The Communication Equipment sector includes companies whose primary business involves the physical transmission of telecommunications and related network services, the production of telecommunications equipment, and the delivery of multimedia content through television and related telecommunications activities. This large and diverse sector contains vertically integrated businesses ranging from computer systems design and related services to wired telecommunications carriers.
This broad industry also includes firms engaged in manufacturing cable TV equipment, transmitting and receiving antennas, global-positioning system equipment, pagers, cellular phones, mobile communications equipment, and radio and TV studio and broadcasting equipment.
During an economic recovery, improving consumer spending levels and continued strong demand will be a benefit to sales in this industry group. However, ongoing penetration of imports from low-cost countries and falling unit prices will keep revenue growth to a minimum. To compete with imports, domestic manufacturers will focus on expanding their product lines and acquiring new technologies.
As companies within this Communication Equipment group continue to make fast-paced changes to their product lines, and the information industry itself is constantly changing, how can you decide which stocks to choose? You need to forget about the companies’ catchy ads and how much you personally like their products and reach for unbiased analysis of the strengths and weaknesses of these stocks and key trends that continue to shape the industry.
So far in this bull market, some stocks in the Communication Equipment group have been strong performers. It’s not surprising, since businesses need to increase their investment in machinery and equipment, which on a national-accounts basis has yet to match its pre-recession volume. The current SmarTrend UPTREND indication warrants keeping a close eye on this industry group and related stocks.
We have identified the Communication Equipment industry group as being in an uptrend, and SmarTrend has seen significant returns from several stocks in this sector.
AudioCodes Ltd. (AUDC), which designs, develops and sells products for voice, data and video over IP networks, achieved an impressive 172% increase in the price of its stock since SmarTrend called its Uptrend on July 29, 2010 at $2.83. The stock closed on February 11, 2011 at $7.72.
JDS Uniphase Corporation (JDSU) is a provider of communications test and measurement solutions and optical products for the telecommunications industry, which includes service providers, cable operators and network equipment manufacturers. SmarTrend identified its shares as being in an Uptrend at $11.37 on September 10, 2010. Having risen to $28.16 as of February 11, JDSU had an increase of 147% since the date the Uptrend was issued.
SmarTrend has also called some uptrends in this industry group within the last several weeks:
On February 1, 2011, SmarTrend called an Uptrend for Superconductor Technologies, Inc. (SCON) at $1.82. SCON, which develops and produces high temperature superconducting materials and associated technologies, closed on Friday at $3.03, representing an increase in price of 66%.
On February 2, 2011, SmarTrend identified shares of XETA Technologies, Inc. (XETA), a provider of communications solutions and managed services, as being in an Uptrend at $3.48. Within less than two weeks, XETA shares closed at $5.41, up 55%.
Investing in a fast changing industry like Communication Equipment can be exciting, but you need to develop ways to evaluate these types of investment opportunities without having your emotions take charge. It’s easy to say “buy low, sell high,” but you need to choose a strategy and stay the course.