Charles Brandes' Favorite Telecom Play
By Graham Summers
April 09, 2007
Investing legend Charles Brandes has made billions by betting against the crowd. As I mentioned last Monday, he's betting big on telecom, particularly fixed-line international plays.
Brandes' largest holding is in Telefonos de Mexico (TMX), or Telmex as it's commonly called. Altogether, Brandes owns $1.3 billion worth of Telmex stock.
It's not difficult to see why.
Telmex has a virtual monopoly on Mexico's fixed-line phone service. The company is owned by billionaire Carlos Slim Helu (the third richest man in the world), who bought it from the Mexican government in 1990.
Telmex controls 90% of the fixed-line phone service in Mexico and more than 80% of ISP and broadband access. Not content with a monopoly in just one country, Slim has been branching out into other Latin American countries.
Telmex recently bought AT&T's Latin American assets as well as Techtel and Metrored (Argentina) and Chilesat (Chile). In July 2006, the company completed its acquisition of 90% of the voting shares Embratel (Brazil).
Slim's Telmex now operates in Mexico, Argentina, Brazil, Chile, Colombia, and Peru. The additions to Telmex's revenues and income have pushed the stock to a three-year high. Telmex shares are now closing in on their all-time highs of 1999-2000.
Telmex shares are soaring...
(1-year chart)
Since 1996, Telmex revenues and income have nearly tripled. Even better, the company has diminished its shares outstanding by a third, thanks to massive share buybacks.
Today, Telmex is trading for 15 times earnings, two times book, and eight times cash flow. It yields 2.3%.
By buying Telmex, you're investing with Slim, the Warren Buffett of Latin America. And you're also putting your money alongside Charles Brandes, who's shown investors average annual gains of 15% since 1987.
Good company to be in.
Regards,
Graham
