Sector Change May be a Non-Starter For Telecom Stocks

The communication services sector is nearing its debut, a change accessible via exchange traded funds such as the Communication Services Select Sector SPDR Fund (NYSEArca: XLC).

Last year, index providers S&P Dow Jones and MSCI announced the formation of the communication services sector, a new look on the telecommunications sector that includes traditional telecom companies as well as companies previously classified as consumer discretionary and technology names.

While communication services is not a new sector, it brings a new look to the previously stodgy telecommunications sector by adding some well-known growth stocks from the consumer discretionary and technology sectors. That does not mean traditional telecom stocks will benefit from the sector shift.

Dow component Verizon Communications Inc. (NYSE: VZ), AT&T Inc. (NYSE: T) and CenturyLink (NYSE: CTL) are the telecom stocks residing in the communications services sector.

“The telecom sector has been the biggest loser among the S&P’s 11 major sectors with an 4.4-percent decline so far in 2018, driven by AT&T’s 13.3-percent drop. In comparison, many of the other companies joining the group have shown strong gains for the year with Netflix rising 91.5 percent, Twitter (TWTR.N) rising 21.7 percent and Alphabet rising 10.8 percent,” according to Reuters.

Inside the Communication Services Sector

Verizon is a top 10 holding in XLC.