Luxembourg-based Millicom International Cellular SA (MICC), which provides cell phone service in developing countries, meets my requirements for entry into the Cara 100.
One look at the stock in the three years since I started this blog shows the results of management performance. The stock ran from ~20 to ~80 in about 15 months.
Management performs extremely well. A couple weeks ago, the company’s board approved a long-term performance-based compensation plan for its 125 top international sales executives, so I expect they will continue to perform extremely well.
I like the business model: Cell phone sales in developing economies. Who needs land lines?
I like the top line growth (quarterly revenue growth +85% y/y), the high margins (gross margin at 72.5% and operating margin at 27.8%), and the terrific return on equity (+61%). Moreover, I like the fact that insiders own over 39% of the stock, and that institutions hold just 27%. Lots of room for growth there.
I also like the fact that Wall Street analysts are not shy in their opinions of this company. Six analysts have a mean recommendation of 1.8 (where 1.0 is a Strong Buy, 2.0 is a Buy, and 5.0 is a Strong Sell).
Finally, as a trader, I love the Beta of 3.5, which means there is plenty of volatility. If, as and when the broad market sells off (this year I expect), then MICC will be a stock that will quickly become over-sold. And while the North American and European economy may run aground, I believe the emerging economies of the world have awoken and their continued growth will not be denied. If so, it’s just a matter of time when well over one billion of these people are using cell phones.
So, what’s not to like? Well, PE for one. It’s up at 46 versus an industry wide 15-16. But the competitor comparison table at Yahoo Finance also shows why traders like this stock.
Yes, I think Millicom International Cellular SA is a worthy entrant to the Cara 100.
The problem, of course, is that the Relative Strength Index for the Monthly-Weekly-Daily is up at 87.8/67.7/61.5. I have to wait until this stock drops down into the Cara Accumulation Zone, which is normally a Monthly-Weekly-Daily RSI all down at 30. Unfortunately, while I do expect the Weekly and Daily to drop below 30, I do not expect the Monthly RSI to get below 40. But then, maybe the stock (yesterday at $77.33) will drop down to 50.
Disclosure: No holdings (yet).