Wendell Perkins, Telecom Bull

Includes: IXP, IYZ, VOX
by: Roger Nusbaum

Roger Nusbaum submits: Wendell Perkins was on Kudlow yesterday talking up the telecom sector. Apparently he has liked the group for a while... Does anyone remember him saying this before? According to the website for his fund the target weight for a sector is the average of the weight of that sector in the S&P 500 and the Russell 1000 Value indices. As I figure it the average of those two is 4.58% (3.46 for SPX and 5.7% for the Russell Value 1000 divided by two).

According to Morningstar the telecom weight in Wendell's fund is 4.11%. According to the fund's site they have 6.2% in what they call communications. Included in that 6.2% is a 2.3% weight in Echostar (NASDAQ:DISH). I'm not sure Echostar is telecom exactly. PowerShares thinks of that name as aerospace. If you back out Echostar, the communications weight drops to 3.9%.

If my numbers are correct, I guess he likes telecom but he does not appear to be overweight the sector despite the comments on Kudlow?? Do I have this wrong? Does anyone remember him talking up telecom before (if so please leave a comment)? I must have some aspect of this wrong.

One thing is clear, telecom has done very well. I wrote favorably about the sector last December. I have two general themes that I think pertain to telecom but one has faded significantly. The long-term big macro is that most of the world does not have reliable phone service and that will change by some measure over the next few years or longer. The shorter term idea was that as a function of sector rotation and being under sponsored I thought telecom might do well in 2006. A lot of names in the group are up alot, even if unspectacularly.

I had a slight overweight in the group (and still do) and while the idea could have just as easily been wrong having some exposure has been a big help to any portfolio this year, especially if you own a high yielder. Missing the run in telecom would have been easy in terms of not being overweight but there is a big difference in being wrong with an underweight and being wrong with a zero weight.

This is a good example of my approach to portfolio construction.

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