Don’t worry. We’re not talking about stodgy telecommunications fare here. Rather, the focus is more exotic fare, such as those companies and exchange traded funds with exposure to cloud computing, visualization, and data center transformation, firms that are expected to provide a lift to the broader communications equipment industry.
The industry is top heavy with five companies – Dow component Cisco (NasdaqGS: CSCO), Qualcomm (NasdaqGS: QCOM), Motorola Solutions (NYSE: MSI), Juniper Networks (NasdaqGS: JNP)R and Harris (NYSE: HRS), combining for 90% of the groups roughly $320 billion market value, according to S&P Capital IQ.
ETF investors can access communications equipment with the iShares North American Tech-Multimedia Networking ETF (NYSEArca: IGN). Up 7.5% this year, the $157.3 million IGN allocates a combined 40.2% of its weight to Juniper, Cisco, Qualcomm, Motorola Solutions and Harris.
“Ken Leon, an equity analyst at S&P Capital IQ, thinks that while telecom service providers have been cautious over the past several years due to the economy, spending will likely begin to rebound in the second half of 2015, as new technologies gain broader market acceptance. For 2016, S&P Capital IQ expects accelerated equipment funding related to cloud computing and data centers from the enterprise and government markets,” said S&P Capital IQ.
The research firm has four-star ratings on Cisco, Juniper and Qualcomm. Palo Alto Networks (NasdaqGS: PANW) is IGN’s largest holding. Combine that stock with Juniper and Cisco and that is almost 29% of IGN’s weight, meaning the ETF has significant exposure to ultra-hot cyber security theme. All three stocks are members of the PureFunds ISE Cyber Security ETF (NYSEArca: HACK), one of this year’s top-performing ETFs. [Headlines Help HACK]
The $29 million PowerShares Dynamic Networking Portfolio (NYSEArca: PXQ) also offers robust exposure to communications gear makers.
Up 13.3% this year, PXI’s features Motorola Solutions, Juniper and Cisco among its top 10 holdings as well as Palo Alto Networks and an almost 5% weight to Apple.