On the Move with America Movil
09/15/2009 11:11 am EST
Mexico's wireless carrier is leveraged to Latin American growth, writes Paul Goodwin of Cabot Wealth Advisory.
My investment idea today is a Mexican telecom company that's turning into a regionally dominant provider of voice and data network services. Founded in 2000, America Movil (NYSE: AMX) provides both wireless and fixed-line communications, but it's clearly the buildout of the wireless network that's stirring things up.
The company offers the whole spectrum of cellular services, such as short messaging, content downloading, video streaming, GPS, and Internet access in addition to standard fixed-line services like Internet, cable TV, and data transmission.
With more than 180 million wireless subscribers and nearly four million fixed-line subscribers, America Movil has a presence in Mexico, Guatemala, Nicaragua, Ecuador, El Salvador, Brazil, Argentina, Colombia, the US, Honduras, Chile, Peru, Paraguay, Uruguay, the Dominican Republic, Puerto Rico, Jamaica, and Panama. That's a huge geographic base, which provides access to many emerging markets.
After a couple of quarters in which earnings dipped slightly, the company showed a 5% gain in earnings in [the second quarter] with a 24% after-tax profit margin. The stock pays a small dividend (1%) and has 280 institutional investors on board, leaving lots of room for growth. The stock put in a double bottom at $23 last November and March, and has pulled back slightly after doubling off that bottom.
As the Latin American region begins to power back up after the global recession, America Movil will be leading the way.
Since the inception of the Dow Jones Industrial Average in 1896, the 11 months of the year that are not September have averaged a gain of 0.7% per month. September, on the other hand, has averaged a loss of 1.2%!
There's also a decade-by-decade comparison that shows September finishing 12th out of the months of the year in performance in four of the last six decades and only ninth and tenth in the other two.
The statistic has a long duration, which eliminates noise, and it's not qualified or cherry-picked. It's also paralleled by the performance of the Standard & Poor’s 500 index, which represents the broader large-cap market pretty well.
But the question is: Can you use September's poor relative performance to any advantage in your investing? And my answer is, probably not. There might be a case to be made for pulling some money out of an S&P 500 or Dow index fund during September and then plugging it back in when October rolls around. But the idea of using decades-long statistics to make daily investment decisions doesn't make any sense to me.