New entrants in the telecom and multimedia sector are causing disruptions across the traditional communications pyramid, which are creating investment opportunities in the space, however investors can continue to benefit from the larger, more established names as part of this secular trend, says Kristina Salen, a Portfolio Manager for Fidelity Asset Management.
“So the great thing about telecom is you can get some of these exciting secular trends that we were discussing previously, but you can also participate in those changes through companies, which have very predictable topline growth, high cash flow generation, and therefore, a propensity to return that cash to shareholders in the form of dividends and/or buybacks,” she said.
Salen gives Walt Disney Co. (DIS) as an example of a large-cap name in the multimedia space that has performed well over time despite any disruptions or shifting secular trends in the space. She says from a content perspective in the telecom sector, content tends to be branded so it tends to have high barriers to entry, and Disney has been able to benefit from this advantage.
“It’s really difficult to replicate Disney. And because the brand has resonated with the consumer, it has tended to do well no matter what the device. Disney has done well on a mobile phone, on television set, on a computer, in a book format and on the iPad,” Salen said. “So I don’t have to worry so much about secular shift at the top of the pyramid.”
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