When it comes defensive, low beta sector exchange traded funds, consumer staples and utilities ETFs get most of the press, but telecom ETFs are delivering solid performances this year as well.
Telecom ETFs such as the Vanguard Telecommunication Services ETF (NYSEArca: VOX) and the iShares U.S. Telecommunications ETF (NYSEArca: IYZ) are benefiting from the Federal Reserve backing off of raising interest rates this year, an important factor because telecommunications is one of the most rate-sensitive sectors.
AT&T and Dow component Verizon (NYSE: VZ) combine for significant percentages of the lineups in IYZ and VOX. In the case of VOX, the Vanguard telecom ETF, those stocks combine for over 44% of that fund’s weight.
Related: 6 Telecom ETFs to Dial Into Verizon, AT&T, Vodafone
However, some other, less heralded names are helping drive IYZ higher.
“A lesser-recognized name is Shenandoah Telecommunications (SHEN), and it is another reason the ETF has performed well. The company provides telecommunications services such as fiber optic lines and wireless antennas in the Mid-Atlantic region as an affiliate of Sprint. That affiliation grew with the acquisition of nTelos in May, which swelled the number of telecom subscribers it serves,” reports Investor’s Business Daily.
[related_stories]International telecom stocks and exchange traded funds represent an option for yield-starved investors that are also looking to reduce their exposure to rising U.S. Treasury yields. That theme can be accessed with the iShares Global Telecomm ETF (NYSEArca: IXP).
The U.S. telecom industry is changing. Consumers are exchanging traditional land lines for cellphones. Cable providers are muscling in on the telecom space, expanding internet access and phone coverage. Some industry analysts expect further consolidation.
Telecom stocks and ETFs could also prove durable should the dollar rebound because among S&P 500 sectors, telecommunication services and utilities have the lowest reliance on global sales.
Related: 46 Tech ETFs to Tap Into Big Growth Names
“IYZ itself broke out of a base on June 20, clearing a 32.17 buy point. The ETF is slightly extended from that entry, although historically it makes only modest gains from breakouts. For the year, the ETF is up about 17%,” according to IBD.
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iShares U.S. Telecommunications ETF
