In this article we will take a look at the 10 best telecom stocks to buy right now.
The long-term value that telecommunication stocks offer seem to flow under the radar of investors who are looking for shorter plays on more highly rewarding options. However, for an industry that is expected to be worth more than $3.4 trillion in the coming years with a compound annual growth rate of 6%, and is dominated by established businesses with stable revenues, it is somewhat surprising that the telecom sector does not get the attention it deserves in the market these days, especially in the context of current volatility.
Should You Invest in Telecom Stocks?
Telecom stocks trade at reasonable valuations and offer reliable dividends, and are one of the best options to have in your portfolio during an economic downturn. With 5G technology rapidly making inroads into everyday life — in 2020, the US market had more than 15 million 5G connections, a figure expected to jump 161% to more than 40 million in 2021 — global smartphone sales breaking records, and the US government set to increase spending on communications infrastructure, telecom stocks are perhaps the best defensive play in the market presently. President Biden’s plan to invest $100 billion for high speed broadband will also boost telecom stocks in the coming months.
According to a report by the International Finance Corporation, telecom stocks in all subsectors, including tower companies, data centres, mobile network operators, and broadband providers, performed better than the S&P 500 during the height of the COVID-19 panic, reporting fewer losses than the bigger firms that dominate the market. In fact, according to global consultancy McKinsey, the biggest impact of the pandemic on the telecom industry has been that it has become even more central to the lives of almost everyone on the planet.
Philipp Nattermann and Karolina Sauer-Sidor, two senior McKinsey partners, have highlighted in detail the resilience, adaptivity, and future trends for the industry in a conversation on the impact of the pandemic on telecommunications. Key takeaways from the conversation underline how digital services are expected to play a central part in the telecom sector in the coming years. A survey conducted by Netherlands-based accounting firm KPMG finds that more than 79% of the executives in telecom are of the view that COVID-19 has accelerated digital transformation.
However, even the telecom sector is not immune to the short or medium turn disruptions in the stock market. General macroeconomic impacts, restrictions in distribution of airtime, and demand shortfalls from the bottom of the pyramid all seem to be impacting the telecommunication companies. The rise of social media and market speculation around technology stocks has hogged all the attention, but there is something more to the fundamental shift towards higher risk plays in the industry that has even left market experts baffled.
The entire hedge fund industry is 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 in mind, here are the top 10 best telecom stocks to buy right now.
Best Telecom Stocks to Buy
10. Altice USA, Inc. (NYSE: ATUS)
Number of hedge fund holders: 56
Altice USA, Inc. (NYSE: ATUS) is a New York-based telecom firm that provides television, internet access, and telephone services to almost 4.9 million residential and business customers in 21 US states. The firm also operates news channels like News 12 Networks, Cheddar, and i24NEWS. It has a construction and network division that offers telecom customers maintenance services as well. It was founded in 2015 and is placed tenth on our list of the 10 best telecom stocks to buy right now.
As President Biden moves ahead with a plan to inject government money into high speed broadband, Altice is one of the firms that could benefit from the plan in the coming months. On April 7, the firm completed a $300 million deal for the purchase of Morris Broadband, giving Altice access to a further 36,000 customers in North Carolina.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Soroban Capital Partners is a leading shareholder in the firm with 31 million shares worth more than $1 billion.
9. TELUS Corporation (NYSE: TU)
Number of hedge fund holders: 14
TELUS Corporation (NYSE: TU) is a Vancouver-based telecommunications company. The services that the firm markets include data and voice; equipment sales from mobile technologies, internet protocol; television hosting, and cloud-based services. TELUS has more than 16 million subscribers which include almost 9 million mobile phone customers. It was founded in 1993 and is placed ninth on our list of the 10 best telecom stocks to buy right now.
It has a market cap of more than $27 billion and posted more than $12 billion in annual revenue in December 2020, up from $11 billion in the previous year. On March 5, investment bank Morgan Stanley gave the company stock an Overweight rating and raised the price to $28 from $24. The bank said that the telecom sector in Canada was expected to fare better than peers in the US during the second quarter of 2021.
