This week’s Global Bull Market Alert revisits an old favorite of mine, Millicom International (MICC), the “Indiana Jones” of the cell phone industry.
The explosion in cell phone usage is one of my favorite "top-down" themes in global investing. No technology has spread wider and more quickly than the cell phone. While it took television 30 years to penetrate households across the globe, cell phones managed to achieve this in less than a decade. Relatively cheap, portable, and, today, incorporating email, Internet access, cameras and MP3 players, cell phones are replacing computers as the technology device of choice among countries with the fastest-growing populations in the world. It’s no exaggeration to say that in many developing countries, people are more likely to have a cell phone than to have electricity.
Millicom has adopted a daring strategy to take advantage of this relentless megatrend. While the Vodafones and América M³vils of the world slug it out in the big cell telecommunications markets like Brazil and India, Millicom has cobbled together a patchwork empire that consists of 13 countries ranging from El Salvador, Paraguay, and Colombia in Latin America to Chad, Senegal and Laos in Africa and Asia.
Why is this such a great strategy? Given the relatively low cell penetration rates, Africa is the fastest-growing region of the world in terms of cell phone use. Cell phone penetration is only 14%, compared with 20% in the Middle East, 25% in Asia and more than 80% in Western Europe. And lest you think this isn’t a big enough opportunity, remember that Millicom’s mobile operations have a combined population under license of approximately 260-million people — 80% of the population of the United States.
That’s why it’s no surprise that Millicom is growing like a weed — and making money hand over fist, even in the midst of the “Great Recession.” At the end of fiscal 2009, Millicom had 33.92-million wireless subscribers, up 22% year-over-year. And, while most other companies were struggling, Millicom’s quarterly total revenue hit $923.7 billion — a rise of 9.8% year-over-year and substantially higher than the consensus estimate of $876 million. The business also continues to be profitable beyond management’s targets. Quarterly EBITDA margin was 46.6%, compared to 45.4% in the same quarter a year-ago — well above management’s long-run target of 45%.
So, buy Millicom International (MICC) at market today. Place your stop at $76. If you want to bet on potentially even bigger profits, I recommend the July $90 call options (CQD100717C00090000). This is also a position that I hold for my clients at my firm Global Guru Capital.
Portfolio Update
Cognizant Technology Solutions Corp. (CTSH) hit a record of $52.52 last week, before pulling back and ending the week slightly below your entry price. Every cloud has a silver lining and the passage of Obamacare may actually benefit Cognizant, which can offer front and back office assistance to potential clients like insurance providers. CTSH remains a BUY.
UltraShort Euro ProShares (EUO) jumped another 2% last week, falling back from the record high of $20.54 it hit on Thursday of last week. On the one hand, another agreement to bail out Greece strengthened the European currency. On the other, it’s not as if Europe has cured its structural problems overnight, even as the accelerating U.S economy means that forecasts for U.S.-dollar strengthening are being upped daily. EUO remains a BUY.
Mechel (MTL) soared 11% last week and is now up 25.76% since our initial recommendation. The stock may be hit after news of the explosions on the Moscow metro this morning, making it a good time to enter or to add to your position. MTL remains a BUY. Tighten your stop to $23.95.
National Bank of Greece (NBG) jumped 5.2% last week, as the EU came through with another bailout package in conjunction with the International Monetary Fund (IMF). NBG bounces around with the news of the day concerning Greece but it is encouraging that the stock has just penetrated its 50-day moving average for the first time since the start of the crisis. It may take some patience, but I continue to believe that this pick could be a big winner. NBG remains a BUY.
China North East Petroleum Holdings Ltd (NEP) jumped 4.88% this past week, as investors anticipated the company’s earnings announcement today. Expect the stock to pop on any positive news. I have moved the stock back to a BUY.
P.S. Don’t miss out on the 22nd annual MoneyShow Las Vegas, May 10-13 2010 at Caesars Palace. This event will be your one-stop resource for the comprehensive education, efficient research, and valuable advice you need to make smart investment decisions in 2010 and beyond. Join me there and hear leading experts reveal where they see growth opportunities in stocks, bonds, ETFs, commodities, and options. Also learn about which overseas markets may outperform in the near term. Visit The MoneyShow Las Vegas to register FREE online, or call 800/970-4355 and mention priority code 017443 today!
P.P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy.
