Best and Worst ETFs In The Telecom Services Sector

telecomDavid Trainer: The Telecom Services sector ranks fourth out of the ten sectors as detailed in my Sector Rankings for ETFs and Mutual Funds report. It gets my Dangerous rating, which is based on aggregation of ratings of 5 ETFs and 13 mutual funds in the Telecom Services sector as of January 22, 2014.


Figure 1 ranks from best to worst all five Telecom Services ETFs and Figure 2 shows the five best and worst-rated Telecom Services mutual funds. Not all Telecom Services sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 25 to 61), which creates drastically different investment implications and ratings. The best ETFs and mutual funds allocate more value to Attractive-or-better-rated stocks than the worst ETFs and mutual funds, which allocate too much value to Neutral-or-worse-rated stocks.


To identify the best and avoid the worst ETFs and mutual funds within the Telecom Services sector, investors need a predictive rating based on (1) stocks ratings of the holdings and (2) the all-in expenses of each ETF and mutual fund. Investors need not rely on backward-looking ratings. My fund rating methodology is detailed here.


Investors should not buy any Telecom Services ETFs or mutual funds because none get an Attractive-or-better rating. If you must have exposure to this sector, you should buy a basket of Attractive-or-better rated stocks and avoid paying undeserved fund fees. Active management has a long history of not paying off.



Figure 1: ETFs with the Best & Worst Ratings


NC_Telecom1Q141


* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.




Sources: New Constructs, LLC and company filings




Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5


NC_Telecom1Q142


* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.




Sources: New Constructs, LLC and company filings



Fidelity MSCI Telecommunications Services Index ETF (NYSEARCA:FCOM) is my top-rated Telecom Services ETF and T Rowe Price Media & Telecommunications Fund, Inc. (PRMTX) is my top-rated Telecom Services mutual fund. FCOM earns my Dangerous rating and PRMTX earns my Neutral rating.


State Street SPDR SPDR S&P Telecom ETF (NYSEARCA:XTL) is my worst-rated Telecom Services ETF and Rydex Series Funds: Telecommunications Fund (RYTLX) is my worst-rated Telecom Services mutual fund. XTL earns my Dangerous rating and RYTLX earns my Very Dangerous rating.


Figure 3 shows that 7 out of the 104 stocks (over 17% of the market value) in Telecom Services ETFs and mutual funds get an Attractive-or-better rating. However, 0 out of 5 Telecom Services ETFs and 0 out of 13 Telecom Services mutual funds get an Attractive-or-better rating.


(...)Click here to continue reading the original ETFDailyNews.com article: Best and Worst ETFs In The Telecom Services Sector [Verizon Communications Inc., SPDR Series Trust]
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