ETF Chart of the Day: Talking Telecom

Today we see the Telecom sector in the spotlight thanks to headlines and speculation that AT&T (T) may have interest in acquiring DTV (which is up >5% this morning), and this brings us to a quick roundup of relevant sector funds here.

VOX (Vanguard Telecommunication Services, Expense Ratio 0.14%) is the biggest fund in the category, with greater than $659 million in assets under management, but the fund only averages about 64,000 shares traded daily.

We say “only”, because the second largest fund in the category IYZ (iShares DJ U.S. Telecommunications Sector, Expense Ratio 0.48%), has about $588 million in assets under management and averages a large multiple of
VOX’s daily volume (329,000 shares).

This shows us that traders and short term sector tactical traders are likely using IYZ while VOX is attracting the “buy and hold” types. VOX tracks the MSCI U.S. Investable Market Telecommunications Services 25/50 Index, which is market cap weighted, and has very heavy allocations to VZ (24.37%) and T (22.97%), while there is a big drop-off to the next largest holding CTL (4.74%).

IYZ tracks the DJ U.S. Select Telecommunications Index, and has notably different weightings than VOX, with top five exposure that looks like the following: T (8.58%), VZ (8.39%), CTL (6.55%), FTR (5.40%), and SBAC (5.38%). IXP (iShares S&P Global Telecommunications Sector Index Fund, Expense Ratio 0.48%) is another ETF in the space that may move on the T speculation, as T has the second largest weighting in the fund at 14.51%, behind VZ (16.15%).

After these top three funds in the sector there is a severe drop-off in terms of assets under management, with much lesser known ETFs populating the broad Telecom space (including some Internationally exposed funds) like IST (SPDR S&P International Telecommunications Sector, Expense Ratio 0.50%), FCOM (Fidelity MSCI Telecommunications Services Index ETF, Expense Ratio 0.12%), XTL (SPDR S&P Telecom, Expense Ratio 0.35%), and FONE (First Trust NASDAQ CEA Smartphone Index, 0.70%) for instance. Additionally, two leveraged products that have not quite taken off as of yet despite being launched back in 2008, LTL (ProShares Ultra Telecommunications, Expense Ratio 0.95%) and TLL (ProShares UltraShort Telecommunications, Expense Ratio 0.95%), also exist in this space.