Sunday Morning Coffee

We executed a swap for larger accounts over the last couple of weeks. We sold Partner Communications (PTNR) and then replaced it early on Friday with the EG Shares Emerging Market Telecom ETF (TGEM).

PTNR turned out to be a poor proxy for both Israel and telecom as it turned out (maybe this will change in the future) but the massive dividend offset a large portion of the price decline, but not all of it. The stock had a couple of hiccups along the way in terms of missing estimates once or twice, still what I would call very good growth but with certain stocks, earnings misses obviously get punished.

We've been slightly overweight telecom but the PTNR sale left us temporarily underweight which was not going to be the case very long. I was very positive of the concept of the EG Shares sector funds from the outset and when they finally listed the rest of them I liked what I saw under the hood of the telecom fund. Had PTNR worked out as hoped for I doubt I would own TGEM at the point but we did sell, I wanted a replacement and I think TGEM can be a good hold.

From the top down I wanted high yielding foreign exposure that avoids Europe. From the bottom up I think telecom in China (the largest country in the fund) is one of the sectors that can be held and if China Mobile (CHL) ever gets going then this fund will do well. I also like being able to access South Africa in a consumer-ish sector and increase our Brazil exposure. The fund should yield in the high threes after accounting for the fee.