Ryan Vanzo's  Instablog

In this type of market, good management goes further than usual. With depressed prices on almost everything, competent management should be able to leverage their companies business to take advantage of today’s values and build for the future. The following company not only has a healthy growing business, but has more than able management to help boost the company’s returns for years to come.

NTELOS Holdings Corp. (NTLS)

Sporting a market cap of just under $650 million, NTELOS isn’t the first name you think of when someone mentions Telecom. Over-shadowed by giants such as Verizon and AT&T, NTELOS is finding its niche in an otherwise crowded Telecom market. A quick glance at its valuations show that the company is cheap (12x P/E, 0.9 PEG, double-digit growth estimates, stable and recession-proof industry) but the real icing on the cake is management.

In some cases, management is clever enough to capitalize on an undervalued competitor through an acquisition; other times however, management is able to capitalize on itself being undervalued. Taking advantage of a depressed stock price of $15.34 (52wk Range: 13.66 - 25.65) management has instituted a $40 million share buyback program. Citing the company’s strong and growing free cash flow generation, Standard & Poor’s applauded the move stating it would be highly accretive to shareholders.

More proof of NTELOS’ strong cash flow and superior management comes in the form of their dividend. Investors fretting over the stability of the company’s high 6.5% dividend were comforted recently with the news that management was not cutting the dividend, deciding the raise it instead. The company boosted its dividend payout by 8%, rewarding investors with a 7.2% dividend yield and a still healthy 73% payout ratio.

On the business side of things, management is rolling out more new products than ever before and even scooping up regional competitors at a discounted price. In early October, NTELOS agreed to purchase Allegheny Communications Connect from Allegheny Energy Inc. for $27 million. The division owned and operated thousands of miles of fiber optic cables in many of NTELOS’ main markets. This recent move not only relieved NTELOS of competition at a fire-sale price (the company expects about $4.5 million in profits next year from the acquisition, entailing a very low purchase price of under 6x earnings), but it will also save the company over $500,000 a year in synergy costs.

Conclusion: I encourage you to dig deeper on your own, but considering the historically low valuations, top-tier management, and recent moves that will reward investors for years to come, I’ve taken a strong position in NTELOS.

Disclosure: Author is Long NTLS