/">Russ Koesterich said in a recent note</a>.

"Membership in the club of AAA-rated countries is rapidly shrinking, and rising correlations mean that, at least in the short term, virtually all risky assets are moving together," Koesterich said. "While there are still a few places to hide, I believe the “safety” of the real safe-haven investments comes at a cost."

Koesterich's "semi-safe" haven group includes some predictable choices at the sector level, but these low-beta options have proven sturdier than their high-beta counterparts in recent weeks.

"As of Monday's close, the US market was down roughly 8% from its peak. In contrast, at the same time, healthcare and consumer staples were down roughly 4% and 2% respectively, while utilities and telecom were posting new highs for 2012," he said in the note.

Koesterich highlighted the iShares S&amp;P Global Telecommunications Sector Index Fund (NYSE: <a class="ticker" href="/stock/ixp#NYSE">IXP</a>) as a low-beta sector fund for investors to consider. IXP devotes over 40% of its weight to just three stocks – AT&amp;T (NYSE: <a class="ticker" href="/stock/t#NYSE">T</a>), Vodafone (Nasdaq: <a class="ticker" href="/stock/vod#Nasdaq">VOD</a>) and Verizon (NYSE: <a class="ticker" href="/stock/vz#NYSE">VZ</a>). Overall, the $457 million ETF is home to 39 stocks and has a trailing 12-month yield of 5.56%, nearly double the trailing 12-month yield on the more domestically-focused iShares Dow Jones U.S. Telecommunications Sector Index Fund (NYSE: <a class="ticker" href="/stock/iyz#NYSE">IYZ</a>).

Koesterich highlighted dividend ETFs with his choices being the iShares High Dividend Equity Fund (NYSE: <a class="ticker" href="/stock/hdv#NYSE">HDV</a>) and the iShares Emerging Markets Dividend Index Fund (NYSE: <a class="ticker" href="/stock/dvye#NYSE">DVYE</a>). HDV has only been trading for about 15 months, but has managed to accumulate almost $1.6 billion in assets in that time. With an expense ratio of 0.4%, HDV is home to 75 stocks. Top-10 holdings include AT&amp;T, Pfizer (NYSE: <a class="ticker" href="/stock/pfe#NYSE">PFE</a>) and Procter &amp; Gamble (NYSE: <a class="ticker" href="/stock/pg#NYSE">PG</a>).

DVYE, which <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/06/2664497/the-definitive-guide-to-emerging-markets-dividend-etfs">faces intense competition in the rapidly expanding world of emerging markets dividend ETFs</a> charges 0.49% and has a 30-day SEC yield of 6.08%, according to iShares data.

Investors looking for semi-safe haven fixed income options should consider the iShares S&amp;P National AMT-Free Municipal Bond Fund (NYSE: <a class="ticker" href="/stock/mub#NYSE">MUB</a>) and the iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSE: <a class="ticker" href="/stock/lqd#NYSE">LQD</a>), Koesterich said in the note. Both funds pay monthly dividends. LQD has a trailing 12-month yield north of 4% and MUB's is above 3%.

"With Europe a lingering concern and the US fiscal cliff unlikely to be resolved until after the election, I'm sympathetic with investors' desire for safety. However, as traditional safe-haven investments come with considerable costs, 'semi-safe havens' may be the new place to hide," Koesterich said.

For more low-beta ETF ideas, click <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/04/2465292/loving-low-beta-etfs-xlp-xlv-vtv">here</a>.

