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Russian (RU) After being the best-performing stock market sector in 2024, communications is getting a curtain call in 2025. Year to date, communications is, yet again, the top performer of the 11 stock market sectors.
The epic run-up may come as a surprise, since red-hot stocks like Nvidia, Broadcom, and Palantir Technologies are all in the technology sector. But communications has some advantages that could help the sector continue to outperform major indexes like the S&P 500.
The Vanguard Communication Services exchange-traded fund (ETF) (NYSEMKT: VOX) is a simple, low-cost way to invest in the sector. With just a 0.09% expense ratio, or 90 cents for every $1,000 invested, the fund is an inexpensive way to mirror the performance of the communications sector.
Here's what's driving the sector to new heights, and why the Vanguard Communication Services ETF could be worth buying now.
Nearly half of the communications sector is in Meta Platforms (NASDAQ: META) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). While it's common for a handful of companies to be highly weighted, no other sector is as concentrated in just two companies as communications.
| Vanguard Communications ETF | Meta Platforms and Alphabet | 48.5% |
| Vanguard Consumer Discretionary ETF | Amazon and Tesla | 40.8% |
| Vanguard Energy ETF | ExxonMobil and Chevron | 34.4% |
| Vanguard Information Technology ETF | Apple and Nvidia | 30.7% |
| Vanguard Consumer Staples ETF | Costco Wholesale and Walmart | 27.2% |
| Vanguard Materials ETF | Linde and Sherwin-Williams | 21.9% |
| Vanguard Health Care ETF | Eli Lilly and UnitedHealth Group | 18.6% |
| Vanguard Utilities ETF | NextEra Energy and Constellation Energy | 18.4% |
| Vanguard Financials ETF | JPMorgan Chase and Berkshire Hathaway | 16.5% |
| Vanguard Real Estate ETF |
| 11.6% |
| Vanguard Industrials ETF | GE Aerospace and Caterpillar | 7.2% |
Data source: Vanguard Group.
Although the Vanguard Communication Services ETF has 117 holdings, it's not that diversified when looking at the weights of the top holdings. What's more, 11.8% of the fund is in media giants Netflix, Walt Disney, and Comcast. 10.4% of the fund is in telecom companies AT&T, Verizon Communications, and T-Mobile.
Add it all up, and the fund is essentially betting big on a small number of companies.
The sheer size of Meta Platforms and Alphabet showcases just how valuable social media has become relative to traditional communications companies. Stock valuations aside, Meta and Alphabet arguably have two of the best business models on the planet.
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