TelMex Had a Good Run: Time to Start Selling

| About: Telfonos de (TMX)
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I bought Telefonos de Mexico (NYSE:TMX), the Mexican phone operator controlled by Mexican Billionaire Carlos Slim, last year, and in 2004, because it represented value. The stock is now fairly priced.

I sold about half my position in Telmex ($35.64) yesterday at $35.64. I bought the shares back in January 2004 and in June 2006. Specifically, I thought TMX was cheap on June 2nd and 6th, 2006, when I paid $20.42 and $19.89, respectively, and on April 2006, when I bought back short calls against my long position. What has changed? Dividend yield is now only around 2%. The p/e ratio was in the single digits, but now it's almost 15. In general, the emerging markets have been on a tear. I'm now dumping another emerging market stock. After being a bull on the emerging markets for years and selling this year, Telmex was one of my last ones (only Unibanco, Usiminas and Korea Electric remain).

Disclosure and What I Own: I own TMX and am short Jan 2008, 30 strike calls (basically, I sold the upside on my remaining Telmex above $30/share). I own Unibanco (UBB) and Usiminas and thought I might sell them, but I would like to retain some exposure to Brazil. I also feel both are very well managed. Also both positions have capital gains to me that represent 80%-95% of the stock price. I don't feel the opportunity present in selling the stocks justifies the capital gain I'd have to pay. Currently, I plan on letting the rest of my Telmex position get called away in January, but if I need to raise cash I could unwind the remaining TelMex position as well.

TMX 1-yr chart