XLC seeks to correspond generally to the price and yield performance of publicly traded equity securities of companies in the Communication Services Select Sector Index. The index includes companies that have been identified as Communication Services companies by the GICS®, including securities of companies from the following industries: diversified telecommunication services; wireless telecommunication services; media; entertainment; and interactive media & services.
Since the communication services sector is not a new sector (it is a new take on telecommunications), XLC features exposure to traditional telecom companies such as Verizon Communications Inc. (VZ) and AT&T Inc. (T). However, the fund is heavily allocated to faster-growing companies.
“Facebook returned almost 50% in the April through June period, which was a boon for XLC,” reports InvestorPlace. “This is particularly important because the social media giant is once again the center of political controversy. Politicians aren’t just concerned about the monopoly-esque status enjoyed by Facebook (Alphabet is part of this conversation, too), but also the company’s perceived political leanings."
XLC Coronavirus Positioning
While Facebook and Alphabet are the dominant names in XLC, combining for over 45% of the ETF’s roster, Disney and Netflix add to the fund’s possibilities as a coronavirus stay-at home-idea.
Thanks to the likes of Netflix (NFLX), Amazon.com Inc. ( AMZN), Roku ( ROKU), and others, the streaming space is becoming increasingly competitive and that competition spotlights the utility of a fund such as XLC, which helps investors avoid stock picking on their own.
“In lieu of a proper streaming entertainment ETF, XLC is an adequate proxy with robust exposure to Netflix (NASDAQ: NFLX), among other streaming stocks. Put simply, Netflix is one of the best-performing S&P 500 stocks this year and shelter-in-place directives are a big reason why that’s the case,” according to InvestorPlace.
Both Netflix and Disney, the latter of which is also a rising streaming player due to Disney +, are the top 10 holdings in XLC.
Investors added nearly $2.1 billion to XLC on a year-to-date basis.