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Featured Article from MarketBeat Media Forget QQQ: This ETF Marries the Magnificent 7 and CommunicationsWritten by Jordan Chussler. Published 9/10/2025. 
Key Points - Since the S&P 500’s September 2018 rebalancing, communication services have become an earnings powerhouse.
- The XLC, which tracks the sector, provides exposure to the Magnificent Seven as well as telecom, media, and entertainment stocks.
- The fund isn’t as large as the more popular QQQ, but it carries a lower expense ratio and pays a higher dividend.
The technology sector often dominates financial media coverage, retail investors and sell‐side firms. It's home to the biggest players in the ongoing AI rally and most of the Magnificent Seven. Consequently, ETFs focused on this sector's growth prospects tend to top investors' lists. One high‐profile example is the Invesco QQQ Trust, Series 1 (NASDAQ: QQQ), which manages $364.41 billion in assets. Unsurprisingly, its top 10 holdings include all Magnificent Seven names alongside Broadcom and Netflix. NVIDIA, its largest position, carries a weight of 9.95%. AI breakthroughs. Inflation shocks. Energy rotations. The market is moving fast — and the biggest winners often start small.
At Street Ideas, we focus on small-cap companies showing early momentum — before the crowd piles in. "3 Under-the-Radar Stocks Triggering Early Signals" In fact, QQQ's top 10 holdings account for 52.2% of its assets, presenting a significant concentration risk. For investors seeking broader exposure, one sector—and its flagship fund—offers a more balanced approach, blending Magnificent Seven names with leading telecom, media and entertainment companies. The Communication Services Sector Should Have Your Attention When the S&P 500 was rebalanced in September 2018, several tech giants—including Meta Platforms, Alphabet and Netflix—moved into the communication services sector. The results have been striking. Over the following six years, communication services ranked among the top three sectors four times, delivering gains of 32.7% in 2019, 23.6% in 2020, 21.6% in 2021, 55.8% in 2023 and a market-leading 40.2% in 2024. Even including a 39.9% loss in 2022's bear market, the sector has averaged 16.33% annual returns since the rebalancing. In 2025, communication services is again outperforming with an 18.60% year‐to‐date gain—the best among all 11 sectors and well ahead of industrials at 14.81%. The sector's combination of growth potential, consistent consumer demand and defensive traits in downturns makes it particularly attractive. Why XLC Is an All‐in‐One ETF State Street's Communication Services Select Sector SPDR Fund (NYSEARCA: XLC) launched in June 2018 and has since gained 127.41%. By comparison, QQQ is up 91.69% over the same period. Although XLC's assets total $26.14 billion, its 0.08% expense ratio and 0.92% dividend yield offer cost and income advantages over QQQ's 0.20% expense ratio and 0.49% yield. Meta Platforms remains XLC's largest position at 18.81%, exceeding QQQ's allocation to NVIDIA. However, XLC's broader mix of names translates to lower volatility. Beyond Meta, Alphabet (both Class A and Class C) and Netflix, XLC's top 10 holdings include: As a result, XLC's implied volatility stands at 10.9—its lowest level in 52 weeks—compared to QQQ's 17.45%. XLC also trades at a price‐to‐earnings multiple of 19.40, versus QQQ's 33.33 (and above the NASDAQ's 29.77 and S&P 500's 28.97). The Smart Money Loves XLC Short interest and institutional ownership offer insight into Wall Street sentiment. As of Aug. 15, 2025, XLC's short interest stands at 5.8 million shares, with average daily volume of 6.2 million—yielding a days‐to‐cover ratio of 1.0. This figure is down sharply from July, when short interest ranged from 12 million to 14 million shares and days‐to‐cover ratios approached 2.4. In just one month, bearish bets against the sector more than halved. Over the past 12 months, 836 institutions increased their XLC holdings while 551 reduced positions, resulting in inflows of $21.59 million compared with outflows of $2.77 million. In Q2 alone, institutions bought $19 billion worth of XLC and sold just $700 million. The ETF holds a consensus Moderate Buy rating—with three analysts at Buy, 14 at Moderate Buy and only one at Sell.
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