Tech and telecom might be a safe place to hide

The poster-child stocks for the last boom-bust period, the tech and telecom sector, might be the sector to hide in during the recent market volatility. Unlike the late 1990s, when telecom was loaded with debt and tech companies sold for sky-high valuations of 50 to 100x earnings, this time around things are different.

Most telecom stocks have very low debt to EBITDA levels, and many of the start ups that were able to survive went through bankruptcy or, if avoided it, were able to recapitalize their balance sheets.

Another point, this industry is substantially less competitive then it was back then. In terms of national service providers, AT&T Inc (NYSE: T), Verizon Communications Inc (NYSE: VZ), Level 3 Communications Inc (NASDAQ: LVLT) and Sprint Nextel Corporation (NYSE: S) remain. Qwest Communications International Inc (NYSE: Q) is getting itself ready for a sale and has been less aggressive in the national market. Level 3 has purchased many of the start-ups during the past few years, playing the role of industry consolidator.

The two huge service providers, Verizon and AT&T, might look particularly attractive. During Level 3's recent conference call, Jim Crowe said their problem is handling the new business, pricing is no longer an issue in the industry. If this is the case, that means Verizon and AT&T are going to make a lot of money.