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Calling Foreign Telecom Stocks
The telecom stocks in the U.S. were once the favorites of long-term investors and dividend seekers. That has since changed with the expansion of mobile phone service in countries around the globe. Investors now have a larger pool of telecom stocks to choose from, and the best of the best appear to be outside the U.S.
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Emerging Market Telecoms
Millicom International Cellular (Nasdaq: MICC) is a nearly $10 billion company based in Luxembourg, but it has most of its business in frontier and emerging markets. At the end of 2009, the company served 34 million customers with pre-paid telecom services. The stock has had a strong 2010, gaining 20%, partly spurred on by strong second quarter earnings. Strong sales in Africa and South America helped overall revenue grow by 11%; Africa was the big winner with a 23% revenue gain. MICC could be a triple-digit stock by the end of the year.
China Mobile (NYSE: CHL) is one of three major wireless telecom companies in China and the biggest by market cap. The stock has outpaced the Chinese stock market, gaining 17% in 2010, as the middle class expansion helps the entire sector. With a P/E ratio of 13, it is the cheapest of the big three China telecom stocks, and a 3.4% dividend makes it that much more attractive.
America Movil (NYSE: AMX) is based in Mexico and offers telecom services throughout Latin America. The stock has not performed as well as the first two in the category (up 7%), but it's beating the indexes. It also trades at an acceptable valuation with a forward P/E ratio of 12. It's an attractive way to play Latin American growth.
Emerging Markets Telecom Fund (NYSE: ETF) is a closed-end fund that focuses on telecom stocks based in the emerging markets. The top two holdings are CHL and AMX, making up 22% of the allocation. Countries with the largest exposure are Hong Kong, Mexico, Taiwan, India and Indonesia. The fund does charge a high 1.43% expense ratio, but it could be worth it for investors that seek instant diversification.
Developed Country Telecoms
BCE (NYSE: BCE) is Canada's largest communications firm, and in early August it beat Q2 earnings and increased 2010 guidance. Net income for the quarter increased by an astounding 70%; however, that was partly due to job cuts. The company also increased its dividend, and the yield currently stands at 5.7% with a forward P/E ratio of 10.7. Adding to the bullishness is the strong chart.
Vodafone (Nasdaq: VOD) is the world's leading mobile telecom company based in the U.K. but with operations around the globe. Its U.S. subsidiary is Verizon, and there are several other brand names in various countries. Technically the stock recently broke above very important resistance at $23, and it could be ready to turn the corner.
Consider The Risks Before Buying
As with all stocks, domestic or foreign, keep in mind the risks associated with the country you are investing in. There is political risk, currency risk, etc. to consider. (To learn more, see Dial Up Choice Telecom Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
Emerging Market Telecoms
Millicom International Cellular (Nasdaq: MICC) is a nearly $10 billion company based in Luxembourg, but it has most of its business in frontier and emerging markets. At the end of 2009, the company served 34 million customers with pre-paid telecom services. The stock has had a strong 2010, gaining 20%, partly spurred on by strong second quarter earnings. Strong sales in Africa and South America helped overall revenue grow by 11%; Africa was the big winner with a 23% revenue gain. MICC could be a triple-digit stock by the end of the year.
China Mobile (NYSE: CHL) is one of three major wireless telecom companies in China and the biggest by market cap. The stock has outpaced the Chinese stock market, gaining 17% in 2010, as the middle class expansion helps the entire sector. With a P/E ratio of 13, it is the cheapest of the big three China telecom stocks, and a 3.4% dividend makes it that much more attractive.
America Movil (NYSE: AMX) is based in Mexico and offers telecom services throughout Latin America. The stock has not performed as well as the first two in the category (up 7%), but it's beating the indexes. It also trades at an acceptable valuation with a forward P/E ratio of 12. It's an attractive way to play Latin American growth.
Emerging Markets Telecom Fund (NYSE: ETF) is a closed-end fund that focuses on telecom stocks based in the emerging markets. The top two holdings are CHL and AMX, making up 22% of the allocation. Countries with the largest exposure are Hong Kong, Mexico, Taiwan, India and Indonesia. The fund does charge a high 1.43% expense ratio, but it could be worth it for investors that seek instant diversification.
BCE (NYSE: BCE) is Canada's largest communications firm, and in early August it beat Q2 earnings and increased 2010 guidance. Net income for the quarter increased by an astounding 70%; however, that was partly due to job cuts. The company also increased its dividend, and the yield currently stands at 5.7% with a forward P/E ratio of 10.7. Adding to the bullishness is the strong chart.
Vodafone (Nasdaq: VOD) is the world's leading mobile telecom company based in the U.K. but with operations around the globe. Its U.S. subsidiary is Verizon, and there are several other brand names in various countries. Technically the stock recently broke above very important resistance at $23, and it could be ready to turn the corner.
Consider The Risks Before Buying
As with all stocks, domestic or foreign, keep in mind the risks associated with the country you are investing in. There is political risk, currency risk, etc. to consider. (To learn more, see Dial Up Choice Telecom Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Matthew McCall
Matthew McCall is the president of Penn Financial Group, LLC, a registered investment advisor. He also publishes two newsletters, The ETF Bulletin and The PFG Letter as well as other educational material. As a registered investment advisor, he manages clients' investments based on their specific goals and objectives.
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