In this article we will take a look at the 10 best 5G stocks to buy now.
The 5G revolution is set to bring about consequential changes in key markets including telecom, gaming, data center, software production, smartphones and apps. Major telecom, software and hardware companies are already racing to profit from the migration of billions of users from 4G to 5G networks across the globe. Samsung last year launched two 5G-enabled smartphones. Similarly, in March 2020, HMD Global announced Nokia 8.3 5G in the market. Powering these 5G smartphones are chips by giants like Qualcomm, Huawei, Marvell and Skyworks. The governments in the developed world are expanding the 5G infrastructure rapidly and doling out billions in contracts to 5G infrastructure, semiconductor and telecom companies.
Growth Catalysts for 5G Stocks
5G stocks present a strong investment opportunity for long-term investors as the connectivity revolution is just getting started. A report by McKinsey predicts that just 25% of the world’s population will be able to use 5G by 2030, mostly in wealthy parts of the world like the U.S., Europe and mainland China. As new companies enter the market, 5G stocks will gain traction. 5G isn’t just about having higher internet speeds. Once billions of users are able to break through the limited internet speeds, their demand for content, gaming, videos, apps and software will rise exponentially. This would buoy various markets and lift stocks mostly in the sectors directly affected by the connectivity boost. McKinsey’s report says that the consequential communication revolution after 5G is expected to add $1.5 trillion to $2 trillion to global GDP.
5G will also fuel growth in AI, Internet of Things and smart home technology. Jake Moskowitz from Ericsson Emodo, said in an interview that 5G will make it possible for sensors to operate better, increasing data aggregation and improvement. This would improve the quality of AI and smart home devices.
While choosing stocks to invest in, you should perform detailed research amid the increasing volatility in the financial markets, which is making it harder for even the smart money to sustain profits. The hedge fund industry that once used to post sterling gains is also feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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With this context and industry outlook in mind, let’s start our list of 10 best 5G stocks to buy now.
Best 5G Stocks to Buy Now
10. Nokia Corporation (NYSE: NOK)
Number of Hedge Fund Holders: 19
Nokia ranks 10th on the list of 10 best 5G stocks to buy now. The Finland-based company is cutting reliance on FPGAs as 40% of its products now use ASICs designed in-house. The company plans to tap into the Chinese market for 5G radio projects. In January, Nokia won a new 5G contract from T-Mobile. In the fourth quarter, Nokia’s 5G gross margins jumped amid reduced costs and higher volumes and shipments of ReefShark Nokia’s 5G chipset.
The company is also getting the attention of the smart money, as 19 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter, compared to 21 funds a quarter earlier.
9. Telefonaktiebolaget LM Ericsson (publ) (NASDAQ: ERIC)
Number of Hedge Fund Holders: 20
Swedish giant Ericsson ranks 9th in our list of 10 best 5G stocks to buy now. The company was recently chosen by Belgium’s Telenet Group for its 5G wireless network. The company posted upbeat results in the fourth quarter on the back of increasing margins and new 5G contracts. Revenue in the quarter jumped 13%, while gross margin improved by nearly four percentage points.
As of the end of the fourth quarter of 2020, Arrowstreet Capital owns 4.7 million shares of Ericsson worth $55.9 million. ERIC accounts for 0.07% of Arrowstreet’s total portfolio.
8. Marvell Technology Group Ltd. (NASDAQ: MRVL)
Number of Hedge Fund Holders: 40
Bermuda-based Marvel is an excellent stock to ride the 5G wave, as the company offers various products in the industry. The company recently partnered with Samsung to develop a new System-on-Chip (SoC) which will be integrated into Samsung’s Massive MIMO and advanced radios. In October 2020, KeyBanc analyst John Vinh gave an Overweight rating to Marvell with a $55 price target. The analyst said that Marvell is one of the “best-positioned companies” to take advantage of the inflection in 5G infrastructure market.
A total of 40 hedge funds tracked by Insider Monkey were bullish MRVL at the end of the fourth quarter, up from 37 funds a quarter earlier.
In one of their investor letters, Brown Advisory highlighted a few stocks and Marvell Technology Group Ltd (NASDAQ:MRVL) is one of them. Here is what Brown Advisory said:
“Marvell reported a strong beat to expectations for the first quarter and raised both revenue and margin guidance for the year. The company is performing exceedingly well in our view. While the company’s storage business still has some headwinds, strong demand in networking and cloud computing has helped tremendously.”
7. Skyworks Solutions, Inc. (NASDAQ: SWKS)
Number of Hedge Fund Holders: 41
California-based semiconductor company Skyworks Solutions ranks 7th in the list of 10 best 5G stocks to buy now. In September 2020, Ascent Wealth Partners’ Todd Gordon said that Skyworks is an excellent 5G stock because the company is diversifying into Internet of Things and smart home. The company launched its 5G platform called Sky5 in 2019. The company recently beat first-quarter estimates and said that its board approved a $2 billion share buyback plan. The company also issued a strong revenue guidance.
