It’s interesting to see how different two exchange traded funds (ETFs) that cover the same sector, one domestically and one internationally, can perform. A strong example of this is shown in the telecommunications arena. The U.S-based iShares Dow Jones U.S. Telecommunications Fund (IYZ) has been in a bit of a funk over the last six months, as its returns have been negligible, as Gary Gordon for ETF Expert says.
However, during the same time, the iShares S&P Global Telecommunications Fund (IXP) increased 20%. Both IYZ and IXP have AT&T (T) and Verizon (VZ) in their top holdings. AT&T makes up 16.9% of IYZ, and Verizon makes up 13.8%. In IXP, AT&T holds 15.6%, and Verizon holds 8.3%. Year-to-date, IYZ is up 11.6%, and IXP is up 31.2%. So what does the global IXP have that U.S. (IYZ) doesn’t?
For one, IXP has more diversification. It diversifies across the biggest names in the world, including England’s Vodafone, Spain’s Telefonica, Mexico’s America Movil and China’s China Mobile. IXP has benefited from exposure to emerging market countries China and Latin America whose telecommunications companies have been very successful. On the other hand, U.S.-based IYZ has more exposure to the ailing Sprint Nextel (S) and sliding Qwest Communications (Q).
For those investors interested in other international telecommunications ETFs, there’s also the WisdomTree International Communications (DGG). Currently, it’s up 33.9% year-to-date and has a 4.3% yield.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.