Communication Services was one of Wall Street's biggest success stories in 2024. The Communication Services Select Sector SPDR (XLC) jumped 34.1% through the year and emerged as the S&P 500’s biggest growing sector. While it trailed utilities for the better part of the year, growth during the holiday season and falling interest rates boosted it.
The sector constitutes companies that provide wired, wireless, satellite, cable, Internet media services, broadcasting and other communication infrastructure. These companies generally boast strong fundamentals. Also, companies that comprise communication services constantly invest in new technologies and innovation and offer significant opportunities for price appreciation.
This is why “generative artificial intelligence (AI)” has driven growth in this sector. Several communication services companies could be well-positioned to benefit from the continued evolution of generative AI capabilities. In addition to the growing enthusiasm for AI, companies in the interactive media and services segments benefited from improving fundamentals. Cost-cutting efforts have aided, while strong consumer spending helped drive steady growth in revenues from digital advertising.
Communication Services, as a sector, is likely to stay robust with the U.S. economy remaining strong. In fact, the Trump administration has just announced a $500 billion AI infrastructure project called “Stargate”, which is likely to boost the sector. A few elements of the sector are also defensive in nature, like wireless and broadband service providers. So, parts of the sector can hold up relatively well even in times of weakness and volatility for the broader market.
Hence, astute investors should invest in communication services funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without the array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three such communication services mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive 5-year and 10-year annualized returns, minimum initial investments within $5000 and carry a low expense ratio.
Fidelity Select Communication Services Portfolio FBMPX primarily invests in common stocks of communication services companies. FBMPX advisors employ a fundamental analysis approach to arrive at their investment decisions.
Priyanshu Bakshi has been the lead manager of FBMPX since July 2024. The three top holdings of the fund are Meta (24.8%), Alphabet (22.5%) and AT&T (4.8%).
FBMPX’s 3-year and 5-year annualized returns are 8.8% and 15.1%, respectively. Its net expense ratio is 0.67%. FBMPX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared with its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Advisor Communication ServicesA FGDMX primarily invests in common stocks of communication services companies. FGDMX advisors employ a fundamental analysis approach to arrive at their investment decisions.
Priyanshu Bakshi has been the lead manager of FGDMX since July 2024. The three top holdings of the fund are Meta (24.8%), Alphabet (22.5%) and AT&T (4.8%).
FGDMX’s 3-year and 5-year annualized returns are 8.5% and 14.8%, respectively. Its net expense ratio is 0.96%. FGDMX has a Zacks Mutual Fund Rank #2.
T. Rowe Price Comm & Tech Investor PRMTX primarily invests in securities of communications and technology companies. PRMTX advisors may use both growth and value approaches to make their investment decisions. The portfolio may consist of a relatively small number of holdings.
James Stillwagon has been the lead manager of PRMTX since November 2019. The three top holdings of the fund are Meta (8.2%), Netflix (7.2%) and Apple (6.4%).
PRMTX’s 3-year and 5-year annualized returns are 4.6% and 14%, respectively. Its net expense ratio is 0.77%. PRMTX has a Zacks Mutual Fund Rank #2.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpGet Your Free (PRMTX): Fund Analysis Report
Get Your Free (FBMPX): Fund Analysis Report
Get Your Free (FGDMX): Fund Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
