5 Best Communication Stocks To Buy According To Hedge Funds

2. T-Mobile US, Inc. (NASDAQ:TMUS)

Number of Hedge Fund Holders: 79

T-Mobile US, Inc. (NASDAQ:TMUS) delivers mobile communication services across the United States, Puerto Rico, and the United States Virgin Islands. The company provides voice, messaging, and data services to customers in different plans, including postpaid, prepaid, and wholesale. T-Mobile US, Inc. (NASDAQ:TMUS) is one of the best communication stocks to buy. 

On January 25, T-Mobile US, Inc. (NASDAQ:TMUS) reported a Q4 GAAP EPS of $1.67, falling short of Wall Street estimates by $0.23. The revenue came in at $20.48 billion, outperforming market consensus by $810 million. 

According to Insider Monkey’s third quarter database, T-Mobile US, Inc. (NASDAQ:TMUS) was part of 79 hedge fund portfolios, compared to 86 in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the largest stakeholder of the company, with 5.2 million shares worth over $734 million. 

ClearBridge Dividend Strategy made the following comment about T-Mobile US, Inc. (NASDAQ:TMUS) in its Q3 2023 investor letter:

“During the quarter we initiated positions in two new names: T-Mobile US, Inc. (NASDAQ:TMUS) and Gilead Sciences. T-Mobile is the best-in-class player in the wireless space, delivering the strongest growth with the lowest cost structure and the best consumer proposition. T-Mobile’s strength is rooted in its advantaged competitive position. Its superior spectrum holdings enable it to provide better wireless service at meaningfully lower cost. T-Mobile’s annual capital expenditures run about $10 billion, on the order of half the amount its peers must spend. Due to its lower cost structure, T-Mobile can undercut its competitors on price while still generating compelling profitability and returns.

This combination — superior service at lower prices — has enabled T-Mobile to outgrow its competition. In the three years since completing its merger with Sprint, T-Mobile has grown its postpaid subscriber base by about 22%. Over the same period, AT&T’s has grown by about 14%, while Verizon’s by less than 5%.

Given the high fixed-cost nature of the wireless business, these steady increases in revenue growth have led to outsize increases in profits and free cash flow. Free cash flow in 2023 is expected to come in around $13.5 billion, up from less than $8 billion last year. In 2024 free cash flow is expected to grow by over 20% to approximately $17 billion — providing a 10% yield based on today’s stock price.

We have long admired T-Mobile, but until recently the stock did not pay a dividend. The company announced its inaugural dividend in September, and we bought the stock shortly thereafter. The initial yield is about 2% and it is expected to grow about 10% per year.”