Recent shifts in the communication services and technology sectors prompted several portfolio adjustments in the fourth quarter of 2025.

In the communication services sector, we exited our positions in Comcast (tkr: CMCSA) and Verizon (tkr: VZ). Despite their high dividend yields and low valuations, both companies face structural challenges that limit long-term growth and increasingly resemble value traps.

Verizon operates in a saturated wireless market with limited growth potential. While the dividend remains attractive, a heavy debt load and significant capital expenditures required to support its 5G network and recent acquisitions constrain free cash flow. At the same time, competitive pressure from T-Mobile (tkr: TMUS) continues to intensify.

Comcast is experiencing accelerating broadband subscriber losses alongside ongoing declines in its legacy cable business. Investor concerns have also increased amid reports of a potential bid for Warner Bros. Discovery (tkr: WBD), which would have added leverage, as well as the company’s decision to spin off its cable assets.

These pressures are further exacerbated by the convergence of wireless and broadband markets. Major wireless providers such as AT&T (tkr: T) and Verizon now offer home internet services, increasing competition and placing downward pressure on pricing across the industry.

We redeployed capital into Netflix (tkr: NFLX), which has declined meaningfully from prior highs but remains a strong business with solid cash flow and a loyal subscriber base. The introduction of an ad-supported tier has opened a new revenue stream, and the company continues to leverage artificial intelligence to improve recommendations, content creation, and advertising. Shortly after our purchase, Netflix announced an offer to acquire Warner Bros. following the spin-off of its traditional TV assets, positioning it as the front-runner in the bidding war against Paramount Skydance (tkr: PSKY). While the pending acquisition remains an overhang until a deal is finalized, we believe the long-term investment thesis remains intact.

Within the technology sector, we sold Adobe (tkr: ADBE). Generative AI has lowered switching costs and intensified competition in creative tools, putting pressure on pricing power and long-term moat durability, while Adobe’s AI monetization strategy remains less proven than peers offering lower-cost or freemium alternatives. At the same time, enterprise demand has shown signs of caution, with longer deal cycles and increased scrutiny of incremental spending weighing on near-term growth visibility. Proceeds were reinvested into the State Street® Technology Select Sector SPDR® ETF (tkr: XLK), providing more diversified exposure to the technology sector.

We remain focused on maintaining a well-diversified portfolio and allocating capital toward opportunities with attractive long-term, risk-adjusted returns.

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