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Quarter-End Insights

Communication Services: Attractive, Sustainable Yields on Offer

Complexity and confusion, particularly in Europe, has created opportunities for investors.

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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 does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.