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Feature Article

Telecom: Great Stocks at Bear Market Prices

By Roger S. Conrad on Dec. 13, 2021

The S&P 500 now sells for roughly 21 times members’ expected next 12 months earnings. The S&P Telecom Index trades at about 19 times. But leaving out the handful of information technology companies like Alphabet Inc (NSDQ: GOOGL) added in recent years, the Index’ earnings multiple falls to just 9.4 times.

S&P Telecoms excluding info tech yield nearly 6 percent, and trade at an enterprise value (EV) of 7.4 times trailing 12-months EBITDA. That compares to a yield of just 0.81 percent and EV nearly 15 times EBITDA for the Telecom Index including info tech, and a yield of 1.3 percent and EV/EBITDA of 17 times for the broader S&P 500.

When an entire sector trades at such low prices, there’s always a reason why. If it has staying power, it may be best for investors to stand aside. But if the sector is visibly overcoming its challenges as communications is, the opportunity can be compelling. Here are four reasons to buy telecom’s best now:

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