Following a precipitous decline at the hands of the fiscal
cliff negotiations, telecommunications
have bounced back. The sector might have more upside in store
this year due to increased LTE network spending. That catalyst be
spark increased wireless data growth.
"We believe the tower providers, with their stable earnings
model, will benefit from increased LTE investment and fare best
in the near term," according to a research note by S&P
Capital IQ. The research firm also highlighted increasing
differences among the four major national wireless providers.
"We believe carriers will actually increase prices for data to
offset declining voice prices in the U.S. wireless market," said
S&P Capital IQ. "Also, there are increasing differences among
the four national wireless carriers. In the fourth quarter,
Verizon Wireless, part of a larger integrated telecom carrier,
outperformed AT&T (NYSE:
) in terms of postpaid net additions, as both carriers saw a
resurgence in smartphone sales with the launch of the iPhone
The research firm has three-star ratings on Dow components
AT&T and Verizon (NYSE:
), the parent company of Verizon Wireless.
As the two largest U.S. telecommunications firms by market
value, AT&T and Verizon usually hold dominant positions
within ETFs tracking this sector. That is the case with the
iShares Dow Jones U.S. Telecommunications Sector Index Fund
) and the Vanguard Telecommunication Services ETF (NYSE:
), both of which are rated Marketweight by S&P Capital
Verizon and AT&T combine for 43.6 percent of VOX's weight
and over 20 percent of IYZ's weight. IYZ "has roughly 18% of its
holdings in Wireless Telecommunication stocks. In particular, the
fund has significant exposure to wireless tower providers Crown
Castle Corp (NYSE:
) and SBA Communications (NASDAQ:
), as well as service provider Sprint Nextel (NYSE:
); all three are top ten holdings," according to the research
S&P Capital IQ has a five-star rating on Crown Castle and
four-star ratings on SBA Communications and Sprint Nextel.
Regarding VOX, S&P said the "fund has roughly 15% exposure
to Wireless Telecommunication Services, and the top ten holdings
include S&P Strong Buy-ranked Crown Castle and Buy-ranked SBA
Communications and Sprint Nextel. The fund has a Marketweight ETF
ranking based on a combination of S&P Capital IQ's Equity
Research's performance, risk and cost metrics. We believe VOX has
an above-average expense ratio of 0.14%, above-average S&P
risk assessment and above-average standard deviation."
VOX has gained 10 percent in the past year while IYZ has
returned 6.5 percent.
For more on ETFs, click
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