The SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA), the Dow Jones tracking ETF, is off 2.2% over the past month, but the Dow’s two telecom constituents have been among the blue chip index’s most durable members.
Over the past month, AT&T (NYSE: T) is flat while Verizon (NYSE: VZ) has trade slightly higher. That jibes with the decent or less bad performances turned in by consumer staples and utilities, the other ultra-defensive sectors in addition to telecom. [Utilities ETFs Prove Reliable]
The iShares U.S. Telecommunications ETF (NYSEArca: IYZ) has tumbled 6% in the past month while the Vanguard Telecommunication Services ETF (NYSEArca: VOX) is lower by 4%, indicating telecom ETFs have provided investors with no shelter from the recent market storm. IYZ one-month loss is nearly twice as bad as the S&P 500, a surprising statistic when considering the ETF’s beta against the benchmark U.S. index is just 0.55% and the fund has a three-year standard deviation of just 12.8%, according to iShares data.
The weakness in telecom ETFs is also surprising (and concerning) when considering the sector is considered interest rate-sensitive, but 10-year Treasury yields have dipped nearly 7% in the past month.
Obviously, neither IYZ nor VOX are sector SPDR ETFs, but only the Energy Select Sector SPDR (NYSEArca: XLE) has lagged IYZ over the past month. VOX has only been better than four of the nine sector SPDRs over that period. [Dial up a Popular Telecom ETF]
While AT&T and Verizon, the largest holdings in IYZ and VOX, have remained durable in recent weeks, the ETFs have been hampered by deterioration in smaller telecom names. For example, shares of Windstream Holdings (NasdaqGS: WIN) have plunged 8% in the past month while shares of Frontier Communications (NYSE: FTR) are lower by 6.3%. Those stocks, which combined for nearly 9% of IYZ, served as catalysts for rallies in telecom ETFs earlier this year. [Defensive Telecom ETFs]
Unfortunately, Frontier and Windstream are not the only telecom offenders. T-Mobile (NYSE: TMUS), the unit of Germany’s Deutsche Telekom (OTC: DTEGY), is lower by nearly 9% over the past month while former suitor Sprint (NYSE: S) has shed 5%.Those stocks also combine for nearly 9% of IYZ’s weight.
Despite the weakness in telecom stocks and ETFs, investors have remained committed to the thesis that sector is a solid defensive destination. Since the start of the third quarter, VOX has added $52.3 million in new assets while almost $13 million in new capital has flowed into IYZ.
iShares U.S. Telecommunications ETF
