In the first 6 years of the new decade (2000-2005), telecom was one of the worst performing segments of the U.S. stock market. From its heyday in March 2000 when the once mighty iShares Dow Jones Telecom Index (IYZ) traded at $60… it’s only made it back to the $30 mark after 7 long years.
However, this fact ignores where telecom has gone in 2006 and 2007 alone. IYZ has reliably outperformed the S&P 500’s SPY since May of 2006… and it has done so with relatively little downside pressure. It sports an attractive P/E of 14, remains well-above its long-term average and still gives a reasonable dividend of 2%.
(IYZ) and Vanguard’s version (VOX) Vanguard Telecom Services (VOX) hold some of the many popular names in the industry, including AT&T, (T) Verizon, (VZ) Sprint Nextel, (S) Alltel (AT). And while the S&P is dead flat on the year… telecom has picked up 4%-5%!
Personally, I am a bit more intrigued by WisdomTree International Communications (DGG). Granted, it was hit much harder than the U.S. in the flight from international. Yet it holds 137 stocks with superior dividends, including France Telecom, (FTE) Deutsche Telekom, (DT) China Mobile (CHL) and Telefonica, (TEF).
It may be flat on the year, but it is up 10% in 6 months. If international investing remains part of your investing plan, it is certainly worthy of consideration.
Disclosure statement: Some of Pacific Park’s investment clients may hold positions in any of the investments mentioned above.