Jack Bowers, who focuses exclusively on Fidelity family funds in his Fidelity Monitor & Insight, looks to the telecom sector for his Top Pick for income investing in 2017.
The wireless carriers account for a majority of capitalization in the telecom sector at Fidelity Select Telecom (FSTCX).
Indeed, hefty dividend paying stocks such as AT&T (T) and Verizon (VZ) account for about 30% of the fund’s assets.
These firms have successfully navigated a tough business model transition from voice to data, amid intense competition for smartphone customers and heavy capital spending demands to keep up with fast-growing demand for data.
Stock values are still relatively cheap, but things are beginning to improve on multiple fronts.
Upgrading their networks is getting cheaper and easier because it is less about building towers and more about replacing equipment, which is getting cheaper with each passing year.
On the revenue front, the maturing U.S. smartphone market is becoming less competitive and the carriers are beginning to figure out how to generate advertising revenue.
And the internet of things is beginning to take off, so there is an opportunity to sell mobile data plans for autos, drones, street lights, road signs, utility meters, and other remote tracking functions.
