(B)(N) AMOV America Movil SAB
Drama. Since taking control of the state phone monopoly, Telmex, in the early 90’s, Mr. Carlos Slim has built a service that has 160,000 employees, and 80% of Mexico’s fixed-line market, 70% of the mobile phone traffic, and more than 260 million wireless subscribers across the Americas (Reuters, June 10, 2013, Threat of break-up looms over world’s richest man).
Courtesy: America Movil
Anyone who has a complaint should put their hand up, or send a smoke signal, in practice when that is all to be had in lesser hands than those of enterprise.
Baby Bells
Case in point, the breakup of Standard Oil in 1911 and AT&T in 1984, gave us Exxon Mobil Corporation and AT&T Incorporated, and a raft of others, not all of which are small, but with results that could have been achieved, and are still being achieved, with more thoughtful legislation and regulatory oversight (Financial Post, May 13, 2013, Rogers, Telus, BCE shares drop following report warning of regulatory risk).
After a great run-up from $15 to $28 in 2009 through 2011, the stock price of America Movil has been up and down since and is presently trading at $20 and significantly below the price of risk of $25. Please see Exhibit 1 below.
The company pays a dividend of $0.15 per share every six months for a payout of $1.1 billion per year and a current yield of 1.5%. Our estimate of the downside volatility in the stock price is minus ($2.50) so that we would not be surprised by any price between the current $20 and $17.50 to $22.50, but still below the price of risk.
Options are only available for the ADS (American Depository Share) which trades as AMX in New York on volumes of between 5 and 10 million shares on an average day, and we would think that the July put at $20 for $0.75 a share today is not a bad purchase, pending more news of government assistance and “hand-ups”, so to speak, on the Televisa of Mr. Emilio Azcarraga which may be heard everywhere and broadcasts to over 60 percent of the televisions in Mexico and the southwest U.S.A.
Exhibit 1: (B)(N) AMOV América Móvil SAB – Risk Price Chart
(B)(N) AMOV America Movil SAB
The Company and its subsidiaries provide wireless and fixed communications services in Latin America.
(Please Click on the Chart to make it larger if required.)
From the Company: América Móvil, S.A.B. de C.V. provides telecommunications services in the United States, Latin America, and the Caribbean. It offers mobile and fixed voice services, including airtime, local, long-distance services, public telephony services, and network interconnection services. The company also provides value added services comprising short message services, multimedia messaging services, and mobile entertainment services; and data services, such as data transmission, e-mail services, Web browsing, instant messaging, content streaming, and interactive applications, as well as corporate network services. In addition, it offers handsets, smartphones, broadband cards, and tablets; accessories consisting of chargers, headsets, belt clips, and batteries; push-to-talk services; and other wireless services that include two wave, PC and wireless security, and machine-to-machine services, as well as Oficina Móvil Telcel, a services suite to enhance applications, video calls, and mobile banking. Further, the company provides video, music, radio, online gaming, and applications; advertising, e-commerce, and digital marketing services; application development services for mobile devices; digital discount coupons; and social media solutions, as well as publishes and distributes yellow-pages and white-pages directories. Additionally, it sells computers, telecommunications equipment and accessories, public phone services, and billing and collection services; rents high-speed data lines to businesses and other telecommunications providers; offers satellite data and packet-switched data transmission services, frame relay, and message-handling systems; satellite solutions; and cable pay television services, as well as pay per view and additional programming, and advertising services. The company markets its products and services through distributors and company-owned retail stores. América Móvil, S.A.B. de C.V. was founded in 2000, has 160,000 employees, and is based in Mexico City, Mexico.
The calculated Risk Price (SF) is a provably effective estimate of the “price of risk” which is “the least stock price at which the company is likeable” (Goetze 2009) and “likeability” is determined by the demonstrated factors of “risk aversion” – we want to keep our money and obtain a hopeful return above the rate of inflation – and the properties of portfolios of such stocks. Stock prices that are less than the price of risk can be said to be “bargain prices” but with the risk attached that the company might never get a higher price other than that due to ambient volatility or “surprise”; on the other hand, investors who are willing to pay the “full price” above the price of risk, and buy and hold the stock at those prices, must also be confident, and have reason to believe, that the company will produce those values, absent new information.
Please see our Posts, The Price of Risk, August 2012 and The Nash Equilibrium & Its Stock Price, October 2012, for more information on the theory.
To see what else “risk averse” investing can do for us, please see our recent Posts, The Wall Street Put, April 2013, and earlier Posts such as The Dow Transports, March 2013, or The Risk Adjusted Dow, March 2013, or The Canada Pension Bond, February 2013, and for a more colorful description of investment risk and the application of the “price of risk” to mergers & acquisitions, please see our Post, Bystanders & Collateral Damage, April 2013.
Postscript
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