FCOM: Investors Beware - Red Flags For This Communication Services ETF

Summary

• FCOM holds 100+ Communication Services stocks in all size segments. It has a category-leading 0.08% expense ratio and $515M in assets.
• Performance compared to peers like XLC and VOX is solid, but the sector has historically underperformed the market. FCOM also comes with increased volatility and a poor growth profile.
• FCOM trades at 20x forward earnings, which is still too high. In addition, Alphabet controls 21% of the portfolio, and it has missed analyst estimates for four straight quarters.
• This article compares FCOM's fundamentals alongside five other Communication Services ETFs, and we think XTL is where investors should look for growth. Otherwise, avoid overweighting the sector altogether.

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Investment Thesis

This article aims to compare the fundamentals of the Fidelity MSCI Communication Services Index ETF (NYSEARCA:FCOM) with five peers in the category. Though FCOM is more diversified than more popular ETFs like the Communication Services Select Sector SPDR

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SPY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.