SPDR S&P Telecom ETF XTL, which targets the U.S. telecommunications sector, gained 11% last month, becoming the top-performing ETF of August. 

Although most of the stocks in XTL’s portfolio have delivered strong returns this year, a few have gained more than 25%. These are Lumen Technologies LUMN, Applied Optoelectronics AAOI, AST SpaceMobile ASTS, Lumentum Holdings Inc. LITE and Digi International Inc. DGII.

The telecom sector witnessed strong growth last month, driven by soaring AI demand and September rate-cut bets. Rising demand for AI requires greater connectivity between data centers and the telecom companies are in a position to help drive the AI growth wave. As telecom is a capital-intensive sector, lower rates will help drive more business expansion, given that they will face lower loan rates over time.  

Amid the extreme volatility seen last month, the telecom sector proved relatively resilient, as communication services remain essential regardless of economic conditions. Additionally, several major telecom players reported better-than-expected quarterly earnings in August, citing a rise in new subscribers, particularly in developing markets (read: Low Volatility ETFs Shining Halfway Through Q3).

Further, the industry outlook remains promising given the widespread adoption of 5G, strong subscriber growth, diversification into digital services, economic resilience and a supportive regulatory environment. As the sector continues to evolve, it remains well-positioned to capitalize on future opportunities, making it an attractive option for investors looking for stability and growth in an uncertain market.

Let’s take a closer look at the fundamentals of XTL.

XTL in Focus

SPDR S&P Telecom ETF provides exposure to the telecommunications segment and follows the S&P Telecom Select Industry Index. It holds 39 stocks in its basket, with communications equipment making up 52.4% of the assets, while alternative carriers and integrated telecommunication services round off the next two spots with double-digit exposure each. 

SPDR S&P Telecom ETF has amassed $86.3 million in its asset base and charges 35 bps in annual fees. It trades in a lower average daily volume of 11,000 shares and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 5 Best-Performing Sector ETFs in Volatile August).

Best-Performing Stocks of XTL

Lumen Technologies is an international facilities-based technology and communications company and operates one of the most interconnected networks globally. The stock accounts for an 8.4% share in the ETF and soared 102.7% in August.

LUMN saw a positive earnings estimate revision of 5 cents for this year and has a Zacks Rank #3 (Hold). It has a Momentum Score of A.

Applied Optoelectronics designs, develops and manufactures advanced optical devices, packaged optical components, optical subsystems, laser transmitters and fiber optic transceivers. The stock jumped 62.9% in August. Its earnings are expected to decline 61.9% this year. 

Applied Optoelectronics makes up 0.7% of the assets in XTL and currently has a Zacks Rank #3. 

AST SpaceMobile is building a space-based cellular broadband network to operate directly with standard, unmodified mobile devices based on its extensive IP and patent portfolio. The stock makes up 3% of the assets in the XTL portfolio. 

AST SpaceMobile surged 56.2% and has an expected earnings growth rate of 3.7% for this year. It has a Zacks Rank #3 and a Momentum Score of A.

Lumentum Holdings is a manufacturer of innovative optical and photonic products. The stock gained about 39% last month and accounts for a 4.4% share in the XTL portfolio. 

Lumentum Holdings has an estimated earnings growth rate of 68.3% for the fiscal year (ending June 2025) and a Zacks Rank #3 (Hold). 

Digi International is a leading global provider of business and mission-critical Internet of Things (IoT) products and services. The stock rose 28.6% in August (read: 5 Technology ETFs at the Forefront of the August Rebound). 

DGII’s earnings are expected to decline 0.5% for the fiscal year (ending September 2024). The stock accounts for a 0.7% share in XTL. It has a Zacks Rank #3 and a Growth Score of B.

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Digi International Inc. (DGII) : Free Stock Analysis Report

Applied Optoelectronics, Inc. (AAOI) : Free Stock Analysis Report

Lumentum Holdings Inc. (LITE) : Free Stock Analysis Report

SPDR S&P Telecom ETF (XTL): ETF Research Reports

Lumen Technologies, Inc. (LUMN) : Free Stock Analysis Report

AST SpaceMobile, Inc. (ASTS) : Free Stock Analysis Report

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