The telecom sector is the biggest winner this quarter, up close to 20 percent; banks are the worst, up just 5 percent. As we close out the quarter, is the trade about to change? Jason Goldberg, managing director and banking analyst at Barclays Capital, and David Burks, telecommunications analyst at Hilliard Lyons, shared their insights.
“Telecoms have performed well as of late, but if you go back to the market bottom in March '09, the S&P 500 has risen 70 percent since then; and by contrast, telecoms have risen about 40 percent, so we believe there’s still some further upside left,” Burks told CNBC.
Burks explained that the average dividend yield on telecoms is around 6 percent and said the fundamentals in the sector are improving.
“The group generates strong cash flows, which support the dividends, and the total return potential over the next 12 months could be in the 12- to 15-percent range,” he said.
In the meantime, Goldberg said he likes the big banks, as companies show more signs of loan growth and credit quality improvements. ('Fast Money' counterpoint: Can You Trust Citigroup Gains?)
However, Goldberg is cautious on the mid- and smaller sized banks.
“They are tied to their commercial real estate exposures,” he said. “You have seen delinquencies and losses steadily increase in the commercial real estate business, and it’s been masked by other improvements on the banks' balance sheets, but we think it’s an area we have to focus on.”
Scorecard—What They Said:
- Burks' Previous Appearance on CNBC (Sept. 7, 2010)
- Goldberg's Previous Appearance on CNBC (Sept. 14, 2010)
Market Views—Across the Board:
CNBC Data Pages:
No immediate information was available for Burks or Goldberg.