Yahoo Finance 2 Communication Services Funds to Buy as Sector Growth Continues
Communication Services was one of the best-performing sectors in 2023 and has continued to grow in 2024. As of May 2024, the sector grew 35% over the prior 12 months, clearly ahead of the broader technology sector. Year to date, it has grown 14.9%, just behind utilities.
The communication services segment was created in 2018 by combining FANG stocks with the telecom sector. It comprises high-growth, cyclical stocks of telecommunications and media companies that see massive decline in demand when an economy enters a downturn. But when the market booms, like it did in 2023 over AI optimism, the sector makes gains.
The sector has had a good first-quarter 2024 earnings season. The “Magnificent Seven” stocks, which comprise mainly tech and communication services, did exceedingly well in the quarter. Though the communication services segment ended April on a low note, as its first losing month in six months, the last week of the month witnessed a massive turnaround in inflows.
For some time now, despite delays by the Fed, the general investor consensus has been that a recession has been averted and a soft landing of the economy seems attainable with rate cuts on the not-so-distant horizon. The Fed, in its June meeting, confirmed that it is looking at at least one 25 bps rate cut before the year ends. Currently market participants anticipate the rate cut in September. This would boost markets even further, especially since inflation is slowing down simultaneously.
In such an environment, tech and tech-based sectors like communication services have done well historically. Funds focused on stocks from this diverse group, thus, provide a great opportunity to investors looking to add solidity and fast growth to their portfolio.
Hence, astute investors should invest in communication services funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected two such communication services mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive 5-year and 10-year annualized returns, minimum initial investments within $5000 and carry a low expense ratio.
DWS Science and Technology KTCAX primarily invests in common stocks of science and technology companies, including communication services. For investment purposes, KTCAX advisors may concentrate on one or more industries in the technology sector.
Sebastian P. Werner has been the lead manager of KTCAX since November 2017. The three top holdings of the fund are NVIDIA (11%), Meta (8.7%) and Broadcom (5.6%).
KTCAX’s 5-year and 10-year annualized returns are 21.1% and 16.1%, respectively. Its net expense ratio is 0.90%. KTCAX has a Zacks Mutual Fund Rank #1. To see how this fund performed compared with its category, and other 1 and 2 Ranked Mutual Funds, please click here.
T. Rowe Price Comm & Tech Investor PRMTX primarily invests in securities of communications and technology companies. PRMTX advisors may use both growth and value approaches to arrive at their investment decisions. The portfolio may consist of a relatively small number of holdings.
James Stillwagon has been the lead manager of PRMTX since November 2019. The three top holdings of the fund are Meta (7.3%), Alphabet (7%) and T-Mobile (5.7%).
PRMTX’s 5-year and 10-year annualized returns are 12.6% and 13.3%, respectively. Its net expense ratio is 0.77%. PRMTX has a Zacks Mutual Fund Rank #2.
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