11 Best Communication Stocks To Invest In

Published on January 5, 2022 at 10:21 am by Usman Kabir in Hedge Funds, News

In this article, we discuss the 11 best communication stocks to invest in. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Communication Stocks To Invest In.

Supply chain threats loomed large over the communications sector in 2021 and complicated the post-pandemic economic recovery as smartphone shipments fell, the rollout of 5G service was delayed globally, and the broadcast medium challenged streaming for advertising spend. These trends are likely to continue in 2022 as consumer spending, content creation, and device availability alter the technology and communications landscape. According to a report by consulting firm Deloitte, WiFi-6 devices will outsell 5G ones globally in 2022.

Communications Sector: What To Expect in 2022

Kevin Westcott, a sector leader at Deloitte, believes that cost and licensing are the two main factors behind the popularity of WiFi 6 over the much-hyped 5G services. NFTs, gaming, and ESG initiatives will also play a huge part in influencing the overall performance of the tech and communications sector this year. According to EMR, the global communications market is expected to grow at a compound annual growth rate of 24% in the next few years to reach a size of close to $200 billion by 2026.

Investors who want to capitalize on these growth trends should check out some of the top communications stocks to invest in. Since many communication firms pay dividends, investors who want to shield their portfolios against rising inflation could invest in telecom stocks that provide stability in times of volatility. Some of these include T-Mobile US, Inc. (NASDAQ:TMUS), Charter Communications, Inc. (NASDAQ:CHTR), and AT&T Inc. (NYSE:T), among others discussed in detail below. Communications firms are also increasing their spend towards digital. A survey by accounting firm KPMG reveals that close to 80% of the executives in the communications sector believe that the pandemic has accelerated digitization in the industry by years.

Our Methodology

The companies that operate in the communications sector were selected for the list through a careful assessment of business fundamentals and analyst ratings to provide readers with some context for their investment choices.

Hedge fund sentiment was included as a classifier as well. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.

Photo by Mario Caruso on Unsplash

Best Communication Stocks To Invest In

11. Vodafone Group Plc (NASDAQ:VOD)

Number of Hedge Fund Holders: 18

Vodafone Group Plc (NASDAQ:VOD) stock has gained in recent weeks on the back of reports that a private equity firm is interested in acquiring the communications giant. In November, Vodafone Group Plc (NASDAQ:VOD) CEO Nick Read had told a London newspaper that he was supportive of consolidation in the communications industry in Europe and the United Kingdom “on the right terms”. Read also pushed regulators to allow a potential merger between Vodafone Group Plc (NASDAQ:VOD) and Three, a mobile operator based in the UK.

Vodafone Group Plc (NASDAQ:VOD) is a communications stock that does not enjoy significant hedge fund interest, but those that do hold stakes in the company often back it with lots of money. At the end of the third quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $613 million in Vodafone Group Plc (NASDAQ:VOD).

Just like T-Mobile US, Inc. (NASDAQ:TMUS), Charter Communications, Inc. (NASDAQ:CHTR), and AT&T Inc. (NYSE:T), Vodafone Group Plc (NASDAQ:VOD) is one of the stocks on the radar of elite investors.

10. Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC)

Number of Hedge Fund Holders: 21

Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) provides communications infrastructure and related services. The company has gained importance in recent years as a major deployer of 5G networks on a mass scale. Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) has partnered with telecom firms globally for 5G deployment, including AT&T in the US, Airtel in India, and is also tapping the Chinese and Far East markets. Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) recently acquired cloud communications firm Vonage for $6.2 billion as part of a plan to push into the metaverse.

The activity has attracted the interest of hedge funds. At the end of September, 21 hedge funds in the database of Insider Monkey held stakes worth $227 million in Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), up from 19 at the end of June.

9. Nokia Corporation (NYSE:NOK)

Number of Hedge Fund Holders: 22

Morgan Stanley analyst Dominik Olszewski recently initiated coverage of Nokia Corporation (NYSE:NOK) stock with an Overweight rating and a price target of $7.5, backing Nokia Corporation (NYSE:NOK) to improve margins in the next two years amid improved operational efficiency and competitive pricing. The analyst highlighted the accelerated deployment of 5G networks as a major growth catalyst for Nokia Corporation (NYSE:NOK) in the long term.

Nokia Corporation (NYSE:NOK) has inked agreements for 5G network expansion in Japan, Slovenia, Qatar, Estonia, and several other countries. Even though supply chain concerns haunted Nokia Corporation (NYSE:NOK) stock in 2021, analysts expect the company to navigate these issues better in 2022.