As of the end of the fourth quarter, there were 41 hedge funds in Insider Monkey’s database that held stakes in Skyworks, compared to 50 funds in the third quarter. AQR Capital Management, with 1.9 million shares of SWKS, is the biggest stakeholder in the company.
Semper Augustus Investments Group, in their Q4 2020 investor letter, said that they’ve liquidated their position in Skyworks Solutions, Inc. (NASDAQ: SWKS) to look for better opportunities. Here is what Semper Augustus Investments Group has to say about Skyworks Solutions, Inc. in their Q4 2020 investor letter:
“Analog semiconductor manufacturer Skyworks was also completely liquidated. The stock had reached our appraisal of fair value early in the year and then fell by half, back to our cost basis in March. Worried about the duration of loss of demand in consumer electronics and having better opportunities, we sold the Skyworks position, wanting the cash for deployment elsewhere. Skyworks was sold at approximately our original cost basis, all of the prior gain evaporated. The Skyworks sale was boneheaded, as the shares not only doubled back to their highs but continued higher from there. That the proceeds were invested well doesn’t remedy that the sale was of too good of a company at way too low a price. Opportunity cost in this case was opportunity lost.”
6. Qorvo, Inc. (NASDAQ: QRVO)
Number of Hedge Fund Holders: 51
Qorvo is a semiconductor company that is set to benefit from the 5G market as it enables 5G infrastructure in the U.S. and global markets. The North Carolina-based company offers a broad range of RF connectivity solutions and chips. Last month, Barclays upgraded Qorvo stock, citing expected radio frequency market growth of over 20% in 2021. The firm also increased its price target for the stock to $190 from $185.
Seth Klarman’s Baupost Group is one of the 51 hedge funds tracked by Insider Monkey having stakes in QRVO at the end of the fourth quarter. The fund owns over 4.4 million shares of the company.
5. Broadcom Inc. (NASDAQ: AVGO)
Number of Hedge Fund Holders: 59
Broadcom is one of the best 5G stocks to buy now. In 2019, the company said it completed its 5G switching portfolio designed to enable the end-to-end networks. Last year, the company said it would sell $15 billion worth of wireless equipment to Apple over the next 3 years. In the fourth quarter, the company posted better-than-expected revenue and strong profit. Operating profit in the quarter jumped 23% to $1.84 billion.
According to our database, the number of AVGO’s long hedge funds positions was unchanged at the end of the fourth quarter of 2020. There were still 59 hedge funds that hold a position in AVGO. The biggest stakeholder of the company is Cantillon Capital Management, with 1.2 million shares, worth $505.7 million.
4. T-Mobile US, Inc. (NASDAQ: TMUS)
Number of Hedge Fund Holders: 103
Wireless carrier T-Mobile would be one of the biggest beneficiaries of the 5G revolution. The company claims that its 5G network is 3.5 times bigger than Verizon’s and reaches over 200 million people. KeyBanc recently gave bullish comments about T-Mobile stock, along with several other telecom companies, citing the upcoming strengths in the 5G market in the U.S. The firm sees net organic growth at T-Mobile slowing slightly in 2022 before accelerating back to 5% – 6% range.
Schroder Investment Management said in their letter that they are hopeful for T-Mobile US, Inc. (NASDAQ: TMUS)’s growth. Here is what Schroder Investment Management has to say about T-Mobile US, Inc. in their investor letter:
“T-Mobile US, Inc.’s (“TMUS”) 2020 merger with Sprint Corporation (“Sprint”) was transformational. The company now controls c.45% of low/mid-band spectrum (which is crucial for 5G) but has only 29% of industry subscribers. We expect this gap to narrow over time, via market share gains, while the deal will also generate significant merger synergies; TMUS should, consequently, achieve substantial profits and free cash flow growth over the next 3-4 years.
TMUS has, hitherto, had an inferior network to its peers, and achieved its subscriber growth via very effective marketing and lower prices, encapsulated in its ‘un-carrier’ approach.
In the 5G era, however, it will have a much better network than its peers – as well as lower prices – because it has more of the critical mid-band (2.5GHz) spectrum than AT&T Inc. (“T”) and Verizon Communications Inc. (“VZ”) combined.
The value of this advantage is reflected in the very aggressive C-Band auction currently underway, in which all three companies have likely spent heavily; T and VZ to supplement their holdings of the key enabling asset for the new 5G era, and TMUS to reinforce its advantage and force its peers to leverage up, so they will be less likely to compete on price. The proceeds from this auction have already reached $81bn (and will entail further substantial spending to ready it for use).
