With a more than 52% weight to tech stocks as of July 3, the Nasdaq-100 Index (NDX) is rightly viewed as a tech-heavy index. However, investors should not ignore the gauge’s exposure to the communication services sector – a tech-esque group in its own right. The Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ), the NDX-tracking exchange traded funds, allocate 15.33% of their rosters to communication services stocks, making that the ETFs’ second-largest sector exposure.
That’s a good thing, too. Communication services is the second-best sector in terms of performance this year, behind only tech.
Meta Platforms (META) and Alphabet (GOOG), which combine for more than 9% of the Invesco ETFs’ portfolios, are the biggest names from that sector and they’ve played prominent roles in driving the group higher this year. That’s relevant because both names hit record highs earlier this year.
Speaking of All-Time Highs in QQQ…
Tech stocks get a lot of attention. Still, communication services names have regularly notched new all-time highs since the start of 2024.
“Communication services (SP500-50) emerged as the second-best performing segment among the 11 S&P 500 sectors, gaining 26% in the first half of 2024. The sector has reached 35 new highs in the first-half, hitting a 52-week high of $316.15,” according to Seeking Alpha.
In addition to Alphabet and Meta, T-Mobile US (TMUS) is another example of a communication services stock that all-time highs this year. The telecom giant is a QQQ/QQQM holding.
Given the sector’s high-flying ways, some investors may argue it’s overvalued, but there are some value plays in the group. Those include Comcast (CMCSA) and Warner Bros Discovery (WBD), both of which are QQQ/QQQM holdings.
“We expect Comcast’s network will enable it to maintain the size of its broadband customer base over time while a rational competitive environment allows broadband prices to rise,” noted Morningstar analyst Michael Hodel.
Shares of Warner Bros Discovery are off 36% as of July 3. This slide is probably keeping investors at bay. However, the company’s rich content library could support streaming gains, potentially pavingthe way for a rebound by the stock.
“While we don’t expect a major turn imminently, the streaming business is entering many new markets. Warner also has a premier studio business that continues to generate profits despite a recent lull. We expect linear to continue declining, but that fate is more than priced in, and we think discipline in considering the renewal of NBA rights is prudent,” added Hodel.
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