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Telecoms May Be a Good Place to Sit

|Includes: iShares U.S. Telecommunications ETF (IYZ), T, VOX-OLD, VZ

Bill Gross has recently made a call to buy utilities in his monthly newsletter.  Why?  For one, they are already regulated and will not have to go through the transformation that other domestic industries are facing.  Secondly, in a slow growth environment, a company's stock should yield more than it's risky debt, and many of the utilities provide that opportunity. 

I believe in this idea, but prefer to own the telecoms specifically as they exhibit some of the same characteristics as utilities with regard to yield but may have better growth prospects.  The two ETFs that play on this opportunity are the IShares US Dow Jones Telecom (IYZ), currently yielding slightly over 4%, and the Vanguard Telecom Services Vipers (VOX) currently yielding around 2.5%.  Keep in mind that two stocks, AT&T (T) and Verizon (VZ) make up a substantial percentage of the portfolios in both of these ETFs.  In addition, many of the holdings in both ETFs are undervalued, and both are now trading above their 50 and 200 day moving averages.

In an environment where the markets have run so significantly, experts are on opposite ends with their views, and there continues to be uncertainty about an economic recovery, it seems that this value-oriented sector might just be a good place to sit.  Especially if you believe that we will be in a slow growth environment for an extended period of time.

Stephanie Sammons, CFP, and Principal of Sammons Ventures LLC holds a position in one of the ETFs mentioned above in her Covesor Investment Model Manager Portfoio.