Preface

The Fisher Investments On series is designed to provide individual investors, students, and aspiring investment professionals the tools necessary to understand and analyze investment opportunities, primarily for investing in global stocks.

Within the framework of a “top-down” investment method (more on that in Chapter 7), each guide is an easily accessible primer to economic sectors, regions, or other components of the global stock market. While this guide is specifically on Telecom, the basic investment methodology is applicable for analyzing any global sector, regardless of the current macroeconomic environment.

Why a top-down method? Vast evidence shows high-level, or “macro,” investment decisions are ultimately more important portfolio performance drivers than individual stocks. In other words, before picking stocks, investors can benefit greatly by first deciding if stocks are the best investment relative to other assets (like bonds or cash), and then choosing categories of stocks most likely to perform best on a forward-looking basis.

For example, a Telecom sector stock picker in the late 1990s probably saw his picks soar as investors cheered the so-called New Economy. However, from 2000 to 2002, he probably lost his shirt. Was he just smarter in the late 1990s than he was in 2000? Unlikely. What mattered most was stocks in general, and especially Technology and Telecom stocks, did great in the late 1990s and poorly entering the new century. In other words, a top-down perspective on the broader economy was key to navigating markets—stock picking just wasn’t as important.

Fisher Investments on Telecom will guide you in making top-down investment decisions specifically for the Telecom sector. It shows how to determine better times to invest in Telecom, what Telecom industries are likelier to do best, and how individual stocks can benefit in various environments. The global Telecom sector is complex, covering different industries and countries with unique characteristics. Using our framework, you can be better equipped to identify their differences, spot opportunities, and avoid major pitfalls.

This book takes a global approach to Telecom investing. Most US investors typically invest the majority of their assets in domestic securities; they forget America is less than half of the world stock market by weight—over 50 percent of investment opportunities are outside our borders, and even more when you include emerging markets. While a relatively large proportion of the world’s Telecom weight is based in the US, there remain many investment opportunities overseas. Given the vast market landscape and diverse geographic operations, it’s vital to have a global perspective when investing in Telecom today.

USING YOUR TELECOM GUIDE

This guide is designed in three parts. Part I, “Getting Started in Telecom,” discusses vital sector characteristics and the history of the sector since Alexander Graham Bell invented the first practical telephone.

Part II, “Next Steps: Telecom Details,” provides an overview of the sector’s two industries and walks through the next step of sector analysis. We discuss the most important economic, political, and sentiment factors that drive Telecom’s relative performance. We also explore some of the most influential consumer trends driving demand for Telecom services and products and the resulting challenges and opportunities.

Part III, “Thinking Like a Portfolio Manager,” delves into a top-down investment methodology and individual security analysis. You’ll learn to ask important questions like: What are the most important elements to consider when analyzing wireline and wireless service providers? What are the greatest risks and red flags? This book gives you a five-step process to help differentiate firms so you can identify ones with a greater probability of outperforming. We also discuss a few investment strategies to help determine when and how to overweight specific industries within the sector.

Fisher Investments on Telecom won’t give you a silver bullet for picking the right Telecom stocks. The fact is the “right” Telecom stocks will be different in different times and situations. Instead, this guide provides a framework for understanding the sector and its industries so that you can be dynamic and find information the market hasn’t yet priced in. There won’t be any stock recommendations, target prices, or even a suggestion of whether now is a good time to be invested in the Telecom sector. The goal is to provide you with tools to make these decisions for yourself—now and in the future. Ultimately, our aim is to give you the framework for repeated, successful investing. Enjoy.