 Good day fellow investors. Now whenever I run a screen I always get telecom stocks into my screens because they have low valuations, good price to book values and extremely high dividends. So today we'll dig into the sector and see whether there is value or the complete set sector will be a value trap. The best way to look at a sector is to look at an ETF. You get immediately all the stocks that compose it, what's going on, what are the values, you can find it for example on the e-shares web pages, you can find whatever you want to know about the whole sector and the performance of the sector in the past. Here you see that the telecommunications ETF did extremely badly after the dot-com bubble and then let's say it did as good as the market but in the last three four years it didn't go anywhere. There is the dividend but there hasn't been any stock price appreciation. Let's see what's going on. I have created a quick table with the top five US and top five European telecoms where I discuss a little bit dividends somewhere there is no dividend and the dividends go up to five percent but most dividends of the big companies are around five percent, four to five percent. There is no revenue growth except for two companies T-Mobile and Sprint which is losing money. Earnings are volatile, T-Mobile was losing money that's why there is a great increase in prices. Price earnings ratio are subdued except for T-Mobile that's growing but if you look at then what's going on in the company you can see that there is or no growth or slow growth, some of them are losing money increasing debt most of the companies to pay for the dividends, declining book values, acquisition growth, dilutive acquisitions and debt so that's let's say the sector at a whole. Now then many think that the sector is defensive but look at what happened in 2009 the sector fell 60% while the SAP 500 fell only 47%. This means that the telecommunications sector isn't that defensive as people expect it to be. Further as I look at the income statements I see those companies getting more and more in-depth to pay the dividends. If interest rates increase they cannot really increase prices because there is so much competition nobody's going to do that so if interest rates increase their high extremely high levels of debt will make it very difficult for them to pay the dividend especially if there is a recession they will get hit because a lot of companies will cancel their subscriptions and whatever is being paid which will then again hit the dividend so it's a very very risky environment and I wouldn't call telecommunications at this moment in time as defensive. However there is the excitement trend of disruption in telecommunications from 5G from new internet from the internet of things from everything being connected and let's see how would that affect this huge telecommunication companies. For example Verizon wants to grow through 5G because that will increase the capacity lower the cost that they have to transport data and they are already investing in the 5G they and AT&T want to be the first in the US and hope to grasp a significant share of the market. However with every new technology everybody invests so much so there is a lot of money spent and then the competition is merciless margins go down and then you again see always the same pattern revenues don't go anywhere because they need to spend so much money in the infrastructure just to keep up with the demands and then there is the risk of huge disruption that it might not be there yet but it doesn't even have to be there it is enough that somebody announces it. Amazon is not going into retail but is already disrupting in because they have announced it with the purchase of Whole Foods so if somebody company let's say like Facebook announces a different way of transporting data around the world then the telecommunication sector is toasted totally toasted because somebody is going to do it cheaper for less money with other intentions Facebook might just want to sell ads and make you pay nothing for what you use for the data you use perhaps I'm talking science fiction here but it's a very very big risk to investing in those companies and for a dividend of 5% even if it might seem attractive I wonder if that dividend will still be 5% in 10 years and if it isn't then you really have made a big mistake when investing in such a seemingly stable dividend this is something that Facebook is doing they are trying to beam internet across the globe from let's say unmanned internet aircrafts very interesting not yet developed not yet here but potential disruption yes however how to invest we know there will be much more data usage the internet of things crazy things will develop every car will be connected there will be so much transportation of data that it is crazy we know that 5g is coming will be the platform that will enable this internet of things to grow even more so how to invest well in the midst of gold fevers in the midst of gold rushes in the 1800s the miners on average didn't make a lot of money some minor got the jackpot some minor lost everything however who made the money was the person that was selling pikes and shovels that's how you make money and that's how you will also make money in the 5g environment in the beaming internet from the sky and all those kinds of investments so please share your ideas i'll be digging deeper this is just the start i wanted to see what's going on with the telecom what is their threat to potentially smaller companies in the 5g sector and how the smaller companies that will we discuss in the future can take advantage of what's going on thank you for watching looking forward to your comments about the telecommunication sector and about potential 5g or other disruptors we are looking for businesses that are doing well now so that the downside is limited but will have the potential to do extremely good if something changes thank you have a great day and i'll see you in the next video