Betting Alongside George Soros on a Latin American Telecom Turnaround

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

This week’s Global Bull Market Alert pick, NII Holdings Inc. (NIHD), is a bet on the explosion of cell phone services across Latin America — as well as a turnaround in the fortunes of a company that has seen its stock tumble more than 60% in the last six months.

Headquartered in Reston, Va., and formerly known as Nextel International, NII Holding’s mobile networks support digital mobile telephone services, Internet services, Global Positioning System technologies, and specialized mobile radio services across Latin American markets that include Mexico, Brazil, Peru, Chile, and Argentina. Because NII Holdings focuses on the highest margin business customers, it boasts the highest revenue per subscriber and the lowest churn rates among all of its competitors in Latin America.

NII Holdings was hit hard by the turmoil in global markets. After hitting a peak of $83.27 in early October, the stock plunged 21.3% on Oct. 25. It was punished hard for adding slightly fewer net subscribers than expected during third quarter 2007. The stock didn’t find its feet until it hit bottom on March 29 at $30.70.

It didn’t take long for company insiders to start snapping up shares in the company. Sure enough, last week NII Holdings announced strong results for first quarter 2008, which reinforced the company’s status as one of the strongest growth stories in the global cell phone space. Consolidated operating revenues in 1Q 2008 hit $993 million, a 39% increase compared with first quarter 2007. Net income jumped to $114 million, or $0.67 per share, a 35% increase compared with the same quarter last year. The company’s net subscriber additions also grew by 35%, resulting in an ending subscriber base of more than five million subscribers. Average monthly service revenue per subscriber (service ARPU) remained steady at $58 for the first quarter.

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With its status as a fast-growth company re-established, NII Holding’s forward P/E of 11.3 and a PEG ratio of only .54 suddenly seem very inexpensive. The company itself used the weakness in the stock price to launch a $500 million share purchase program in January. Several brokers also have a "buy" rating on the stock, with a target price ranging between $80 and $90. That’s roughly double the stock’s current levels. Alpha trader George Soros also added the stock to his portfolio in the last quarter of 2007. At the stock’s current price, you’re probably getting a better price than Soros himself did.

So buy NII Holdings (NIHD) at market today. This is a volatile stock so place your stop at $30.00. For even more potential upside, buy the September $50 call options (QHQIJ.X).

PORTFOLIO UPDATE

Potash (POT) is the star of your current portfolio, up 16.77% during the last three weeks, and the options up 133.56%. With the company reporting record earnings last week, this one has a way to go. But tighten your stop to $160.00. Also move your stop in Russian steel maker Mechel (MTL) to $110.00

To make room for NII Holdings (NIHD), close your short position in the CurrencyShares British Pound Sterling (FXB) for a slight loss, and sell your put options as well. In addition, we stopped out of Yamana Gold (AUY) on April 23 for a loss. We previously had sold all of the options with that holding.

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There were two big stories in your Global Stock Investor portfolio this week. Potash (POT) hit yet another record high this week, soaring 16.5% on the back of rising fertilizer prices. Potash now has almost doubled since October. Millicom International (MICC) also jumped 12.2% yesterday on the back of strong earnings, as the stock awoke from its slumber.

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