Bonds

Futures

Commodities

Economics

DVYE

iShares S&P National AMT-Free Municipal Bond Fund

Koesterich Highlights ETF "Semi-Safe" Havens (LQD, DVYE, IXP)

<div class="widget-wrapper"><a class="Covestor_hook" href="http://covestor.com/sizemore-capital/tactical-etf">Charles Sizemore, Sizemore Investment Letter</a>
<script class="Covestor_injector" type="text/javascript" src="http://widgets.covestor.com/chart/sizemore-capital/tactical-etf"></script></div>
<a href="http://blog.covestor.com/content/2011/08/sizemore.jpg"><img class="alignleft size-full wp-image-11724" title="sizemore" src="http://blog.covestor.com/content/2011/08/sizemore.jpg" alt="" width="124" height="154" /></a>Author: <a href="http://covestor.com/sizemore-capital">Charles Sizemore</a> 
Covestor models: <a href="http://covestor.com/sizemore-capital/sizemore-investment-letter">Sizemore Investment Letter</a> and <a href="http://covestor.com/sizemore-capital/tactical-etf">Tactical ETF</a>
We are genuinely pleased with the performance of most asset classes in 2012.  As we expected, <a href="http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/">bond yields</a> have moved mostly sideways.  But the real story has been the remarkable rally in <a href="http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/">stocks</a>.  The strong start in January was followed by an equally strong February.  After multiple months of bull market conditions, some sort of mild correction might be expected.  But in playing the role of contrarian, it is our view that the growing chorus of investors expecting a correction might be disappointed.
Bull markets do not last forever, of course, and the current bull market will be no exception.  But we believe that this bull market still has room to run.  Our reasoning centers around developments in Europe.  Fears of a Euro zone meltdown were the primary driver of last year's volatility.  But as those fears continue to recede, investors who were previously afraid to buy stocks are slowly re-entering the market.  This thawing of investor sentiments should keep this rally going for another couple of months.
Sizemore Capital is heavily allocated to Europe in its Tactical ETF and Sizemore Investment Letter portfolios, and we believe that European stocks should be among the highest performers in 2012.  Within Europe, we prefer companies with a strong presence in emerging markets.
Our primary strategic focus continues to be high-quality companies that pay strong and growing dividends.  These, in our view, represent the best risk/return trade-off for the next 5-7 years and should be the backbone of any portfolio.  We do, however, continue to look for shorter-term tactical trades in more cyclical sectors.
Our biggest disappointment thus far in 2012 has been the performance of the telecom sector.  Sizemore Capital has a dedicated position in global telecom in the Tactical ETF portfolio via the iShares Global Telecom ETF <a href="http://www.marketwatch.com/investing/fund/IXP">(<a class="ticker" href="/stock/ixp#">IXP</a>)</a> and in the Sizemore Investment Letter portfolio via our positions in Telefónica <a href="http://www.marketwatch.com/investing/stock/TEF">(<a class="ticker" href="/stock/tef#">TEF</a>)</a>, Turkcell <a href="http://www.marketwatch.com/investing/stock/TKC">(<a class="ticker" href="/stock/tkc#">TKC</a>)</a> and China Mobile <a href="http://www.marketwatch.com/investing/stock/CHL">(<a class="ticker" href="/stock/chl#">CHL</a>)</a>.  We continue to see great long-term value in the individual stock holdings, but our position in the broader ETF is currently under review as a shorter-term tactical holding.
Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at <a href="http://site.covestor.com/help/disclosures" title="http://site.covestor.com/help/disclosures">http://site.covestor.com/help/disclosures</a>. For information about Covestor and its services, go to <a href="http://covestor.com" title="http://covestor.com">http://covestor.com</a> or contact Covestor Client Services at (866) 825-3005, x703.

Stock Picks for a Market That Has Room to Run

Keeping with the theme of trying to play some defense in an environment of elevated equity correlations, we're following up our look at forgotten consumer staples ETFs by looking at another sector cherished for its defensive traits: Telecom.

While the divergence between Dow components AT&amp;T (NYSE: <a class="ticker" href="/stock/t#NYSE">T</a>) and Verizon (NYSE: <a class="ticker" href="/stock/vz#NYSE">VZ</a>) and the S&amp;P 500 isn't startling, on a year-to-date basis, both stocks have outperformed the broader market.

