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Pandemic Hits Communication Stocks in Different Ways

Some communications stocks struggle in pandemic, while others benefit.

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The Morningstar communications services sector was reconstituted at the end of 2019 to reflect the blurring lines between several industries related to traditional telecom: the changing ways people communicate with one another and use networks for a multitude of daily activities. Previously, telecom stalwarts AT&T (T) and Verizon (VZ) dominated the index. Both firms still have large weightings in the new index, but not to the same extent--combined, the two firms account for about 17% of the sector index. Instead, internet giant Alphabet (GOOGL) is now the largest firm in the sector, with a 28% weighting, followed by Facebook (FB) at 16%.

The broader character of the sector has caused it to lose some of the defensive nature it has historically been known for. Sector performance thus far in 2020, throughout the turbulence tied to the coronavirus pandemic, has largely mirrored the broader market. The Morningstar U.S. Communications Services Index is down about 14% year to date versus nearly 16% for the broader market.

Michael Hodel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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