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Blink and you missed it. One day there’s a “telecommunication sector,” the next day — thanks to the people who run the stock indices — it morphs into “communication services.”
Why should we care?
With major S&P 500 companies from Facebook (Nasdaq: FB ) to Netflix (Nasdaq: NFLX ) now reassigned, the change is simply too big to be ignored. That goes for passive investors — ones who rely on an index-tracking approach — and active investors like us who frequently screen sectors and indices for ideas.
That’s because we all need to be aware that some of the most innovative and fastest-growing companies of today no longer resign in the tech or consumer sectors. When we search for the next investment, whether it’s an index fund or a stock, we need to know where to look.
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Some of us may have missed this realignment in the S&P 500 this past September because it nearly coincided with the market top. Similarly, when the small-cap Russell 2000 reciprocated at year-end, the changes may have fallen through the cracks because of the market rally that had just started unfolding.
Regardless, the small-cap changes, which involve expanding the telecommunications sector to include telecommunications equipment (from the technology industry) and cable television services (from the media sector) — are important. We don’t want to miss any investment ideas just because some of the companies have been reassigned. Hence, today’s screen is devoted to seeking the fastest-growing small-cap companies from the newly updated telecommunications sector.
Let’s Screen For Small Cap Stocks
Since the goal of my Fast-Track Millionaire premium newsletter is to find high-growth stocks, we need to keep this focused on smaller stocks, since they’re more likely to have the kind of potential we need. So I screened this sector of the Russell 2000 small-cap index for companies whose revenue growth exceeded 20% last year and whose market capitalization is at least $1 billion.
It turns out there are only six such companies in the entire sector that fit this criteria. Here’s the list…
The fastest-growing company of the group, CarGurus (Nasdaq: CARG ) , is also the most interesting one — and, until recently, an unlikely component of a “telecommunications” grouping.
The company, founded in 2005 and public since October 2017, operates an online automotive marketplace for new and used cars. Both dealers and consumers can and do use its online listings. Out of nine analysts that follow the company, only one currently rates it a “Hold;” the rest rate it a “Buy” or “Outperform.” Expected growth: 32%.
Founded in 1878, The E. W. Scripps Company (Nasdaq: SSP ) has also been growing faster than the group, partly because of good management and partly because of the company’s recent inroads into digital media and podcasting (SSP owns and operates Stitcher, one of the leading podcast applications). SSP is also well-known to readers of my Game-Changing Stocks advisory, where we’ve already made some 30% in five months. I expect even more from this media enterprise going forward.
Meredith Corporation (NYSE: MDP ) , too, is a media company, as is Gray Television (NYSE: GTN ) . MDP owns print magazines (People, Better Homes & Gardens, InStyle, Allrecipes, Real Simple, Shape, Southern Living, Martha Stewart Living) via digital and mobile media. GTN, on the other hand, is a television broadcast company. Because of their growth, I am keeping both companies on my watch list.
Glu Mobile (Nasdaq: GLUU ) is a mobile game company that develops, publishes, and markets a portfolio of free-to-play mobile games for smartphones and tablet devices. GLUU specializes in four genres: home décor, sports and action, fashion and celebrity, and time management, and creates games based on third-party licensed brands, such as Kim Kardashian: Hollywood, MLB Tap Sports Baseball, and Restaurant Dash with Gordon Ramsay. With expected growth of about 15% over the next few years, GLUU looks interesting, although its upside might be limited after the stock’s one-year 165% rally.
Unlike GLUU, which has already made its first profit, Boingo Wireless (Nasdaq: WIFI ) is not expected to break even for another couple of years. And yet the company, which provides wireless connectivity for devices we use every day — smartphones, tablets, laptops, wearables, and others — looks interesting. That’s because of its technological strength, and also because it’s poised to capitalize on tremendous growth in mobile data usage as well as on the growth in 5G technology. Out of eight analysts following the company, six rate it a “Buy” and two rate it an “Outperform.”
Action To Take
Keep in mind that the investing ideas I present here are intended to provide a starting point for further research. They are not a final recommendation for your portfolio. Also, since our goal at Fast-Track Millionaire is to find stock picks with the potential for truly life-altering gains, not all of these stocks will necessarily fit that criteria. That said, each of these stocks look interesting and could be worth a look.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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