Maybe it's time for investors to capture some yield, play some defense and outperform, albeit slightly, the broader market with some telecom ETFs. Here are a few we have a feeling your broker forgot to tell you about.

Vanguard Telecommunications Services ETF (NYSE: <a class="ticker" href="/stock/vox#NYSE">VOX</a>):
The Vanguard Telecommunications Services ETF is home to 36 stocks and all the big boys of the U.S. telecom industry are found in this ETF. As is par for the course in many U.S.-focused telecom ETFs, VOX's top-10 holdings account for a huge share of the ETF's weight. In this case, we're talking about nearly 71%. On the bright side, VOX features a scant 0.24% expense ratio.

iShares MSCI ACWI ex-US Telecom Services Index Fund (NYSE: AXTE):
Compared to VOX, AXTE will cost you twice as much in fees (0.48%), but give you exposure to almost twice as many stocks (71) all hailing from outside the U.S. Given the robust yields found on many European telecom names, it's surprising AXTE hasn't attracted more than $2.7 million in assets under management. The ETF is still just 14 months old.

SPDR S&amp;P International Telecommunications Sector ETF (NYSE: <a class="ticker" href="/stock/ist#NYSE">IST</a>):
Apparently, investors really haven't dialed up international telecom ETFs because IST, which is barely different than AXTE, has just over $12 million in AUM. The SPDR offering is home to about 45 stocks and an expense ratio of 0.5%.

iShares S&amp;P Global Telecommunications Sector Index Fund (NYSE: <a class="ticker" href="/stock/ixp#NYSE">IXP</a>):
Home to 40 stocks and an expense ratio of 0.48%, IXP is one of the better bets for investors looking for global telecom exposure beyond Europe. Japan, Mexico, China and Australia account for about a quarter of this ETF's weight and maybe that's why it has nearly $400 million in AUM.

ProShares Ultra Telecommunications (NYSE: <a class="ticker" href="/stock/ltl#NYSE">LTL</a>):
Yep, there really is a leveraged telecom ETF. If you're anxious to quickly juice up your telecom returns, LTL is your weapon of choice. For a bearish play, try the ProShares UltraShort Telecommunications (NYSE: <a class="ticker" href="/stock/tll#NYSE">TLL</a>), but be advised both ETFs are thinly traded.

Five Telecom ETFs Your Broker Forgot to Mention

Are big things afoot in the telecom sector following AT&amp;T's (NYSE: <a class="ticker" href="/stock/t#NYSE">T</a>) $39 billion purchase of T-Mobile? Is there a partner out there for Sprint (NYSE: <a class="ticker" href="/stock/s#NYSE">S</a>), soon to be the smallest of the U.S. wireless carriers assuming the AT&amp;T/T-Mobile deal gets done?

Keep in mind the AT&amp;T deal is no lock as it faces heavy regulatory scrutiny, but we know this much: The telecom sector has at least morphed from really boring to worth watching over the medium-term. Even in the absence of more consolidation, there are few <a href="http://marketbulletin.com/etf.php">ETFs</a> worth keeping an eye on.

1) iShares Dow Jones U.S. Telecommunications Index Fund (NYSE: <a class="ticker" href="/stock/iyz#NYSE">IYZ</a>):
If you can't decide between AT&amp;T and Verizon (NYSE: <a class="ticker" href="/stock/vz#NYSE">VZ</a>), IYZ is the fund for you as the two Dow components combine for over 28% of the ETF's weight. IYZ is also home to high-yielders such as CenturyLink (NYSE: <a class="ticker" href="/stock/ctl#NYSE">CTL</a>). Good liquidity, a 3% yield and a decent expense ratio of .48% mean this ETF could be an excellent telecom stock replacement tool.

2) Vanguard Telecommunication Services ETF (NYSE: <a class="ticker" href="/stock/vox#NYSE">VOX</a>):
VOX really doesn't need much of an explanation. It's IYZ with half the fees. Vanguard does it again.

