Top Picks 2016: NII Holdings
01/15/2016 7:00 am EST
Formerly known as Nextel International, Our Top Pick for growth investors is the last remaining independent piece of the old Nextel cellphone service company, explains George Putnam, editor of The Turnaround Letter.
NII Holdings (NIHD) is a Latin American cellphone provider. As its technology was overtaken by smartphone technology, NII saw its business decline in many of its markets.
By 2014 the company was unable to service its heavy debt load and it filed for Chapter 11 on September 15, 2014. The company emerged from bankruptcy last summer by exchanging old debt for new stock.
When volatility hit the equity markets in August and September, many of the new stockholders bailed out, pushing the stock down hard. Then yearend selling took over and pushed it down further late in 2015.
We expect a substantial rebound in 2016 because NII owns some very valuable assets that are worth a lot more than the stock is currently trading for.
The company has sold its Mexican business and has reached an agreement to sell its Argentine unit, leaving it with just its business in Brazil.
This Brazilian business has two assets that its competitors would love to buy: its radio spectrum (which carries the cellphone signals) and its customers.
As more and more people use cellphones, spectrum is in short supply around the globe and NII controls a valuable chunk of the highest quality spectrum.
Moreover, the company has more than four million customers in Brazil, which competitors are probably salivating over.
We expect NII to sell-off its Brazilian business in the not-too-distant future. Using the sale prices of the Mexican and Argentine units as benchmarks (and the Brazilian business should fetch a better price than either of those) suggests that the stock could be worth several times its current depressed price.