Foreword

I’m pleased to introduce the tenth in a series of investing guides from Fisher Investments Press. This imprint—the first ever from a money manager—was launched in partnership with John Wiley & Sons to bring the accumulated investing wisdom of my firm to you, whether you’re an investing enthusiast, student, or aspiring professional.

This isn’t meant as a technical guide on the nuts and bolts of telephony. Rather, it’s an investing guide. Like the other books in the Fisher Investments On series, it aims to help you make better, forward-looking forecasts on the sector, its industries, and its individual stocks. Each book in the series can stand alone—read one or just a few on topics that interest you. But together, they can be a comprehensive, do-it-yourself training program for capital markets analysis—done from the comfort of your couch. The series will eventually cover all the standard investing sectors (Energy, Materials, Consumer Staples, Health Care, Utilities, etc.—just Financials remains after this) as well as other investing regions and categories.

Telecom (official name: Telecommunication Services Sector) is currently about 5 percent of total world stocks (as measured by the MSCI All Country index). It’s a small sector—globally, only Utilities is smaller. In the US, it’s just 3 percent of the S&P 500—smaller than Utilities (as of 12/31/2010). But in capital markets, “small” never means “unimportant.” Telecom firms don’t manufacture the super cool, itty bitty but powerful computers we now call smartphones. Rather, they provide the service—fixed line, wireless, even some cable and satellite. Try making a phone call without that.

Besides the vital services Telecom firms sell, the sector can play an important role in a larger portfolio strategy. These firms are heavily regulated—because they provide a vital service. Demand for them doesn’t stretch much in good times or snap back much in downturns. They are also very capital intensive—laying new fixed line and launching new wireless networks are very expensive. These features (and others described in the book) help make it a relatively less volatile sector and therefore classically defensive—it tends to do best in a bear market.

But not always! If you accurately forecast a bear market (never easy and difficult to repeat), you may not always want to overweight Telecom. There are traits to learn that sometimes make it fail. And always remember stocks look forward, not back, so it’s seemingly perverse but perfectly normal for Telecom stocks to start outperforming just when sentiment seems particularly rosy and few foresee a bear market. This book describes what can help drive Telecom over- and underperformance in a variety of market environments—critical to building a well-diversified portfolio.

Regional analysis matters too. In developed nations, Telecom isn’t (typically) seen as a growth industry. But in some Emerging Markets, penetration rates are still low and rising. Knowing if local regulation and trends favor fixed line versus wireless or some combination is key. Plus, unlike many other sectors, most Telecom firms typically don’t sell services across country lines—though increasingly, progressive deregulation is starting to move the needle for international firms. Local regulation and politics can matter—a lot. The book shows you what to look for and gives you resources for staying on top of ever-changing global regulations.

What this book and others in the series won’t do is give you hot stock tips or a set “formula” for finding them. In my third of a century-plus investing money for private clients and big institutions, I’ve never run across such a thing. Someone telling you otherwise is telling you more of what they don’t know than what they do. Rather, this book provides a workable, repeatable framework for increasing the likelihood of finding profitable opportunities in the Telecom sector. And the good news is the investing methodology presented here works for all investing sectors and the broader market. This methodology should serve you not only this year or next, but the whole of your investing career. So good luck and enjoy the journey.

Ken Fisher

CEO of Fisher Investments

Forbes “Portfolio Strategy” Columnist

Four-time New York Times best-selling author