3) SPDR S&amp;P International Telecommunications Sector ETF (NYSE: <a class="ticker" href="/stock/ist#NYSE">IST</a>):
IST isn't going to win any daily volume awards and it's expense ratio of 0.5% is higher than both IZY and VOX, but a yield of 4.3% is nice, but this fund has some merit. Deutsche Telekom is IST's fourth-largest holding and that company will retain 8% of T-Mobile, making it a winner assuming the AT&amp;T deal gets regulatory approval.

In addition, Vodafone (NYSE: <a class="ticker" href="/stock/vod#NYSE">VOD</a>) is IST's top holding with a weight of over 20% and that company is a play on almost half of Verizon Wireless. Since this is an international fund, let's clear up it focuses almost entirely on developed markets.

4) iShares S&amp;P Global Telecommunications Index Fund (NYSE: <a class="ticker" href="/stock/ixp#NYSE">IXP</a>):
Think of IXP as a combination of IST and VOX or IYZ. You get AT&amp;T, Verizon, Deutsche Telecom and Vodafone with an emerging markets kicker. China Mobile (NYSE: <a class="ticker" href="/stock/chl#NYSE">CHL</a>) and America Movil (NYSE: <a class="ticker" href="/stock/amx#NYSE">AMX</a>), the largest Latin American wireless carrier, can also be found in the top-10. IXP also has lower fees than IST. For those that want it all in one telecom ETF, IXP may be the pick of the litter.

Emerging Market ETFs

More To Come? ETFs For Telecom M&A...Or Not

Telecom stocks from Asia to Europe climbed higher during Monday trading in reaction to the news that AT&amp;T Inc. (NYSE: <a class="ticker" href="/stock/t#NYSE">T</a>) agreed to purchase Deutsche Telekom AG's T-Mobile USA business unit in a deal that was valued at $39 billion in cash and stock.

The deal, which still faces regulatory approval, would push AT&amp;T past Verizon Communications Inc. (NYSE: <a class="ticker" href="/stock/vz#NYSE">VZ</a>) into the position of the nation's number one wireless carrier in terms of subscribers.

As part of a plan to increase the likelihood that the deal will be approved by regulators, AT&amp;T also announced that it would commit "to a significant expansion of robust 4G LTE (Long Term Evolution) deployment to 95 percent of the U.S. population to reach an additional 46.5 million Americans beyond current plans – including rural communities and small towns."

The move would help to achieve President Obama and the Federal Communications Commission's stated goal of expanding network coverage in rural communities.

News of the deal comes as a blow to Sprint Nextel Corporation (NYSE: <a class="ticker" href="/stock/s#NYSE">S</a>), the number three carrier, which is said to have also been in merger talks with T-Mobile.

Deutsche Telekom was up 13.2% during Monday trading, with volume of 77 million shares traded already far above the daily average volume of 18 million shares.

China Mobile Limited (NYSE: <a class="ticker" href="/stock/chl#NYSE">CHL</a>) saw its share price climb during trading in Asia, while shares of Vodafone Group (Nasdaq: <a class="ticker" href="/stock/vod#Nasdaq">VOD</a>) and France Telecom (NYSE: <a class="ticker" href="/stock/fte#NYSE">FTE</a>) were rising in Europe. These three stocks can be purchased in the form of ADRs on the New York Stock Exchange and the NASDAQ stock exchange.

Investors who want exposure to a broad range of international telecommunications company's should consider the SPDR S&amp;P International Telecom Sector (NYSE: <a class="ticker" href="/stock/ist#NYSE">IST</a>) <a href="http://marketbulletin.com/etf.php">ETF</a> or the iShares S&amp;P Global Telecommunications (NYSE: <a class="ticker" href="/stock/ixp#NYSE">IXP</a>) ETF.

Investors who prefer to put their money into a range of American-based telecommunication company's might want to consider the iShares Dow Jones US Telecom (NYSE: <a class="ticker" href="/stock/iyz#NYSE">IYZ</a>) ETF.

