In this article, we discuss 12 best communication stocks to invest in.
The communications sector has been boosted by a macro environment of rising rates and soaring inflation since it is generally one of the best defensive plays on the market in crisis situations. However, the industry faces several challenges as it seeks to tackle a dynamic regulatory, technological, and competitive environment. The United States government recently passed a $1 trillion infrastructure bill that has earmarked over $65 billion for the upgradation of broadband networks across the country, boosting communications stocks.
Some of the firms likely to be direct beneficiaries from this influx of government money include T-Mobile US, Inc. (NASDAQ:TMUS), Charter Communications, Inc. (NASDAQ:CHTR), and Alphabet Inc. (NASDAQ:GOOG). According to a report by research firm Spend Edge, one of the key areas of growth in the sector is the software side, expected to grow at a compound annual growth rate of 6.20% this year. Research from Deloitte indicates that keeping up with new networks, services, and applications is also going to be a major theme for the sector.
Our Methodology
The companies that operate in the communications sector were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
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Best Communication Stocks To Invest In
12. Vodafone Group Public Limited Company (NASDAQ:VOD)
Number of Hedge Fund Holders: 15
Vodafone Group Public Limited Company (NASDAQ:VOD) engages in telecommunication services in Europe and internationally. The firm features on the list of best communications stocks to invest in. On August 22, the company announced that it had entered into an agreement for the potential sale of Vodafone Hungary for a total cash consideration equivalent to an enterprise value of €1.8 billion.
On September 22, Deutsche Bank analyst Robert Grindle maintained a Buy rating on Vodafone Group Public Limited Company stock and lowered the price target to 215 GBp from 225 GBp, identifying the rate hike as one of the reasons behind the ratings update.
At the end of the second quarter of 2022, 15 hedge funds in the database of Insider Monkey held stakes worth $566 million in Vodafone Group Public Limited Company, compared to 14 in the previous quarter worth $599 billion.
Just like T-Mobile US, Inc., Charter Communications, Inc., and Alphabet Inc., Vodafone Group Public Limited Company is one of the best communication stocks to buy according to hedge funds.
11. Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC)
Number of Hedge Fund Holders: 17
Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) provides communication infrastructure, services, and software solutions to the telecom and other sectors. The company is one of the most prominent communications stocks to invest in. In late July, the firm announced that it had completed the acquisition of Vonage, filling out its communications suite and offering a further expansion into enterprise markets. The firm expects to see $400 million in revenue synergies under the deal.
On July 15, Cowen analyst Paul Silverstein maintained an Outperform rating on Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) stock and lowered the price target to $11 from $15.
Among the hedge funds being tracked by Insider Monkey, San Francisco-based investment firm Cavalry Asset Management is a leading shareholder in Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), with 5 million shares worth more than $37 million.
10. Nokia Oyj (NYSE:NOK)
Number of Hedge Fund Holders: 20
Nokia Oyj (NYSE:NOK) provides mobile, fixed, and cloud network solutions worldwide. The firm is among the best communications stocks to invest in. On September 8, the company announced that it would extend the industrial portfolio of user equipment to facilitate private wireless network connectivity in North America. As part of the plan, the company plans to use a 5G field router and dongle to enable Internet of Things connectivity for enterprises, educational establishments, cities, and other entities.
On September 15, Credit Suisse analyst Adithya Metuku upgraded Nokia Oyj stock to Outperform from Neutral with a price target of EUR 6.31, up from EUR 5.4, noting the firm was better placed than Ericsson due to a strong network infrastructure.
At the end of the second quarter of 2022, 20 hedge funds in the database of Insider Monkey held stakes worth $309 million in Nokia Oyj, compared to 22 in the previous quarter worth $565 million.
9. VeriSign, Inc. (NASDAQ:VRSN)
Number of Hedge Fund Holders: 35
VeriSign, Inc. (NASDAQ:VRSN) provides domain name registry services and internet infrastructure that enables internet navigation for various recognized domain names. The firm is among the best communication stocks to invest in. On July 28, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $1.54, beating analyst expectations by $0.02. The revenue over the period was more than $352 million, up close to 7% compared to the revenue over the same period last year and beating estimates by $3 million.
At the end of the second quarter of 2022, 35 hedge funds in the database of Insider Monkey held stakes worth $4.1 billion in VeriSign, Inc., compared to 41 in the preceding quarter worth $5.4 billion.
In its Q4 2021 investor letter, Longleaf Partners Fund, an asset management firm, highlighted a few stocks and VeriSign, Inc. was one of them. Here is what the fund said:
“VeriSign, Inc. provides internet infrastructure services worldwide and is best known for its exclusive role managing the .com and .net domains, for which it receives annual fees from all those domain owners. Shares of Verisign gained after reporting strong revenue growth and operating margins that exceeded Wall Street forecasts. We continue to be positive on Verisign’s business, based on its strong competitive position, capacity for global growth in domain names, and its ongoing ability to generate substantial free cash flow.”
