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Alphabet stuns with a 93% earnings beat as cloud and AI fuel growth, lifting shares and spotlighting ETFs with heavy exposure.
JPMorgan Chase and Co. reduced its position in iShares Global Comm Services ETF (NYSEARCA:IXP) by 23.9% in the undefined quarter, according to its most recent Form 13F filing with the Securities and Exchange Commission (SEC). The institutional investor owned 19,168 shares of the company's stock after selling 6,015 shares during the quarter.
The iShares Global Communications Services Sector ETF (IXP) is now rated 'hold' after a steep run-up of Alphabet's shares. IXP's top holdings, primarily Alphabet shares, have benefited from AI, but the good performance is now less likely to persist with Alphabet's valuation at the higher end. Concentration risk is elevated in IXP due to heavy weighting in two large-cap names, Alphabet and Meta, limiting the case for overweighting the sector.
IXP and XLC are two perfectly acceptable ETF's for investing in the overall Communications Services sector. The sector performance has been very good and the outlook remains attractive. IXP has a global focus, while XLC only holds equity in the companies in from the S&P 500. ETFs provide ease-of-use and instant diversification, but they have disadvantages as well.
The Investment Committee share their top stocks to watch for the second half.
Wednesday, July 23 came and went with another spate of earnings to report. While the still-hot theme of artificial intelligence (AI) living through big tech earnings may grab headlines, the communications sector specifically may also speak to investors.
IXP has significant concentration risk with Meta Platforms and Alphabet making up 42.6% of its portfolio, making it vulnerable to poor financial reports from these companies. The fund's performance is heavily dependent on digital advertising spending, which, while growing, is decelerating, potentially impacting future returns. Despite an attractive valuation with a weighted average forward P/E ratio of 17.2x, IXP's slow growth profile makes it less appealing for long-term investors.
On Apr 26, 2024, Google-parent Alphabet (GOOGL) officially joined the prestigious $2 trillion club. There are more room for growth.