Rumors

Asset Sales

How to Trade AT&T, Deutsche Telekom Deal (T, VZ, S, CHL, VOD, FTE, IST, IXP, IYZ)

I was privileged to give a couple of presentations at the San Francisco Money Show on the stock trading technique of '<a href="http://stockerblog.blogspot.com/2010/08/stocks-going-ex-dividend-fifth-week-of.html">buying dividends</a>' during the last couple days, and had a very good turnout and much positive feedback. 
The show was held at the San Francisco Marriott Marquis Hotel on August 19th through August 21. The keynote speaker was Steve Forbes, Editor-in-Chief of Forbes Magazine, who spoke very candidly about his opinion of the current administration and its policies adversely affecting the economy and the stock market. However, he was positive about the future and expects many favorable changes to take place over the next couple of years. He went into detail about how capitalism and the free market can save the economy, even with health care, Social Security, and Medicare. His latest book has recently been published, <a href="http://www.amazon.com/gp/product/0307463095?ie=UTF8&amp;tag=antiquestocka-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0307463095">How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today's Economy</a><img src="http://www.assoc-amazon.com/e/ir?t=antiquestocka-20&amp;l=as2&amp;o=1&amp;a=0307463095" width="1" height="1" border="0" alt="" style="border:none !important; margin:0px !important;" />. 
The Opening Ceremonies panel discussion was on <a href="http://stockerblog.blogspot.com/2010/07/top-nanotechnology-stocks.html">Nanotech</a>, with four panelists discussing the various aspects of this fast growing industry, and how nanotechnology is used in heathcare, technology, batteries, transportation (boats with nanotech hulls), and many other areas. 
Some of the stocks that were mentioned in this industry include Harris and Harris Group (<a class="ticker" href="/stock/tiny#">TINY</a>), the stock with the great stock ticker symbol, a venture capital company which specializes in early stage nanotechnology companies. Other companies mentioned were Nanosphere (<a class="ticker" href="/stock/nsph#">NSPH</a>), Starpharma (SPHRY.PK), A123 Systems (<a class="ticker" href="/stock/aone#">AONE</a>), Cree (<a class="ticker" href="/stock/cree#">CREE</a>), First Solar (<a class="ticker" href="/stock/fslr#">FSLR</a>), and SunPower (<a class="ticker" href="/stock/spwra#">SPWRA</a>).
There were 55 seminars to choose from on Thursday, 99 on Friday, and 24 on Saturday, covering everything from options, to ADR's, to ETF's, to dividends, to low priced stocks, to China stocks, to numerous other topics.
One interesting one was called The Top Ten ETFs and Stocks You Should Buy Now, with Mark Skousen and Doug Fabian. Skousen mentioned Enterprise Products Partners (<a class="ticker" href="/stock/epd#">EPD</a>) due to its rising dividend, currently yielding 6%, and insider buying. He also recommended Ford (<a class="ticker" href="/stock/f#">F</a>), due to the fact that sales are rising substantially, the early paydown of debt, and a forward PE of 10.
Fabian recommended iShares S&amp;P Global Telecom ETF (<a class="ticker" href="/stock/ixp#">IXP</a>) due to its 4.8% yield, paid quarterly. He also likes PowerShares CEF Income Composite (<a class="ticker" href="/stock/pcef#">PCEF</a>), which invests in master limited partnerships but doesn't issue K-1s. It pays an 8.5% yield.
Another informative speaker was Michael Murphy who's presentation was called 'Best Tech and Biotech Stocks for the Next Ten Years.' In the Content on Demand sector, he likes TowerStream Corporation (<a class="ticker" href="/stock/twer#">TWER</a>), a company that puts wireless towers on buildings and offers broadband services to businesses. The company has already signed up eleven cities. Insiders own 30% of the company. 
In the biotech arena, one of the stock he recommends is Rochester Medical Corp. (<a class="ticker" href="/stock/rocm#">ROCM</a>), which makes catheters made of silicone instead of latex, to avoid the latex allergies for some patients. This also allows the use of anti-fungals in the catheters. 
One stock he favors in the energy sector is Connacher Oil (CLL.TO), a Canadian company that is in the oil sands industry. Murphy also likes the geothermal industry due to the very favorable government tax credits and loans available to developing projects.
If you missed the MoneyShow in San Francisco, you can check out other upcoming MoneyShows at MoneyShow.com. And if you want to find more information on buying dividends, check out our recent article on <a href="http://stockerblog.blogspot.com/2010/08/stocks-going-ex-dividend-fifth-week-of.html">stocks going ex dividend</a>.
Author owns F.
By Stockerblog.com 
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AONE

