Telecom stocks have had a decent year. They are lagging the broader S&P 500, but it has been a low-teens six-month run. Even if it did nothing from here, that would be a good finish — 13% annually over the long term, not including the dividends that some of these firms provide, would be great for your portfolio.
And one other thing about this sector: It is less volatile than some of the other sectors since most of the companies have total or significant exposure to the U.S. market. “Buying Amercian” has its benefits when you’re in a trade war with the second-largest economy in the world.
The seven telecom stocks below are getting the most attention now according to my Portfolio Grader. And it’s also very likely that they won’t be sitting still for the second half of this year.
Telecom Stocks to Buy: PDVWireless (ATEX)
Source: Pabak Sarkar via Flickr
PDVWireless Inc (NASDAQ:ATEX) just got a new ticker symbol and a new name — more or less — this past Monday. The company is now going to be referred to as Anterix.
This name change goes along with its new focus on the 900 mghz spectrum it bought from Sprint (NYSE:S) in 2014. It is awaiting a ruling from the SEC that would give it the ability to use the spectrum for LTE communications.
Anterix specializes in secure communications for enterprise companies, governments and utilities. The point is to have a network that operates outside of the conventional telecom networks that can provide state of the art bandwidth and its own high level security.
It’s a great niche. And if the FCC gives it the green light, this stock will take off over the next couple quarters. It would also be an attractive takeover play.
Verizon Communications (NYSE:VZ) is usually at the center of most telecom conversations in the U.S. It is one of the original Ma Bell spinoffs (Bell Atlantic) and continues to be a dominant force.
Its challenges are opposite to the smaller companies featured here. While those are trying to exploit their core competencies to expand their businesses, VZ is more focused on not losing business, especially in the wireless space.
With a market cap of around $240 billion, this is one of the most widely held telecom stocks out there. And its 4.2% dividend yield also makes it a very attractive long-term holding.
Right now, 5G is the thing, and the big firms will be spending tons of money to develop this technology. Without Huawei equipment, this makes the challenge more difficult, but still important. If anyone can pull it off, it will be VZ stock.
Otelco (NASDAQ:OTEL) is one of a handful of companies that still run independent phone companies around the country. Based in Alabama, it also operates companies in Maine, Massachusetts, West Virginia, Missouri and Vermont.
It has been doing business for more than 130 years, so it has figured out its markets and defined its role to thrive all that time. There are many places in the U.S. that just don’t have the scale for larger telecoms to come in and compete.
OTEL offers all the modern telecom products that you can find in larger markets, just on a smaller scale. Just as larger telecoms are transitioning to a mobile-focused market from a landline world, the same transition is happening on a smaller level as well.
With over 31,000 customers across its service areas, OTEL is a solid player and has paid down its debt, which will help its margins and any financing for potential upgrades. It’s also an attractive takeover target.
IDT Corp (NYSE:IDT) is in an interesting niche that developed as the Internet Age developed. It provides wholesale global voice traffic over its VOIP (voice over internet protocol) network and it also offers the unbanked and under-banked immigrant population a way to send money back to their home countries through its BOSS Revolution service. It also offers prepay telecom services (aka, phone cards).
At this point it’s the leading prepay service with a customer base that represents about 70% of the U.S. immigrant population. That also means it still has the remaining 30% to acquire, as well as the new customers who arrive annually.
IDT boasts that it gets a new customer every 8 seconds.
It’s still a relatively small company, but its dual-purpose reach into a specific demographic makes it a very interesting play in the months and years to come.
Spok Holdings (SPOK)
Spok Holdings (NASDAQ:SPOK) is a niche player in another megatrend growth sector. It also has been around since 1965, so it has built a reputation in a relatively conservative industry where reputation, reliability and consistency matter.
SPOK develops, runs and manages communications platforms for healthcare services providers like hospitals. It boasts that the top 20 adult hospitals and top 10 children’s hospitals in the country (as rated by U.S. News & World Report) all use Spok communications platforms.
It has the nation’s largest pager network, with more than 100 million messages sent each month. And remember, these are regularly life or death messages, so the systems have to up and running all the time, with near perfect precision.
At this point Spok has over 2,200 hospitals and healthcare systems on its platforms. And the nice thing about its operations is it also has maintenance contracts on its existing systems, which help stabilize its revenue stream. Q1 numbers were strong.
Iridium Communications (IRDM)
Iridium Communications (NASDAQ:IRDM) is a great example of the best and worst of companies that were born (and died) during the dotcom boom in the late 1990s.
Basically, Iridium is 141-satellite global communications network that was launched in 1998 by telecom pioneer Motorola (RIP). The concept was to build a global telecom network that could be accessed anywhere in the world — from the middle of the South Pacific to the top of Everest — at any time.
The vision was grand but the technology wasn’t up to the vision. In the initial versions, the phones (now known as sat phones) couldn’t be used well indoors, which diminished their value to regular consumers.
They also soon learned that the phones wouldn’t function until all the satellites were in place, which meant an enormous upfront spend on a now-smaller, specialized market. The original company went under in 6 months.
But now that tech has grown to meet the vision, IRDM is doing well and more and more specialized sectors are interested in the technology, especially the U.S. military.
There is plenty to like here now and it’s a great long-term growth play on the future of telecom, especially the Internet of Things.
Shenandoah Communications (SHEN)
Shenandoah Telecommunications (NASDAQ:SHEN) has been around since 1902, serving rural Virginia, West Virginia, Pennsylvania and Maryland. Its wireless services are operated by Sprint, has over 1 million customers.
The thing to watch with a long-time telecom like Shentel is the fact that many of its rural operations are now seeing a lot of growth from companies that are relocating outside of larger metropolitan areas.
Because land is cheaper and the population is less dense, “last mile” logistics operations and new companies are taking advantage. That’s bring customers into Shentel’s market.
And that may well be part of the reason that Shentel’s operating income was up 48% in Q1, with a record number of new digital subscribers. It will also be interesting to see what happens if the Sprint-Tmobile (NASDAQ:TMUS) merger happens.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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