Since the Christmas break, the market has seen a lot of volatility, but it has also used positive, trade and interest rate-related news over the last week to rally off of lows that tested bear market territory. Of all of the sectors that make up the market, no sector has rallied more in that period than Communications. Since December 24, as measured by the S&P 500 Communications Sector SPDR ETF (XLC), the sector has rebounded by a little over 10%, making it the strongest performer in the market at this early stage of the year.
Of the stocks in this sector, there are three in particular that stand out. They’ve led the sector since Christmas Eve and look to be building bullish momentum to keep pushing higher. If, as some analysts predict, the market manages to maintain its mostly bullish tone, these stocks could provide the best opportunities to take advantage in the short-term. Here they are, including a review of how much near-term upside each one has.
Netflix Inc. (NFLX)
Current Price: $297.57
NFLX has followed the rest of the market significantly lower since late in the summer of 2018; it has declined nearly 43% over that period. Before that point, the stock seemed to defy any kind of bearish push, but the company’s first subscriber miss in years started the decline in price. Concerns about a slowing global economy, as well as increasing competition in the streaming video space have kept pressure on the stock ever since.
The stock’s bottom came at $232.68 on December 24, and with the stock now pushing near to $300, NFLX is up more than 27% since that point. That puts the stock at the front of this list, and one of top performers – if not the top performer in the market at this early point of the new year. In fact, the stock is pushing very close to immediate resistance just a little above $300; but if the stock’s current momentum continues, its next peak might not be found until the stock gets into the $370 to $375 range. That’s more than 25% of upside from where the stock sits now.
AT&T Inc. (T)
Current Price: $30.34
Since hitting a pivot high point in October a little above $34, AT&T Inc. (T) dropped about 20% to its December 24 low. Since then, the stock has rebounded a little over 10% – not quite as impressive as NFLX, but still a pretty remarkable amount of movement in just a couple of weeks of time. The company is making its own push into streaming content, and its acquisition last year of Warner Media gives it the assets to do it.
The stock has room to keep rallying higher, and to revisit that October high at around $34 per share. Another factor that plays into this stock’s favor for fundamental, long term-minded investors who are looking for value is the fact the stock is trading more than 50% below its historical Price/Book ratio and offers one of the fattest dividends in the market right now; at the stock’s current price, its $2.04 per share dividend translates to an annual yield of 6.72%.
Walt Disney Co. (DIS)
Current Price: $109.61
It took DIS longer than the rest of the market to start dropping; its peak didn’t come until late October, with the broader market’s plunge into deep correction territory finally taking DIS along for the ride. With its low on December 24, the stock’s decline was about 18%. From that point, the stock has rallied just a little less than 10% to its current price. That rally has only just recently pushed the stock above the long-term trend line as represented by the 200-day moving average. That could give the stock some solid bullish momentum to rally back near to its 2-year high price around $119.
DIS may be one of the biggest competitive reasons NFLX’s stock has come under pressure; its deal to acquire Fox assets included a controlling interest in streaming competitor Hulu and gave the company even more room to launch its Disney+ streaming service. When that happens, Netflix will lose a bunch of Disney content, including the Marvel and Star Wars franchises as well as the entire library of animated movies and content.