Telecom ETFs Rise On Rumor Of Buyout

It turns out the rumors were false. Vodafone (NYSE: - ), the planet's largest wireless-network firm, denied that it wanted to buy Verizon Communications (NYSE: - ) for $160 billion.

Verizon stock gapped up more than 2% intraday. It helped lift the Dow and telecom ETFs to new highs. Shares of the $124 billion company kept their gains after Vodafone said in Monday it had no plans of making such an offer.

A $160 billion bid was 32% above Verizon's total market cap of $121 billion, as of Friday's close.

HOLDRS

Verizon makes up 23% of Telecom HOLDRS (AMEX: - ) and 10% of Wireless HOLDRS (AMEX: - ).

Telecom HOLDRS pulled back to its 10-week moving average after hitting a five-year high of 41.69 in early June. It has climbed 14.7% year to date and 37% the past year.

AT&T (NYSE: - ), which accounts for half of the assets, dictates much of the action in the 12-stock portfolio.

AT&T pulled back to its 10-week moving average line on light volume after hitting a six-year high July 2.

Wireless HOLDRS climbed to a six-year closing high of 71.93 Monday. It gained 6.7% in the past month and 19% year to date -- the most of any telecom ETF or HOLDRS for those time periods.

It holds large stakes in Motorola (NYSE: - ), Nokia (NYSE: - ), Qualcomm (NasdaqGS: - ), Research In Motion (NasdaqGS: - ), Sprint Nextel (NYSE: - ), Vodafone .

The major difference between HOLDRS and ETFs is that you can unbundle the HOLDRS and trade the component stocks individually. It's a basket of stocks in which investors own each stock individually, therefore retaining voting rights and dividends. They charge a small custody fee, but no management fees.

ETFs With Most Buying

Vanguard Telecommunication Services (AMEX: - ) and PowerShares Dynamic Telecommunications & Wireless (AMEX: - ) sport the highest IBD Accumulation/Distribution Rating of A+.

Vanguard's is also heavily weighted with AT&T and Verizon, which together control 39% of assets. It overlaps with the two HOLDRS, but offers broader diversification with 44-stocks in the portfolio. It has returned 15% year to date and 40% in the past year.

Powershares holds service providers as well as equipment and consumer products makers. It includes GPS-device maker Garmin (NasdaqGS: - ), Cisco Systems (NasdaqGS: - ) and DirecTV Group (NYSE: - ).

It holds a 4.6% position in Verizon. No one stock makes up more than 6% of assets in the 31-name basket. It has risen 12% year to date and 36% over the past year.

yahoo.com/