The interest rate cut will keep Telstra’s shares hovering at a record high valuation, but here is the news: it’s the tier two and tier three telco firms that will generate share price growth.
Five years ago the internet service provider market was teeming with telcos - there were literally hundreds of them. Okay, maybe it was still dominated by a dozen or so.
Today, it's whittled down to 5 - TPG, M2, Telstra and Optus.
There is little value in Telstra, but its 6 per cent dividend yield will keep it well bid. The real value in the sector lies in the second tier plays - TPG, iiNet and M2.
While TPG is a little expensive, the latter two look cheap by historical standards.
These stocks have market caps over a billion, so they're not really Small Caps, which are under the radar. But they are definitely worth checking out.