Stock Discussion - Millicom International (MICC)

Today I want to take a break from the general economy discussions and get a little more focused on how to make $$! Let's discuss a stock that I've been a fan of for a while and think has some serious long term (albeit somewhat iffy short term) prospects.

Industry I Like - Emerging Market Wireless Telecom

I mentioned long long ago when I first started Investing Decoded, but generally when trying to find stocks I want to invest in I first try to find industries that I think will be strong. My rationale for this is simple - if you're an outstanding company in a poor industry, your company will probably still not perform very well in the stock market (Check out Toyota motors' 1 year stock chart, for example). Furthermore, industry trends are a little easier to predict because there are no company specific variables that you have to factor in.

With that said, one of my favorite long term industries is emerging market wireless telecommunications. Yes, this is a very specific industry, and you might be asking "How in the world did you think of something like this?" Well, as with many of my investing inspirations, is personal experience.

10 years ago, the wireless revolution was well on its way in the US. The average person was starting to get a cell phone in his/her hands and it was beginning to become a staple tool in both business and personal environments. This isn't surprising - a heavily industrialized society like the US needs the most efficient communication means possible. What did surprise me, however, was when I was on a trip to India, I saw a similar revolution! Wireless communications was taking its hold at much the same pace as in the US - something that I don't think most people would've expected. Wireless service providers were able to get their phones in the hands of even the poorest peasants in the Indian countryside, dramatically revamping the way they want about their daily lives.

With that experience I was able to come to a basic conclusion - wireless communication is one of the earliest and most revolutionary advancements any emerging market experiences, and any company that can efficiently tap this market in its infancy will be extremely successful.

Enter Millicom International Wireless

So now I have the industry picked out, so I decided to see if I can find any companies to invest in the concept in. There's always the usual candidates - Verizon, Vodafone, AT&T, etc. But these guys are big and diversified - I was looking for emerging market, not large diversified market. BUT, there was one name that instantly hit the chord. Millicom, a European based company that's been providing wireless services for over 20 years, specifically targets emerging markets that have not experienced the wireless revolution yet.

http://www.google.com/finance?q=micc


What Makes MICC So Special?

A natural question here would be "Why MICC? Wouldn't the big guys with all their resources just destroy a smaller player when they wanted to?" Well, yes, except when the big boys don't have the expertise and know-how to do what MICC does best. MICC competitive advantage lies in its ability and experience in penetrating markets earlier than anyone else. They are experts in going into war-torn third world countries and setting up distribution networks as well as infrastructure to get the citizens cell phones. They make money by setting up these networks and selling pre-paid cell phones to the citizens of a third world country - thereby making them an early entrant on what usually is a very lucrative market. And, like I said earlier, there's always a market for wireless communications in third world countries. What's not to like??

How To Play MICC

MICC has traded between a high in the $120s to a low of $20s over the past year. So if you don't have the stomach for it, don't invest here. However, at it's current price of the mid-50s I think there's an attractive opportunity here. I think the stock has long term running room to at least the mid-70s, and you get a nice 4+% dividend yield to hold you over until then. There may be some shorter term downside, and I would definitely dollar-cost average down during those times.

As long as there's emerging markets in the world, MICC will be able to benefit from doing what they're better than anyone else at doing - connecting those markets and getting them on the path to communications revolutions. If you see the big boys like Verizon starting to do this, I would definitely consider that a sell signal for MICC. However, until that day (which I still think is pretty far away), MICC is buy in my book.


Questions/Comments/Feedback?
Please don’t hesitate to let me know of any questions or comments you have about this post or any other. If you want me to write about something else investing related, do let me know!

The Standard Disclaimer:

The stuff I just wrote above is my opinion and my opinion only. Please do not take it as fact. Perform all necessary research and analysis prior to acting on anything I've said above. This includes consulting with a financial advisor.