January 25, 2013

Verizon Communications (VZ) is expected to continue gaining market share in the wireless space, and although the stock has reached a relative level of full value, the stock can present investors with a defensive play if macroeconomic conditions were to worsen, says Christopher C. King, Director at Stifel, Nicolaus & Co., Inc.

“The third quarter, the entire U.S. wireless industry added 1.3 million postpay contract subscribers, and Verizon added 1.5 million. In other words, the rest of the industry combined lost postpay subscribers, and Verizon accounted for all of the growth in the industry,” King said.

King has a “hold” rating on VZ due to valuation but likes it from an operational standpoint. Besides the company gaining market share, he says VZ is increases its dividends modestly every year and generates a significant amount of free cash flow, and investors may benefit from their stability.

“They are likely to outperform the market when the market begins to fall apart, when the market is scared or jittery, when there are global macro concerns. These stocks are going to outperform because these are safe havens, they are bellwethers and are not going anywhere. They generate a ton of free cash flow and have very healthy balance sheets,” King said.

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