Quarter-End Insights

Communication Services: Attractive, Sustainable Yields on Offer

Michael Hodel, CFA

Telecom stocks across the globe have held up well amid the market’s recent turbulence, with the Morningstar Global Communication Services Index down only 5% in the fourth quarter through Dec. 20 versus a 14% drop for the broader market. We continue to believe that Europe offers a particularly attractive hunting ground for value, with our telecom coverage there trading at a 24% discount to our fair value estimates. Telecom stocks in the U.S. look more reasonably priced, trading at a 15% discount, but opportunities still exist.

Exhibit 1: Telecom stocks have outperformed a volatile market recently

Michael Hodel, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.