At the end of the fourth quarter of 2020, 14 hedge funds in the database of Insider Monkey held stakes worth $183 million in the firm, up from 12 in the preceding quarter worth $163 million.
8. Shaw Communications Inc. (NYSE: SJR)
Number of hedge fund holders: 19
Shaw Communications Inc. (NYSE: SJR) is a Calgary-based telecommunication firm that offers telephone, Internet, television, and mobile services. The company operates in the Alberta and British Columbia states for the telecom business and provides satellite television in the whole country. It was founded in 1966 and is placed eighth on our list of the 10 best telecom stocks to buy right now. Shaw is one of the firms offering 5G services in Canada.
On March 15, it was reported that Rogers Telecom was purchasing Shaw for $26 billion. However, on March 30, a Canadian minister said the merger would create serious competition issues as the two firms were two of the biggest telecom companies in Canada. The shares of Shaw slipped following the statement from the government official but have rebounded since.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in the firm with more than 3.5 million shares worth more than $63 million.
7. Chunghwa Telecom Co., Ltd. (NYSE: CHT)
Number of hedge fund holders: 5
Chunghwa Telecom Co., Ltd. (NYSE: CHT) is a China-based company that is the largest telecom provider in mainland China. The company provides local and domestic long distance telephone and leased line, broadband access, Wi-Fi, and multimedia on demand services. It also has stakes in the mobile carrier business. The company has a market cap of more than $30 billion and posted more than $7.3 billion in annual revenue in December 2020, up from $6.9 billion the year before. It ranks seventh on our list of the 10 best telecom stocks to buy right now.
On April 20, the telecom firm announced that Scandinavian firm Nokia would expand the 5G telecom coverage in Taiwan. The deal for this expansion had been signed back in October 2020. Nokia has been a long-term partner of the Chinese telecom giant. Under the deal signed in October, Nokia is set to expand the 5G coverage in Taiwan through the use of non-standalone small cells to improve high-speed internet coverage.
At the end of the fourth quarter of 2020, 5 hedge funds in the database of Insider Monkey held stakes worth $157 million in the firm, the same as in the preceding quarter worth $149 million.
6. Rogers Communications Inc. (NYSE: RCI)
Number of hedge fund holders: 15
Rogers Communications Inc. (NYSE: RCI) is a Toronto-based telecom company. It offers wireless communications, cable television, telephony and Internet connectivity to Canadian residents. The firm has a large number of telecommunications and mass media assets. It has close to 11 million subscribers. The mass media assets of Rogers include Sportsnet ONE, Sportsnet 360, Sportsnet World, Citytv, OMNI, and OLN television networks. The firm also operates two radio channels.
It was founded in 1960 and is placed sixth on our list of the 10 best telecom stocks to buy right now. On March 5, investment bank Morgan Stanley raised the price target on Rogers stock to $65 from $63 and maintained an Equal Weight rating on the firm. However, the bank forecast a bullish future for Canadian telecom compared to those across the border in the US.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in the firm with more than 3.6 million shares worth more than $168 million.
5. Comcast Corporation (NASDAQ: CMCSA)
Number of hedge fund holders: 84
Comcast Corporation (NASDAQ: CMCSA) is a Philadelphia-based technology corporation that has interests in the cable communications, cable networks, broadcast television, and telecom businesses. The products that the firm offers include high-speed Internet, video, voice, wireless, and security and automation services to residential and business customers. The company was founded in 1963 and is placed fifth on our list of the 10 best telecom stocks to buy right now.
Comcast has a market cap of close to $250 billion and posted close to $104 billion in annual revenue in December 2020, down slightly $108 billion the year before. On April 16, investment banking firm Raymond James upgraded Comcast stock to Outperform rating with a price target of $61. The bank said the reopening of the economy would help the firm as it operated theme parks and theaters.
At the end of the fourth quarter of 2020, 84 hedge funds in the database of Insider Monkey held stakes worth $8.8 billion in the firm, up from 82 in the preceding quarter worth $8.1 billion.
