We see some gems right now in the Communication Services sector, and we also like the sector overall. Argus rates Communication Services as Over-Weight. After Information Technology, Communication Services is expected to deliver the strongest earnings growth in 3Q, with a forecast of 12%, according to Refinitiv. The sector has many well-known names and is considered a 'barbell' group, with high-growth, low-income social media stocks on one end and low-growth, high-income telecom services stocks on the other. The style mix is approximately one-third "value" and two-thirds "growth." The sector is competitive, so companies in it need to be nimble and innovative, constantly assessing their clientele and staying current. Some of the names -- like Netflix, Alphabet, and Meta -- were at the top of the growth charts in the past five years or so. But like other growth sectors, even the leaders have been outshined by the glitz of artificial intelligence (AI). Market breadth has been recovering, though, and the companies listed below are among those starting to get re-recognized. The S&P 500 Communication Services Index is up 28% year-to-date, compared to the 22% gain in the broader S&P 500 Index. We see more runway for the industry. In our list this week, we look at leaders in Communication Services and sort them by those that are furthest from their 52-week high. All are BUY-rated at Argus and some are included in our Focus List and Model Portfolios.

Small- and mid-cap stocks (SMID), despite bursts of outperformance, have underperformed large-caps year to date - as they have over the past five years. But they may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from unrest in the Middle East, the Russian invasion of Ukraine, issues in China, or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps. SMID stocks can be risky, but despite those risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20% of the U.S. stock market's capitalization is comprised of SMID stocks.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are Teva Phar Inds Lt (TEVA); SAP SE (SAP); 3M Co. (MMM); Meta Platforms Inc (META) and the Focus List deletions are Crowdstrike Holdings Inc (CRWD); Lilly(Eli) & Co (LLY); Pinterest Inc (PINS); United Rentals, Inc. (URI).

Pinterest is an online product and idea discovery platform that helps users gather ideas on everything from cooking recipes to travel destinations. Founded in 2010, the platform consists of a largely female audience, which accounts for roughly two thirds of its nearly 500 million monthly active users. The company generates revenue by selling digital ads and is now rolling out more in-platform e-commerce features. About 20% of users reside in the US and Canada, but the region accounted for about 80% of revenue in 2023.