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Investing in the communication sector can expose you to a cutting-edge industry most Americans use daily — including social media and search engine companies, wireless telecommunications providers and streaming services.
Read on to learn more about the demand of this industry and check out the best communication services stocks you can invest in now.
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Overview: Communication Services Stocks
The Global Industry Classification Standard (GICS) telecommunication services sector was renamed communication services in 2018. This change shows that the way we communicate, share information and entertain ourselves has greatly and fundamentally changed due to the convergence of telecom, media and technology.
The new communication services sector also incorporated communication providers from the information technology sector. These include companies like Facebook (NASDAQ: FB) and Alphabet (NASDAQ: GOOGL). Media companies like Comcast Corp (NYSE: CMCSA) and Disney (NYSE: DIS) were also moved from the consumer discretionary sector.
The communication services sector now makes up 8.2% of the MSCI index — the original telecommunication services was just 2.5%.
Best Online Brokers for Communication Services Stocks
You can buy shares of companies in the communication services sector with online brokers. Do a little digging to see what each broker has to offer — educational resources, exchanges offered, fees and commissions required and even just how to open an account. Here are some of the top online brokers you can compare.
Intermediate Traders and Investors
Features to Look for in Communication Services Stock
- Shareholders’ equity or book value: Book value is the difference between the company’s assets and its liabilities (including the value of any preferred stock that the company has issued). Book value per share is the number most investors are interested in.
For stocks with a great long-term potential, consider a book value per share that isn’t out of line with that of similar companies in the same sector.
- Return on equity. This is a company’s net profit after tax deduction divided by the book value. It shows how much a company is drawing on the stockholders’ stake in the stock. If the return on equity shows consistent growth, the stock’s price will exhibit long-term strength. A steady return in equity of more than 15% may indicate a company that knows how to manage itself properly.
- A leader in its sector: A company gains several advantages by being No. 1 or 2 in its primary sector. An industry leader can influence pricing instead of merely reacting to what others do. It also has a bigger market presence – new products have a higher chance of being accepted.
Your New Safe Haven
A majority of companies in the communication sector depend heavily on recurring revenue, while others like Google and Facebook earn from advertising. The 5G rollout expected to increase network speeds means communication service companies will continue to create demand and growth potential.
If you’ve found the best stocks and aren’t sure what to do next, be sure to read Benzinga’s Best Online Brokerages.
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