In this article we will take a look at the 10 best telecom stocks to buy right now. You can skip our comprehensive analysis of the telecom industry and go directly to the 5 Best Telecom Stocks to Buy Right Now.
The long-term value that telecommunication stocks offer often seem to flow under the radar of investors who are looking for shorter plays on more highly rewarding options. However, for an industry that is expected to be worth more than $3.4 trillion in the coming years with a compound annual growth rate of 6%, and is dominated by established businesses with stable revenues, it is somewhat surprising that the telecom sector does not get the attention it deserves in the market these days, especially in the context of current volatility.
Should You Invest in Telecom Stocks?
Telecom stocks trade at reasonable valuations and offer reliable dividends, and are one of the best options to have in your portfolio during an economic downturn. With 5G technology rapidly making inroads into everyday life — in 2020, the US market had more than 15 million 5G connections, a figure expected to jump 161% to more than 40 million in 2021 — global smartphone sales breaking records, and the US government set to increase spending on communications infrastructure, telecom stocks are perhaps the best defensive play in the market presently. President Biden’s plan to invest $100 billion for high speed broadband will also boost telecom stocks in the coming months.
According to a report by the International Finance Corporation, telecom stocks in all subsectors, including tower companies, data centres, mobile network operators, and broadband providers, performed better than the S&P 500 during the height of the COVID-19 panic, reporting fewer losses than the bigger firms that dominate the market. In fact, according to global consultancy McKinsey, the biggest impact of the pandemic on the telecom industry has been that it has become even more central to the lives of almost everyone on the planet.
Philipp Nattermann and Karolina Sauer-Sidor, two senior McKinsey partners, have highlighted in detail the resilience, adaptivity, and future trends for the industry in a conversation on the impact of the pandemic on telecommunications. Key takeaways from the conversation underline how digital services are expected to play a central part in the telecom sector in the coming years. A survey conducted by Netherlands-based accounting firm KPMG finds that more than 79% of the executives in telecom are of the view that COVID-19 has accelerated digital transformation.
However, even the telecom sector is not immune to the short or medium turn disruptions in the stock market. General macroeconomic impacts, restrictions in distribution of airtime, and demand shortfalls from the bottom of the pyramid all seem to be impacting the telecommunication companies. The rise of social media and market speculation around technology stocks has hogged all the attention, but there is something more to the fundamental shift towards higher risk plays in the industry that has even left market experts baffled.
The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here are the top 10 best telecom stocks to buy right now.
Best Telecom Stocks to Buy
10. Altice USA, Inc. (NYSE: ATUS)
Number of hedge fund holders: 56
Altice USA, Inc. (NYSE: ATUS) is a New York-based telecom firm that provides television, internet access, and telephone services to almost 4.9 million residential and business customers in 21 US states. The firm also operates news channels like News 12 Networks, Cheddar, and i24NEWS. It has a construction and network division that offers telecom customers maintenance services as well. It was founded in 2015 and is placed tenth on our list of the 10 best telecom stocks to buy right now.
As President Biden moves ahead with a plan to inject government money into high speed broadband, Altice is one of the firms that could benefit from the plan in the coming months. On April 7, the firm completed a $300 million deal for the purchase of Morris Broadband, giving Altice access to a further 36,000 customers in North Carolina.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Soroban Capital Partners is a leading shareholder in the firm with 31 million shares worth more than $1 billion.
9. TELUS Corporation (NYSE: TU)
Number of hedge fund holders: 14
TELUS Corporation (NYSE: TU) is a Vancouver-based telecommunications company. The services that the firm markets include data and voice; equipment sales from mobile technologies, internet protocol; television hosting, and cloud-based services. TELUS has more than 16 million subscribers which include almost 9 million mobile phone customers. It was founded in 1993 and is placed ninth on our list of the 10 best telecom stocks to buy right now.
It has a market cap of more than $27 billion and posted more than $12 billion in annual revenue in December 2020, up from $11 billion in the previous year. On March 5, investment bank Morgan Stanley gave the company stock an Overweight rating and raised the price to $28 from $24. The bank said that the telecom sector in Canada was expected to fare better than peers in the US during the second quarter of 2021.
At the end of the fourth quarter of 2020, 14 hedge funds in the database of Insider Monkey held stakes worth $183 million in the firm, up from 12 in the preceding quarter worth $163 million.
8. Shaw Communications Inc. (NYSE: SJR)
Number of hedge fund holders: 19
Shaw Communications Inc. (NYSE: SJR) is a Calgary-based telecommunication firm that offers telephone, Internet, television, and mobile services. The company operates in the Alberta and British Columbia states for the telecom business and provides satellite television in the whole country. It was founded in 1966 and is placed eighth on our list of the 10 best telecom stocks to buy right now. Shaw is one of the firms offering 5G services in Canada.
On March 15, it was reported that Rogers Telecom was purchasing Shaw for $26 billion. However, on March 30, a Canadian minister said the merger would create serious competition issues as the two firms were two of the biggest telecom companies in Canada. The shares of Shaw slipped following the statement from the government official but have rebounded since.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in the firm with more than 3.5 million shares worth more than $63 million.
7. Chunghwa Telecom Co., Ltd. (NYSE: CHT)
Number of hedge fund holders: 5
Chunghwa Telecom Co., Ltd. (NYSE: CHT) is a China-based company that is the largest telecom provider in mainland China. The company provides local and domestic long distance telephone and leased line, broadband access, Wi-Fi, and multimedia on demand services. It also has stakes in the mobile carrier business. The company has a market cap of more than $30 billion and posted more than $7.3 billion in annual revenue in December 2020, up from $6.9 billion the year before. It ranks seventh on our list of the 10 best telecom stocks to buy right now.
On April 20, the telecom firm announced that Scandinavian firm Nokia would expand the 5G telecom coverage in Taiwan. The deal for this expansion had been signed back in October 2020. Nokia has been a long-term partner of the Chinese telecom giant. Under the deal signed in October, Nokia is set to expand the 5G coverage in Taiwan through the use of non-standalone small cells to improve high-speed internet coverage.
At the end of the fourth quarter of 2020, 5 hedge funds in the database of Insider Monkey held stakes worth $157 million in the firm, the same as in the preceding quarter worth $149 million.
6. Rogers Communications Inc. (NYSE: RCI)
Number of hedge fund holders: 15
Rogers Communications Inc. (NYSE: RCI) is a Toronto-based telecom company. It offers wireless communications, cable television, telephony and Internet connectivity to Canadian residents. The firm has a large number of telecommunications and mass media assets. It has close to 11 million subscribers. The mass media assets of Rogers include Sportsnet ONE, Sportsnet 360, Sportsnet World, Citytv, OMNI, and OLN television networks. The firm also operates two radio channels.
It was founded in 1960 and is placed sixth on our list of the 10 best telecom stocks to buy right now. On March 5, investment bank Morgan Stanley raised the price target on Rogers stock to $65 from $63 and maintained an Equal Weight rating on the firm. However, the bank forecast a bullish future for Canadian telecom compared to those across the border in the US.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in the firm with more than 3.6 million shares worth more than $168 million.
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Disclosure: None. 10 Best Telecom Stocks to Buy Right Now is originally published on Insider Monkey.