8. Lumen Technologies, Inc. (NYSE:LUMN)

Number of Hedge Fund Holders: 25

Lumen Technologies, Inc. (NYSE:LUMN) operates as a technology and communications firm. It has an impressive dividend history stretching back over two decades and an attractive yield of close to 8%. In November, Lumen Technologies, Inc. (NYSE:LUMN) declared a quarterly dividend of $0.25 per share, in line with previous. 25 hedge funds in the database of Insider Monkey hold stakes worth $941 million in Lumen Technologies, Inc. (NYSE:LUMN).

Lumen Technologies, Inc. (NYSE:LUMN) has become the center of investor focus in recent months as inflation in the US rises to the highest levels since the early 1980s. The high dividend yield of Lumen Technologies, Inc. (NYSE:LUMN) could provide investors with some much-needed cover against inflation in 2022.

In its Q1 2021 investor letter, Longleaf Partners Fund, an asset management firm, highlighted a few stocks and Lumen Technologies, Inc. (NYSE:LUMN) was one of them. Here is what the fund said:

“Lumen (40%, 3.33%), the global fiber company, was the top contributor. While COVID fallout still weighed on fourth quarter results, the company benefitted from positive business mix improvements. Early in the quarter, Lumen appreciated 38% in a few short days amidst the “Game Stop / Reddit” short cover phenomenon. After this short-term bounce, Lumen’s stock price appreciated more steadily over the last six weeks of the quarter with improved results. Many of last year’s worst-case fears have not materialized and the outlook is improving for the core business. We continue to believe that the company has multiple ways within its control to both grow and realize value per share, and we have a 13D filed to allow us to discuss these options with the company. Lumen’s board, which includes Southeastern-nominated Chairman Mike Glenn from FedEx and Director Hal Jones from Graham Holdings, is doing good work to realize Lumen’s hidden value and return the business to FCF/share growth. Despite its appreciation, the stock trades at less than half of our appraisal.”

7. VeriSign, Inc. (NASDAQ:VRSN)

Number of Hedge Fund Holders: 40

Over the pandemic crisis, VeriSign, Inc. (NASDAQ:VRSN), which provides internet infrastructure and services, proved that it could withstand economic downturns. As another variant of the virus rises, investors are looking towards VeriSign, Inc. (NASDAQ:VRSN) to protect their portfolios from risk. VeriSign, Inc. (NASDAQ:VRSN) has solid fundamentals, recently beating market estimates on earnings per and revenue for the third quarter, and growth catalysts ahead as business spend on IT increases.

40 hedge funds in the Insider Monkey database were long VeriSign, Inc. (NASDAQ:VRSN) at the end of the third quarter of 2021. The combined worth of these stakes in VeriSign, Inc. (NASDAQ:VRSN) was around $5.3 billion.

6. Verizon Communications Inc. (NYSE:VZ)

Number of Hedge Fund Holders: 57

Verizon Communications Inc. (NYSE:VZ) is one of the most trusted names in the communications industry. The stock is a long-term holding of legendary value investor Warren Buffett and has registered eight consecutive years of dividend growth. Verizon Communications Inc. (NYSE:VZ) stands to benefit from the increased government spending on 5G deployment across the United States in the coming years. Verizon Communications Inc. (NYSE: VZ) is also planning to expand partnerships into the metaverse.

Cowen analyst Colby Synesael has an Outperform rating on Verizon Communications Inc. (NYSE:VZ) stock with a price target of $71. The analyst believes the stock is “meaningfully undervalued” at current levels given strong fundamentals and raised 2021 guidance.

Along with T-Mobile US, Inc. (NASDAQ:TMUS), Charter Communications, Inc. (NASDAQ:CHTR), and AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ) is one of the stocks that hedge funds are buying.

In its Q1 2021 investor letter, Miller/Howard Investments, an asset management firm, highlighted a few stocks and Verizon Communications Inc. (NYSE:VZ) was one of them. Here is what the fund said:

“We sold Verizon (VZ) based on concerns over how much they might spend in ongoing spectrum auctions. Management may legitimately view spending billions of dollars to expand their spectrum holdings as necessary, but we believe the payoff will be slow and will make it challenging to grow the dividend at a good pace.”

Click to continue reading and see 5 Best Communication Stocks To Invest In.