Communications stocks are rebounding on Friday, led by household media names.
The communications services sector is up 1% in midday trading on Friday, with Paramount Global (PARA) up 6%, Netflix Inc. (NFLX) up 5.1%, and Warner Bros. Discovery Inc. (WBD) up 3.4%.
The Invesco Dynamic Media ETF (PBS) and the Invesco S&P 500 Equal Weight Communications Services ETF (EWCO) offer two ways to access communications stocks, each with different focuses and methodologies.
EWCO weights Netflix at 6.72%, Paramount at 3.87%, and Warner Bros. Discovery at 4.18%; PBS weights Netflix at 5.52% and Paramount at 2.71%, and it does not hold Warner Bros. Discovery, as of December 9.
EWCO is based on the S&P 500 Equal Weight Communication Services Plus Index, which comprises companies in the GICs communication services sector within the S&P 500. Each security is given an equal weight at each quarterly rebalance. The fund includes all securities in the communications services sector, which spans more than just media stocks.
Equal weighting is a methodology favored for enhanced diversification and mitigating size bias in a portfolio. Giving each security an equal weight at each quarterly rebalance ensures that the fund is selling relative winners and buying relative losers, giving EWCO a tilt towards the value factor compared to market cap-weighted funds.
PBS offers more focused exposure to media stocks, comprising 30 U.S. media companies that are principally engaged in the development, production, sale, and distribution of goods or services used in the media industry. The fund tracks the Dynamic Media Intellidex℠ Index, which is designed to evaluate companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action, and value.
EWCO and PBS have eight overlapping holdings, including Netflix, Omnicom Group (OMC), The Walt Disney Co. (DIS), Meta Platforms Inc. (META), Fox Corporation Class A (FOXA), ViacomCBS Inc. Class B (VIAC), News Corp Class A (NWSA), and Interpublic Group of Companies Inc. (IPG), according to ETF Research Center.
For more news, information, and analysis, visit the Portfolio Strategies Channel.