‘Communication’ could lose its sheen

Sector’s high fliers face regulatory threats

NEW YORK, Oct 13, (RTRS): The mash-up of old and new media may not be a winning combination for the new S&P communication services sector index as its highest fliers face regulatory threats and challenges to user growth. The reconstituted sector, which debuted at the end of September, includes telecom, internet, media and entertainment companies such as AT&T Inc, Walt Disney Co and Twitter Inc Three of the five momentum stocks collectively known as FAANGs — Facebook Inc, Netflix Inc and Google parent company Alphabet Inc — make up roughly half of the new sector by market capitalization. Facebook and Alphabet moved to communication services from the technology sector. Netflix was previously in the consumer discretionary sector.

The other FAANG stocks, Amazon.com Inc and Apple Inc , remain in the consumer discretionary and technology sectors, respectively. The addition of several FAANG stocks, among the fastest-rising shares on the S&P 500, has brought more attention to the oncesleepy sector, formerly known as telecom.Indeed, so far communication services has closely tracked the technology sector. Both have slid significantly during sell-offs in October, including a 5.3-percent drop for the S&P 500 over Wednesday and Thursday.

The two indexes recovered somewhat in trading on Friday. The communication sector was last down 5.3 percent month-todate,ahead of tech’s 6.0 percent slide. On one hand, the communication sector’s old-media names have cushioned it somewhat in comparison to tech’s steeper plunge,but those less growthoriented companies also limit the sector’s upside potential. Also, several of the sector’s growth companies — Facebook, Alphabet and Twitter — face regulatory risks that tech companies do not. Recent disclosures of privacy breaches have increased concern among some investors that the US government could soon target internet companies with new regulations.