Communication Services: Attractive, Sustainable Yields on Offer
Complexity and confusion, particularly in Europe, has created opportunities for investors.
Telecom stocks across the globe have held up well amid the market’s recent turbulence, with the Morningstar Global Communication Services Index down only 5% in the fourth quarter through Dec. 20 versus a 14% drop for the broader market. We continue to believe that Europe offers a particularly attractive hunting ground for value, with our telecom coverage there trading at a 24% discount to our fair value estimates. Telecom stocks in the U.S. look more reasonably priced, trading at a 15% discount, but opportunities still exist.
Exhibit 1: Telecom stocks have outperformed a volatile market recently
Michael Hodel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.