If you are unsure about whether extending broadband service into rural Canadian communities can be profitable for telecommunications firms, why not do an end run around them? Invest in the companies that actually provide the broadband fibre instead.
Corning Inc. is one of the biggest players in the business, and it comes with two big advantages. It is diversified among different lines of business, which give it some stability. As long as people are in need of glass, then Corning is in business.
Secondly, the company operates around the world, which gives it access to pretty much any country that wants to expand its broadband reach. The geographic diversification is a big draw, because Canada is by no means the only country that is trying to extend its broadband coverage and where government is willing to throw financial resources at the idea.
No wonder: According to a 2009 World Bank report, broadband accessibility means economic growth. Increase broadband penetration by 10 percentage points and economic growth will rise 1.2 per cent in developed countries and 1.4 per cent in developing countries, the report said.
Australia has begun an impressive campaign to ramp up its broadband access. If that market sounds too small to get excited about, then consider that the United States - stung by a recent report that places it 15th among OECD countries for its broadband availability - is also trying to extend broadband's reach in the country, in what some commentators have called a broadband arms race.
Corning is in the middle of this race, which is a good place to be. Its shares have performed exceptionally well over the past 18 months as the stock market has recovered and economic stimulus plans have been enacted. The shares have risen nearly 160 per cent from their low point in November, 2008.
While that might scare away some latecomers, there are a few good reasons to stay enthusiastic about this stock. For one, its valuation is still reasonable. The shares trade at just 11.5-times estimated earnings, which is close to the bottom of its range over the past 10 years. And despite the stock's recent gains, the price is still 27 per cent below its 2007 high.
As well, a lot of the recent enthusiasm for the stock appears to come from its exposure to glass panels for high-definition televisions, where sales have been booming. "It's all about TVs," said Brendan Furlong, an analyst at Miller Tabak & Co., after Corning beat estimates with its fourth-quarter earnings in late January.
Pretty soon, analysts might be saying that it's all about broadband.