4. AT&T Inc. (NYSE: T)
Number of hedge fund holders: 58
AT&T Inc. (NYSE: T) is a Texas-based technology firm with significant stakes in the telecommunication and media industries. The firm markets wireless voice and data communications services; video and targeted advertising; broadband, and wireline telecom. The company is in partnership with HBO to operate the channel’s video-on-demand and digital streaming services. AT&T was founded in 1983 and is placed fourth on our list of the 10 best telecom stocks to buy right now.
On April 22, the share price of the firm was up 5.1% compared to the same time the previous year on the back of positive streaming and wireless results. Financial advisory firms Citi and Evercore were bullish on the telecom company stock with price targets of $34 and $32 respectively.
Out of the hedge funds being tracked by Insider Monkey, Los Angeles-based investment firm Leonard Green & Partners is a leading shareholder in the firm with 18 million shares worth more than $517 million.
3. American Tower Corporation (NYSE: AMT)
Number of hedge fund holders: 61
American Tower Corporation (NYSE: AMT) is a Boston-based real estate investment trust that runs wireless and broadcast communications infrastructure in several countries. It owns and operates more than 181,000 communication sites and has operations in the US, Europe, Africa, Asia, and Latin America. It is one of the Fortune 500 companies, a list of the 500 largest firms in the US. American Tower has a market cap of more than $112 billion and posted more than $8 billion in annual revenue in December 2020.
It is placed third on our list of the 10 best telecom stocks to buy right now. As one of the largest cell phone tower operators in the US, the firm is expected to benefit from a proposed plan of President Biden to upgrade communication infrastructure in the country. On April 12, financial advisory Jefferies retained the positive coverage on the company stock and identified it as one of the top picks for the quarter on the back of 5G and dish network expansions.
At the end of the fourth quarter of 2020, 61 hedge funds in the database of Insider Monkey held stakes worth $4 billion in the firm.
2. T-Mobile US, Inc. (NASDAQ: TMUS)
Number of hedge fund holders: 103
T-Mobile US, Inc. (NASDAQ: TMUS) is a Washington-based telecom firm that operates primarily in the United States. It has more than 100 million mobile customers. It markets wireless devices, including smartphones, wearables, and tablets and other mobile communication devices. The firm runs almost 108,000 macro towers and 69,000 small antenna system sites; in addition to 3,400 T-Mobile and Metro retail locations. It was founded in 1994 and is placed second on our list of the 10 best telecom stocks to buy right now.
On April 19, investment advisory Deutsche Bank upgraded the price target on T-Mobile stock to $185 from $155, a 40% upside, saying it expected the company to grow at a compound annual rate of 14% over the next three years. Bryan Kraft, an analyst at the bank, said the firm was in the early days of creating value through the takeover rival Sprint last year.
Out of the hedge funds being tracked by Insider Monkey, Greenwich-based investment firm Viking Global is a leading shareholder in the firm with 8.7 million shares worth more than $1.1 billion.
1. Verizon Communications (NYSE: VZ)
Number of hedge fund holders: 67
Verizon Communications (NYSE:VZ) is a New York-based multinational telecom firm that also has stakes in the technology, information, and entertainment service businesses. The firm provides wireless internet for mobiles and laptops, as well as fixed connectivity solutions, including internet, video, and voice services. The company has more than 94 million wireless retail connections, 7 million broadband connections, and 4 million Fios video connections. It was founded in 1983 and is placed first on our list of the 10 best telecom stocks to buy right now.
On April 15, investment advisory Truist Securities named Verizon as one of the top picks for the quarter as a leading presence in the in-home broadband market. The advisory also said that Verizon stock was underperforming and would benefit from a proposed US government plan to spend $100 billion on communications infrastructure in the next few years.
At the end of the fourth quarter of 2020, 67 hedge funds in the database of Insider Monkey held stakes worth $10 billion in the firm, up from 65 in the previous quarter having shares worth $2.7 billion.
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Disclosure: None. 10 Best Telecom Stocks to Buy Right Now is originally published on Insider Monkey.
