| |
|
|
| |
 |
Invalid request! |
Telecommunications ETFs
|
|
 |
| |
About Telecommunications ETFs |
|
Telecommunications ETFs Overview and forecast
Telecommunications, even before the 2008 crash, was a complex sector for investment. After the dot com bubble, it had gone through a slump, and the diversification of the industry added more confusion, as well as choices, for investors. Current Telecommunications ETFs reflect the size and scope of the investment issues. Not encouraging to investors has been the fact that the telecommunications industry is such a huge, and often vaguely defined, sector. It's broadly defined as phone companies, ISPs, and other obvious members, but it also includes big, diverse, corporations, giants like TIME Warner and Cisco.
The index took quite a battering from the dot com fiasco, and had been improving its position, slowly. The 2008 crash affected some Telecommunications ETFs more than others, but the profiles are relatively similar in the post crash era. Telecommunications ETFs traded in the past in very high volumes, but the frenzied trading era ended abruptly during the crash. There were some exceptions, but trading seems to have been pure trading, with comparatively rare spikes in volumes.
The amount of red on the 12 month returns on our chart is indicative of the state of these ETFs. The rises in the second quarter of 2009 are off historic lows. Another factor in the cooling of investment sentiment has been the fact that some ETFs are old model, low capital, funds, microscopic in size and therefore not generating much in terms of returns beyond percentiles related to dividends and price moves.
Short term (6 months)
It's difficult to enthuse about the Telecommunications ETFs in terms of performance, despite an obvious improvement in the June quarter of 2009. Trading is patchy, and although the units can produce reasonable day trader margins, the movements are spasmodic. Although in some cases, like ProShares Ultra Telecommunications ETF (AMEX:LTL) the six month returns have been very good off lows, the more traditional pattern of a static bandwidth is also now in evidence.
Telecommunications ETFs show a historical tendency to these relatively immobile price ranges. Traders would need to see more intensity in trade and a better set of price dynamics, before getting particularly interested. There is scope for a limited upside in the short term, but that will depend on these factors being addressed.
Medium term (2 years)
It must be said that if the stocks and ETFs are often less than athletic in their performances, the industry itself is in a constant state of change, and it's clear that it will have to continue to evolve to meet both economic and technological environments. Commercial realities are impacting the industry, and that could be good or bad for investors. The same basic criteria for an upside remain in the medium term.
This situation could also generate a downside. The telecommunications industry is at the consumer end a saturated market. The common pre upheaval talk of industry rationalization is yet to emerge, but that's what needs to happen, to produce good investment models. The medium term is likely to see the beginnings of this process, which will directly impact the Telecommunications ETFs.
Long term (5 years)
The longer term outlook for the Telecommunications ETFs is blurry, but the need for a more dynamic investment model is the obvious issue in the long term, to get investor interest. The lackluster performance of the past is definitely not likely to get it. As traders, the Telecommunications ETFs have proven the ability to bounce, but not much else.
The potential long term upside for the Telecommunications ETFs comes more from economic factors than the industry itself. Natural growth, and a return to stronger investment markets, will overflow into the industry, and improve returns, as well as adding some volume to trading. That's not much of a recipe for not much of a foreseeable upside.
Qualifiers to projections
The big qualifier to any analysis of the Telecommunications ETFs and the industry itself has to be its continued potential to produce and benefit from new products and services. There's a lot of scope for flexibility in the corporate structures for involvement in high yield telecommunications which are definitely within their core business models. This isn't necessarily a bubble creating exercise, when new products and services take hold in the consumer markets, and generate good cash flow and demand.
The telecommunications industry is unique in its ability to create its own boom and bust cycles. This is the main danger for investors, where being on the crest of the wave is the surest way of going down. The issue for traders is dynamics, but for investors, it's sustainability. Investors need to look at reliable returns in this industry.
|
|
|
| |
|
|
|
|
Last Updated on: 2010-01-14 02:03:40 |
| |
|
|
| |
|
Quotes are updated automatically. Quotes are delayed. Etftips.com has not
reviewed, and in no way endorses the validity the data. Etftips.com shall not be
liable for any actions taken in thereon. All information provided "as is" for
informational purposes only, not intended for trading purposes or advice.
Neither Etftips.com nor any of independent providers is liable for any
informational errors, incompleteness, or delays, or for any action taken in
reliance on information contained herein. By accessing the Etftips.com site, you
agree not to redistribute the information found herein. ETF Values can go up as
well as down.
|
| |
| Copyright EtfTips.com ©2009 |
|
|
| |
|
|