CREE

FSLR

NSPH

PCEF

ROCM

SPWRA

TINY

TWER

Review of the San Francisco Money Show: Recommended Stocks

The following is an excerpt from Sizemore Capital Management LLC’s second quarter Letter to Investors, reproduced with permission.
We made several significant changes to the Tactical Portfolio during the second quarter. The first was the closing of our short position in the euro. In a May 14 trade memo, we wrote,
With negative sentiment on the euro bordering on hysteria, we felt the time was right to take profits and close our short position in the common currency via the Market Vectors Double-Short Euro ETN (NYSE: DRR). All Sizemore Capital portfolios have been sold out of their positions in DRR. 
 
As of Friday, May 14, 2010, the euro had fallen to 18-month lows to $1.2359. The euro was trading over $1.50 as recently as November.
Market conditions have now completely reversed since our initial portfolio move. In August 2009 we initiated the trade, believing that negative sentiment toward the U.S. dollar had reached irrational extremes and that the euro was being unjustifiably rewarded. We correctly pointed out that Europe’s financial woes were as serious as those of the United States, if not more so. The euro’s strength vis-à-vis the dollar was irrational, and shorting the euro was the correct thing to do. 
 
Today, the negativity has shifted to the euro. The European Central Bank’s response to the Greek fiscal crisis had the effect of knocking the euro off of its pedestal as the alternative reserve currency to the dollar. European stock markets are in free fall, and it is now fashionable on financial news shows to predict the dissolution of the Eurozone. When comments like this become mainstream, a trend has generally run its course. In our view, closing the short position in the euro is the correct thing to do.
At current levels, we consider the euro mildly overpriced but not enough to warrant initiating another trade. We do not anticipate making any further currency moves for the remainder of 2010.
The next significant move we made was to initiate a 10% dedicated position to the global telecom sector via the S&amp;P Global Telecommunications Fund (NYSE: IXP). We had been following the telecom sector for most of the second quarter with interest and even made four distinct telecom investment recommendations in SFO Magazine and the Sizemore Investment Letter, of which IXP was one. This ETF gives us fair exposure to two of the remaining recommendations—Telefónica and AT&amp;T—and a host of other solid competitors as well. For a more in depth explanation of our reasoning for this trade, please see: “<a href="http://charlessizemore.blogspot.com/2010/07/telecom-is-dead-long-live-telecom.html">Telecom is Dead. Long Live Telecom</a>.”
On June 21, we closed our short position in gold. It was not an easy decision to make given our view of the fundamentals, but at the same time we must be disciplined and follow the risk management guidelines we set out at the beginning of the trade. On June 21, we wrote,
This is a difficult move for us, but we consider it the right move. We continue to believe that gold is in an irrational speculative bubble driven by a potent combination of fear, angst, and political ideology. But as John Maynard Keynes noted, “The market can stay irrational longer than you can stay solvent.” And as we wrote when we initiated this trade, “The problem with making a contrarian call is that you can be ‘right’ but still lose a lot of money if you are too early. Just ask anyone who tried to short the Nasdaq during the 1990s bubble.” 
 
