The communication services sector officially launched in September, turning attention to new exchange traded funds such as the cap-weighted Communication Services Select Sector SPDR Fund (NYSEArca: XLC).
Now, investors have an equal-weight avenue to playing the communication services sector. The Invesco S&P 500 Equal Weight Communication Services ETF (NYSEARCA: EWCO) debuted on Nov. 7th.
EWCO targets the S&P 500 Equal Weight Communication Services Plus Index, which is the equal-weight equivalent of the benchmark tracked by XLC.
EWCO’s underlying index “is comprised of common stocks of companies in the Global Industry Classification Standard (GICS) communication services sector within the S&P 500 Index. The Fund and Index will rebalance quarterly after the close of business on the third Friday in March, June, September and December,” according to Invesco.
Important Communication Services Differences
XLC tries to reflect the performance of the, Communication Services Select Sector Index, which includes companies that have been identified as Communication Services companies by the Global Industry Classification Standard. Specifically, XLC will include securities of companies from diversified telecommunication services; wireless telecommunication services; media; entertainment; and interactive media & services.
XLC is dominated by just three stocks – Facebook Inc. (NASDAQ: FB) and the two share classes of Google parent Alphabet Inc. (NASDAQ: GOOG). Those stocks combine for about 39% of the fund’s weight. EWCO offers more diversification among the communication services sector’s 26 components.
Just two of EWCO’s holdings exceed weights of 5%. The new ETF devotes 37.60% of its weight to media stocks while entertainment and interactive media names combine for nearly half the fund’s weight. Neither Facebook nor Alphabet are among EWCO’s top 10 holdings.
The new EWCO charges 0.40% per year, or $40 on a $10,000 investment.
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