8. Lumen Technologies, Inc. (NYSE:LUMN)
Number of Hedge Fund Holders: 42
Lumen Technologies, Inc. (NYSE:LUMN) is a facilities-based technology and communications company providing various integrated products and services under the Lumen, Quantum Fiber, and CenturyLink brands. It is one of the top communications stocks to invest in. The company is slowly building a dividend profile to make the shares more attractive. On August 18, the company declared a quarterly dividend of $0.25 per share. The forward yield was an impressive 9.06%.
Among the hedge funds being tracked by Insider Monkey, California-based investment firm Knoll Capital Management is a leading shareholder in Lumen Technologies, Inc., with 100,000 shares worth more than $1 million.
In its Q1 2022 investor letter, Longleaf Partners Fund, an asset management firm, highlighted a few stocks and Lumen Technologies, Inc. was one of them. Here is what the fund said:
“Lumen – Lumen Technologies, Inc. reported weak organic revenue growth and guided more weakness for 2022. We expect revenue growth to kick back in towards the end of 2022, and the huge FCF coupon helped offset value decline from the weaker guidance. The other factor weighing on the stock price was largest shareholder Temasek’s partial sale of its 10% position in the quarter, creating uncertainty and a share price overhang. We have a 13D filed and continue to urge the company to take steps to address the significant price-to-value gap, including continued share buybacks.”
7. AT&T Inc. (NYSE:T)
Number of Hedge Fund Holders: 55
AT&T Inc. provides telecommunications, media, and technology services worldwide. It is one of the elite communication stocks to invest in. On July 21, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $0.65, beating analyst expectations by $0.03. The revenue over the period was more than $29 billion, down close to 17% compared to the revenue over the same period last year but beating estimates by $130 million.
On August 18, MoffettNathanson analyst Craig Moffett maintained a Market Perform rating on AT&T Inc. stock and lowered the price target to $17 from $19, noting the firm had accelerated subscriber growth but is suffering at the hands of cutting free cash flow.
At the end of the second quarter of 2022, 55 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in AT&T Inc., compared to 74 in the preceding quarter worth $4 billion.
In its Q2 2022 investor letter, Argosy Investors, an asset management firm, highlighted a few stocks and AT&T Inc. was one of them. Here is what the fund said:
“I purchased shares of AT&T Inc. prior to its spin-off of Warner Brothers Discovery (WBD). Most people are probably familiar with AT&T. They are a major cellular service provider, and until recently owner of the Time Warner media assets, which include HBO, CNN, TNT, TBS, Cartoon Network, DC Comics and the Batman content brands, and more. At the time of my purchase, I estimated that the combined T/WBD assets traded at a 15% levered FCF yield, or 6x FCF. I also believe that WBD, which now has HBO Max, has future growth in front of it which was previously in doubt when Discovery was primarily tied to the declining cable television bundle. Since then, Netflix reported disappointing subscriber growth, which threw all streaming companies into disarray. WBD followed that news with a disappointing outlook on its business during its own quarterly earnings.
As a result, shares of WBD have declined nearly 40% since the spin-off. WBD now trades for 7x 2023E FCF and there is great potential for returns over the next few years as WBD pays down debt used to finance its merger combining Warner Brothers and Discovery and grows. We do not own a large position in WBD at present, but we may add to it over time.”
6. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 58
Verizon Communications Inc. (NYSE:VZ) offers communications, technology, information, and entertainment products and services. It is one of the elite communications stocks to invest in. On September 22, the company announced that it had received $11.5 million from the US Department of Defense to build a private 5G network in an aircraft maintenance hangar at the Joint Base Pearl Harbor Hickam military base. The design will enable military leaders to leverage the high-speed, high-bandwidth and low-latency of Verizon 5G.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in Verizon Communications Inc., with 17 million shares worth more than $879.8 million.
Along with T-Mobile US, Inc., Charter Communications, Inc., and Alphabet Inc., Verizon Communications Inc. is one of the best communication stocks to buy according to hedge funds.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and VeriSign, Inc. was one of them. Here is what the fund said:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like telecom (Verizon Communications Inc.). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
5. Charter Communications, Inc. (NASDAQ:CHTR)
Number of Hedge Fund Holders: 68
Charter Communications, Inc. operates as a broadband connectivity and cable operator company, serving residential and commercial customers in the United States. It is one of the top communications stocks to invest in. On August 12, the company announced that it was phasing out the original content wing of the firm. The move brings an end to a four year-plus attempt to push into scripted shows and is aimed at helping hold back the tide of cable departures due to cord cutting.
On August 24, KeyBanc analyst Brandon Nispel maintained an Overweight rating on Charter Communications, Inc. stock and raised the price target to $592 from $555, noting that despite weakness, the short sightedness of investors can be proven wrong.
At the end of the second quarter of 2022, 68 hedge funds in the database of Insider Monkey held stakes worth $5.7 billion in AT&T Inc., compared to 73 in the preceding quarter worth $8.5 billion.