We continue to see gold’s fundamentals deteriorate. Demand is almost entirely in the hands of new portfolio investors and hedge funds and particularly by exchange-traded funds such as the SPDR Gold Trust (NYSE: GLD). GLD now holds 42.05 million ounces and its holdings are up more than 7% in the past week alone, according to the Financial Times. Traditional demand for gold—such as for jewelry—have been in decline for years, as high prices have discouraged buyers. Even India—traditionally the biggest buyer of gold in the world—has substantially reduced consumption over the past five years. 
 
In 2009, investors purchased more gold than jewelry buyers for the first time since 1980—which happened to be the year that the last gold bubble burst and ushered in nearly three decades of declines for the yellow metal. 
 
Gold is in a speculative bubble, and shorting it is “logical.” But the truth is that bubbles can go much higher than anyone believes, and we cannot put our investors’ capital at risk. Nasdaq stocks were already priced at absurdly high valuations by the mid-1990s—as Greenspan noted in his “irrational exuberance” speech—yet the bubble did not burst until 2000. Sensible investors who attempted to short tech stocks during that period would have been wiped out. 
 
So, as bearish as we remain on gold, we are following our sell discipline and exiting this trade. We will continue to watch the gold market and may decide to re-enter it at a later date. 
 
In the weeks after we closed this position, gold gave up some of its recent gains. Though we have no immediate plans to reenter the short position, this is something we intend to watch intently.
Finally, on June 25, we entered a 10% dedicated allocation to the healthcare sector. On the trade, we wrote,
In doing research for the July 2010 issue of the Sizemore Investment Letter, we reached the conclusion that U.S. Large-Cap Healthcare stocks represent a unique value at current prices. We are particularly impressed with the valuation of Johnson &amp; Johnson, Merck, and Pfizer and see the potential for both steady income and substantial capital appreciation over the next 1-3 years. These three companies represent more than a quarter of IYH’s market cap, and the sector as a whole is attractive to us at current prices. We consider this a low-risk, high-return allocation for the Sizemore Capital Management Tactical Portfolio.
Moving on to our existing positions, our investment in luxury consumption—The Robb Report ETF (NYSE: ROB)—continues to perform as expected. We have no immediate plans to make changes to this position.
Our core holding in the S&amp;P 500 will also remain unchanged for the foreseeable future, as we consider stock valuations to be very favorable at current levels. The same can be said for our positions in the utilities sector.
We have been quite satisfied with our position in the Fiduciary/Claymore MLP Opportunity Fund (NYSE: FMO), though recent developments in the MLP sector have caused us to reconsider the fund itself. Several new mutual funds and exchange-traded notes have recently been released that, like FMO, sidestep the complicated tax issues associated with partnerships (i.e. filing K1s). Unlike FMO, however, these alternatives are not closed-end funds and thus cannot trade at a discount or premium to the underlying book value like FMO can. We have no immediate sense of urgency to make a change on this investment, as it would be senseless to create taxable gains if the rationale for changing positions was only marginal improvement. This is something we intend to watch, however.
Finally, we have been very happy with the performance of our two bond funds, HYG and VKQ. These two funds have provided stable income during a very volatile period in the global capital markets. We may liquidate part or all of these positions in the next quarter, however, as we believe the stock market offers better relative value. This is another issue we intend to review in the weeks ahead.
Looking Ahead
Going forward, we are most enthusiastic on the prospects for the telecom, utilities, and healthcare sectors. These three sectors have vastly underperformed the market since the March 2009 bottom, and now represent real value in our estimation. All three sectors are loaded with high-quality companies that pay solid dividends. We fully expect the S&amp;P 500 to finish the year in positive territory. But even if it doesn’t, we are being paid handsomely to wait by being overweighted in these sectors. We expect all three sectors to outperform the S&amp;P 500 on a total return basis over the next 12 months.
Here’s looking forward to a great 2010,
Charles Lewis Sizemore, CFA
This blog is a free service of Sizemore Financial Publishing LLC, publisher of the Sizemore Investment Letter.
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