Telecom Stocks: Back on the Rise

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More Broadband Growth

Rosenbluth expects the largest telecom providers to invest to further roll out their successful fiber-based services to support broadband growth, and he foresees all carriers looking to service bundles to combat competition and increase revenue per household. He believes the telecom providers are generating increasing amounts of cash to support recent dividend increases. However, telecom stocks have recently proved less defensive than in prior down markets, with a strong selloff during September and October, he notes.

";All told, we expect stronger relative performance in late 2008 and into 2009, as we think some of the stocks are undervalued and have strong total-return potential," he adds.

So there you have it. The group's improving relative strength is confirmed by a positive fundamental outlook, in our view.

Industry Momentum List Update

Here is this week's list of the subindustries in the S&P 1500 with Relative Strength Rankings of "5" (price changes in the past 12 months that were in the top 10% of the S&P 1500), along with a stock that has the highest S&P STARS (tie goes to the issue with the largest market value).

Source: Standard & Poor's Equity Research

Stovall, the chief investment strategist for Standard & Poor's Equity Research Services, is the author of the forthcoming book The Seven Rules of Wall Street: Crash-Tested Investment Strategies That Beat the Market.