Finding Value In The Communication Sector Is Easy Today – Finding Growth Is A Different Matter

This is part 2 of a series where I have conducted a simple screening looking for value over the overall market based on industry classifications and subindustry classifications reported by FactSet Research Systems, Inc. In part 1 found here, I covered the Consumer Services Sector. In this part 2, I will be covering the Communication Sector.

In each article in this series, I will be providing a listing of screened research candidates from each of the following industry sectors:

(Click on image to enlarge)

A Simple Valuation and Quality Screening Process

With this series of articles, I will be presenting a screening of companies that have become attractively valued primarily as a result of the bearish market activities experienced in 2018 from each of the above sectors. I will be applying a rather simple valuation and quality-oriented screen across each of the sectors. First, I have screened for investment-grade S&P credit ratings of BBB- or above. Next, I have screened for low valuations based on P/E ratios between 2 and 17. Finally, I have screened for long-term debt to capital no greater than 70%.

By keeping my screen simple, and at the same time rather broad, I will be able to identify attractively valued research candidates that I might have overlooked through a more rigorous screening process. In other words, I’m looking for fresh ideas that I might have previously been overlooking. Furthermore, I want to be clear that I do not consider every candidate that I have discovered as suitable for every investor. However, I do consider them all to be attractively valued. Additionally, I also believe that every investor will be able to find companies to research that meet their own goals, objectives and risk tolerances as this series unfolds.

In this part 2, I have found 5 research candidates from the Communications Sector as follows:

Sector 2: Communications Sector:

As I’ve often stated, I believe it is a market of stocks and not a stock market. This simply means that stocks come in all sizes, shapes, flavors, and colors. The same principle applies to sectors. Some sectors will contain a diverse set of companies of varying characteristics, whether it be growth or dividend income, etc. On the other hand, some sectors such as the Communication Sector will be comprised of companies that generally share more attributes in common than they do differences.

In the Communication Sector, I see little opportunities for growth and a lot of cyclicality. Consequently, it is not a sector (or are there subsectors within it) that I find especially attractive for long-term ownership. Moreover, where I do see growth, there is no value. The Communications Sector contains 199 companies in all. However, I only found 5 that I would be willing to cover or present as potential research candidates. Furthermore, I only offer these as opportunities to boost portfolio yield or park cash for the intermediate term. With that said, Version and AT&T also offer large capital appreciation potential over the near term through P/E expansion back to historical norms.

1 2 3 4
View single page >> |

Disclosure: Long VZ, T.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.