A Bet on Latin America’s Cell Phone Giant

Spun out from Telefonos de Mexico (TMX) five years ago, America Movil is Latin America’s cell phone goliath with close to 110 million subscribers. Holding a 70% share of the Mexican market, its wireless network reaches about two-thirds of Latin America’s population. America Movil is the leading wireless player in Colombia, Ecuador, and Guatemala; the second-largest cellular operator in Brazil; and the third-biggest cell phone company in Chile. America Movil, doing business in 14 countries, also has operations in Argentina, Brazil, El Salvador, Nicaragua, Honduras, Paraguay and Peru.

Here’s why America Movil will continue to generate big profits for Global Bull Market Alert subscribers — particularly during the next two quarters.

First, America Movil continues to grow its already expansive footprint. Squeezed out of Venezuela by Hugo Chavez’s anti-American campaign, U.S. operator Verizon is not only exiting that market but also selling its assets in Puerto Rico and the Dominican Republic. But Verizon’s loss is America Movil’s gain, with Slim expecting to pay around $3.7 billion for the three Verizon assets once the transactions close. That’s a bargain by almost any measure.

Second, America Movil is all about fast growth. It is set to grow its subscriber base by 32% this year, and a further 28% in 2007. With average penetration rates of 45%, compared with rates of more than 90% in Western Europe, America Movil still has plenty of growth left. And thankfully, the company is generating cash from Day One. America Movil’s revenues were up 27% from last year, as operating profits skyrocketed 76%.

Although the stock has had a good run, it is trading only at around 13 times 2007 estimates — a significant discount to its projected long-term earnings growth rate of 31%. Indeed, its Price to Earnings to Growth (PEG) ratio is only 0.58. Anything below 1 is a screaming buy.

Finally, America Movil also is a highly seasonal stock. It traditionally notches its best performance in Q4 and Q1 of each year. With the Mexican market hitting record highs and America Movil a strong relative performer, now is a particularly good time to get into the stock.

So buy America Movil (AMX) at market today, and place your stop at $35.25. For even bigger potential upside, I recommend the February $40 options (AMXBH.X)