IXP Global Communications Services Sector ETF From Buy To Hold After Alphabet's Surge
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 Vs. XLC: Three Hidden Investments To Add To A Communications Services Sector ETF
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.
IXP: Growth Profile Not Attractive
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.