Thus, TMUS is targeting the rollout of its 2.5GHz spectrum across 100mn and 200mn POPs by the end of 2020 and 2021 respectively; this will allow it to offer average speeds of 300Mbps (peak speeds >1Gbps) to subscribers (using only 60MHz of the total 160MHz it owns). Its coverage/offer will be far superior to the competition: T’s standard 5G speeds are 40-60Mbps (i.e. barely faster than 4G LTE); VZ’s 5G ultra-wideband network will offer faster speeds (in theory up to multi-Gbps) but currently covers only 2mn POPs, and is difficult to scale because the mmWave spectrum, on which it relies, propagates only over very short distances and is subject to interference (e.g. by foliage).
It is unlikely that the C-band auction will allow T/VZ to rectify their considerable spectrum lag relative to TMUS: 280MHz is being sold, and VZ requires c.190MHz and T c.150MHz to match TMUS. And the spectrum will take considerable time to clear and be deployed (120MHz clears in December 2021 and 160MHz in December 2023). It is also worth noting C-Band is not nearly as good as TMUS’ 2.5GHz – it has weaker propagation characteristics, thus requiring a much denser network grid which is more costly.
We forecast TMUS to grow its market share of subs by only 100bps per annum 2021-2024, i.e. in line with its prior rates, despite having a better network and cheaper pricing than T/VZ.
3. Verizon Communications Inc. (NYSE: VZ)
Number of Hedge Fund Holders: 67
Verizon ranks 3rd in the list of 10 best 5G stocks to buy now. The company was the lead bidder in a recent government auction for 5G airwaves in the U.S, with a $45 billion offer. The company is already offering 5G services in many states. Earlier this year, Verizon expanded 5G network to some parts of Sacramento, Seattle and Pensacola. The stock is up 10% over the last 12 months.
Warren Buffett’s Berkshire Hathaway currently holds 146.7 million shares of Verizon that amounts $8.62 billion. VZ occupies 3.19% of Buffett’s total portfolio.
2. QUALCOMM Incorporated (NASDAQ: QCOM)
Number of Hedge Fund Holders: 85
Qualcomm is one of the best 5G stocks to buy now. The company offers various products for the 5G infrastructure. Its Qualcomm Snapdragon 5G Mobile platforms offer modem-to-antenna system solution for 5G multimode devices. According to data by IPlytics Platform, the company is a leader in the 5G patent/patent family classifications. In March, Piper Sandler analyst Harsh Kumar upgraded QCOM stock to Overweight from Neutral, citing attractive valuation, the company’s dominance in the IoT and RF markets. The analyst set a price target of $160 for the stock.
Matrix Capital Management currently owns 4 million shares of QCOM, worth $609.97 million. QCOM occupies 0.16% of Matrix Capital’s overall equity.
Alger Spectra Fund, in their Q4 2020 investor letter, mentioned QUALCOMM Incorporated (NASDAQ: QCOM). Here is what Alger Spectra Fund has to say about QUALCOMM Incorporated in their Q4 2020 investor letter:
“Qualcomm is a leading semiconductor company with strong positions in telecommunications end markets that position the company as a primary beneficiary of the innovative 5G network standard rollout. Qualcomm is commonly acknowledged as having the best technology specs for 5Gchipsets as evidenced by signing up all 75 major original equipment manufacturers of telephone handsets including Apple. Additionally, beyond handsets, Qualcomm is positioned to generate growth from automobile manufacturers, the Internet of Things, gaming and other markets.
The shares contributed to performance because Qualcomm’s earnings beat expectations in the face of coronavirus driven declines in the broad handset market. Importantly, the market is improving as the magnitude of handset declines is diminishing sequentially. Qualcomm’s fundamentals are benefitting from a faster-than-expected shift to the 5G standard. As such, the company’s 5G guidance exceeded expectations.”
1. NVIDIA Corporation (NASDAQ: NVDA)
Number of Hedge Fund Holders: 88
Nvidia tops the list of 10 best 5G stocks to buy now. The company is working on hardware and software fit for the futuristic 5G networks and higher speeds. It also offers “Nvidia Aerial,” a software development platform designed for wireless companies for 5G wireless Radio Access Networks (RANs). The company’s computing architecture CloudXR is also designed for 5G to render high-quality AR/VR content at the edge and stream it over the 5G networks.
With a $1.9 billion stake in NVDA, GQG Partners owns 3.7 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 88 hedge funds held stakes in NVIDIA as of the end of the fourth quarter, versus 82 funds in the third quarter.
Mairs & Power, in their Q4 2020 investor letter, mentioned NVIDIA Corporation (NASDAQ: NVDA). Here is what Mairs & Power has to say about NVIDIA Corporation in their Q4 2020 investor letter:
“The Fund’s biggest relative contributor in 2020 was Nvidia (NVDA). Nvidia specializes in graphics cards for computers, and it has benefited from updated chipsas well as strong market positions in applications and machine learning.”
You can also take a peek at Billionaire Jim Simons’ Top 10 Stock Picks and Billionaire Steve Cohen’s Top 10 Stock Picks.
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Disclosure: None. 10 Best 5G Stocks to Buy Now is originally published on Insider Monkey.
