2020 is the year of connectivity, as 5G is expected to take the nation by storm. The take over will include improvements such as speeding up mobile connections, bolstering the internet of things (IoT) and providing a lift to a handful of companies poised to capitalize on the new technology. That said, 5G stocks are plentiful, as everyone from electronics makers to semiconductor stocks are expecting the 5G revolution to bolster their earnings. With that in mind, investors should narrow down the field to long-term picks that will deliver during the 5G rollout and beyond.
Overall, 5G is sure to add a boost to the tech sector, but the impact it has could be varied from company to company. For example, while Apple (AAPL) devices could see a bump from the 5G upgrade cycle, and the upside looks like it’s already baked into its share price. Instead, it could be wise to choose stocks that aren’t as pumped up with optimism as they have more room to run.
The semiconductor space is primed for a rally this year, as the industry’s chip sales are seen rising in 2020. That should be music to investors years after revenue from chip sales fell nearly 12% in 2019. With the U.S.-China trade war through phase one of the deal and inventory levels low, the industry should have the space it needs to take off.
With all of that in mind, let’s a look at three 5G stocks worth picking up today for your portfolio.
Faster 5G networks are seen delivering more data at faster speeds, so we can expect data centers to upgrade their chips to keep up with the growing demand. Chipmakers will also have to upgrade in order to keep up with the volume of data, which makes the semiconductor space a great place to find 5G stocks.
Enter Applied Materials (AMAT). Applied Materials supplies chipmakers with the materials they need to create faster, better chips. The firm has become a sort of ‘one stop shop’ for the industry, putting it in a great position as 5G rolls out in the U.S.
Plus, the firm has been on a cost cutting mission over the past few quarters, which has allowed management to reinvest in research and development (R&D). At the moment, AMAT is the top semiconductor fabrication tool supplier, offering a broad product portfolio unrivaled by its competitors. And collectively, these few reasons make it a great 5G stock to snag right away.
Another player in the semiconductor space worth considering for your 5G stocks is Intel (INTC). The company has been undergoing a major strategy shift over the past few years, but it appears to have finally turned the corner. The transition from relying on its antiquated PC business to a much broader and more current portfolio has taken longer than expected — but nevertheless, it’s here.
Intel has been moving into the IoT and data center spaces, both of which should see strong demand as 5G adds a tailwind to both industries. Intel’s data center growth has been impressive from quarter to quarter, suggesting the company is on track for a fully-fledged turnaround.
Furthermore, another bonus for INTC stock investors is the fact that the firm has been a consistent dividend stock for the past two decades. Its trailing dividend yield is a respectable 1.8%, but the firm is likely to raise its dividend in the years to come.
There are a lot of reasons to buy AT&T (T) stock, and 5G is certainly one of them. According to Deutsche Bank’s Bryan Kroft, the firm’s core wireless business stands to benefit from the 5G rollout in 2020. The company is also currently working to improve its network capacity, which should help it get a leg up in the transition to 5G.
Not only is AT&T likely to be a winner in the shift to 5G, but the stock is also trading at a discount as it undergoes a transition. T stock trades at just 10 times its forecasted earnings, a marked discount to the S&P 500 (.SPX) average of 19. Plus, investors get a 5.4% dividend yield to help make the wait for T stock’s turnaround a bit easier.
This year, AT&T will likely see some of its businesses continue to decline as it shifts to a more profitable strategy. Yes, AT&T is losing subscribers, but those who are flying the coop weren’t all that valuable anyway. Instead, AT&T is working to create a value proposition that commands higher prices and better quality subscribers.
The pain T stock is experiencing is likely short-term, and should eventually help drive much longer-term gains. For that reason, investors who can take on a little volatility should absolutely add AT&T to the 5G stocks in their portfolio.
As of this writing, Laura Hoy was long AAPL, INTC and T
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