China Mobile

Ticker: CHL, Buy below $55.

Why I Would Buy

  1. Cheap– Just 12 times forward earnings.
  2. High RoE – Return-on-Equity is my favorite metric for evaluating stocks, CHL has maintained RoE in the teens during the past decade.
  3. Dividend – CHL yields over 3%, while the payout ratio hovers around a healthy 40%.
  4. Credit Rating – Very strong credit ratings: S&P A+, Moody’s A1.
  5. Wide Moat – Largest cell phone, internet and telecommunications provider in China. CHL is the dominant player amongst an oligopoly of 3 participants.

What Could Go Wrong

  1. State Intervention – 70% of China Mobile’s shares are owned by the government, and it exercises considerable control over the company’s operations.  Being state controlled, the company’s profit motive can sometimes be subordinated by state’s social goals.

Disclosure: I am long CHL, please read additional disclosures here before taking any action based on this post.