In its Q2 2022 investor letter, Andvari Associates, an asset management firm, highlighted a few stocks and Charter Communications, Inc. was one of them. Here is what the fund said:
“Regarding Liberty Broadband, Andvari has owned it for the last 7+ years primarily because of its large stake in cable company Charter Communications. Given that Liberty also traded at a wide discount to its own net asset value, Andvari saw this as an even cheaper way to own Charter. We sold Liberty because we saw (too slowly) a violation of one of the core parts to our investment thesis: pricing power at Charter was not as great as we imagined. Charter has not been able to raise prices in line with inflation. To add insult to injury, the trade association for the U.S. cable industry started proudly advertising about how internet price increases have remained far behind the rate of inflation.”
4. Comcast Corporation (NASDAQ:CMCSA)
Number of Hedge Fund Holders: 75
Comcast Corporation (NASDAQ:CMCSA) operates as a media and technology company worldwide. The firm is among the best communication stocks to invest in. On September 14, the company announced that it was boosting its share repurchase program to a total of $20 billion. The firm also revealed that the new authorization does not have an expiration date. So far this year, the media and technology company has repurchased $9 billion of Class A common stock.
Among the hedge funds being tracked by Insider Monkey, New York-based firm First Eagle Investment Management is a leading shareholder in Comcast Corporation, with 30 million shares worth more than $1.2 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Comcast Corporation was one of them. Here is what the fund said:
“Weakness among our holdings in the communication services sector was the other detractor to performance. Comcast Corporation was hurt by tepid subscriber growth in its broadband business but demonstrated strong growth in free cash flow, positioning the company for accelerated capital return going forward.”
3. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 96
T-Mobile US, Inc. provides mobile communications services. The company is one of the most prominent communication stocks to invest in. On September 19, the company announced that it had invested $304 million in Auction 108, a recent auction by the FCC for a 2.5 GHz spectrum. The carrier won 7,000 2.5 GHz licenses in areas covering 81 million people. The firm said it would immediately begin deploying the new mid-band spectrum for 5G once licenses are issued.
On September 9, Raymond James analyst Ric Prentiss maintained a Strong Buy rating on T-Mobile US, Inc. stock and raised the price target to $178 from $175 as the firm announced a $14 billion stock repurchase program.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in T-Mobile US, Inc., with 9.2 million shares worth more than $1.2 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and T-Mobile US, Inc. was one of them. Here is what the fund said:
“As mentioned, the communication services sector has come under some pressure, and irrational pricing competition has negatively impacted wireless industry growth and profitability of late, weighing on T-Mobile US, Inc.. Faced with these headwinds, and with pressure from other wireless carriers and cable companies that could cause the company to cede share in subscriber growth in 2022, we exited our position in the fourth quarter.”
2. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 153
Alphabet Inc. provides various technology products and platforms. The firm features on the list of best communications stocks to invest in. On September 22, the company officially launched the News Showcase publisher program in Spain. Google has spent over $1 billion on the program.
On August 3, Tigress Financial analyst Ivan Feinseth maintained a Strong Buy rating on Alphabet Inc. stock and raised the price target to $186 from $183, highlighting the resiliency of the cloud and search business of the firm.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel investment Group is a leading shareholder in Alphabet Inc., with 3.1 million shares worth more than $6.9 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Alphabet Inc. was one of them. Here is what the fund said:
“Alphabet Inc. is the parent company of Google, the world’s largest search and online advertising company. Shares of Alphabet declined 21.6% in the quarter due to concerns about slower global growth impacting the company’s core advertising business. We retain conviction in Alphabet’s merits as it continues to benefit from growth in mobile and online video advertising, which accrues to its core assets of search, YouTube, and the Google ad network. We are further encouraged by Alphabet’s investments in Cloud, AI, and Autonomous Driving (through its Waymo subsidiary).”
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 184
Meta Platforms Inc. (NASDAQ:META) develops products that enable people to connect and share content with friends and family through mobile devices, personal computers, virtual reality headsets, wearables, and in-home devices worldwide. The firm features on the list of best communications stocks to invest in. On September 20, the company announced that it was planning to integrate the WhatsApp messaging service with the business services of Salesforce to help businesses chat directly with their customers.
On September 12, Piper Sandler analyst Thomas Champion maintained a Neutral rating on Meta Platforms, Inc. stock and lowered the price target to $175 from $190, noting that checks indicated app tracking transparency headwinds were significant for the firm.
At the end of the second quarter of 2022, 184 hedge funds in the database of Insider Monkey held stakes worth $18.2 billion in Meta Platforms, Inc., compared to 200 the preceding quarter worth $19.3 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Meta Platforms, Inc. was one of them. Here is what the fund said:
“Shares of Meta Platforms, Inc., the owner of Facebook, the world’s largest social network, fell 28.4% during the second quarter due to quarterly results that missed consensus estimates, driven by the impact of Apple’s new privacy changes in its iOS operating system. These changes have made it harder for Facebook to measure the effectiveness of its advertising across its mobile apps.
In the longer term, we expect Facebook to continue utilizing its leadership in mobile to provide global advertisers targeted marketing capabilities at scale, with substantial monetization optionality ahead in newer areas such as Reels (Meta’s competing solution to TikTok) and e-commerce.”
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This article is originally published at Insider Monkey.
