by Alyssa Oursler | March 5, 2013 8:55 am
When it comes to the smart money, billionaire Warren Buffett and his Berkshire Hathaway (NYSE:BRK.A, BRK.B) holdings are the talk of the town. However, Forbes recently released its list of the world’s richest people on the planet and, for the first time in over a decade, Buffett didn’t make the top three.
At the same time, oft-overlooked Mexican telecommunication tycoon Carlos Slim was named the richest man in the world for a fourth consecutive year, with his wealth totaling a jaw-dropping $72 billion.
So forget Buffett for a minute. Can (or should) you invest like Slim?
Well, maybe not. For one, his global conglomerate, Grupo Carso (PINK:GPOVY), along with other big holdings like Grupo Financiero Inbursa (PINK:GPFOY) and Minera Frisco (PINK:MFRVF), are very thinly traded ADRs that you probably should pass on.
On top of that, Slim has been struggling lately. In late 2011, the mogul lost around $8 billion in four days, and since then, his net-worth lead over second-place Bill Gates has narrowed to its smallest gap in nearly a year.
Make no mistake — Slim’s no fool, and he’s not the richest man on Earth for nothing … still, not all of his holdings are gold. Here’s a look at five Carlos Slim-held stocks — some of which have held him back for the past year and could weigh him down more going forward, and others that might be nearing the end of their usefulness:
Stake: $33.8 billion
52-Week Returns: -14%
Slim owns and is chairman of America Movil (NYSE:AMX), the largest mobile network operator in the Americas — and that has been the main reason for his recent slip in wealth.
In the past month, he lost almost 10% thanks to the telecom stock’s 20% slide in price; since late 2010, AMX has dipped 32% while the S&P 500 has climbed 13%.
As Bloomberg explains, shareholders have been fleeing Slim’s company as its “dominance in Latin America and especially its home country of Mexico is under fire, with lawmakers and regulators pushing for tighter controls.”
Of course, America Movil has been looking to expand beyond the Americas, recently snatching up exposure to Europe with stakes in KPN (PINK:KKPNY) and Telekom Austria (PINK:TKAGY). Since those moves, though, shares of each company have slid 65% and 36%, respectively.
If you think the hullabaloo over regulations is overblown, though, AMX does have a huge footprint (it’s the fourth-largest telecom company in the world in terms of equity subscribers) and has grown revenue for 12 consecutive quarters.
Stake: $114.6 million
52-Week Returns: +47%
Just as Warren Buffett and countless other investors have taken a liking to newspapers in recent years, so has Carlos Slim.
In 2011, the investor raised his stake in The New York Times Co. (NYSE:NYT) to more than 8%. Slim also loaned the company $250 million during the downturn of 2009 and holds a warrant to buy nearly 16 million shares as a result.
So far, NYT’s returns have justified the increased stake. The stock has climbed nearly 50% during the past 12 months, including a market-doubling 12% gain to kick off 2013. The latest push came amid news that company is again planning to put The Boston Globe up for sale — just the latest move to unload assets that aren’t a part of its core business.
Still, the newspaper industry is hardly a promising one as the medium continues to struggle to stay relevant in an increasingly digital age. The New York Times Co. also must deal with a huge pile of debt, along with operating costs that are rising faster than sales.
That rosy picture doesn’t come cheap, at 22 times next year’s earnings.
Stake: $260.6 million
52-Week Returns: -1%
Saks (NYSE:SKS) has ridden the broader market’s gains in 2013, climbing a solid 6%, but it’s still in the red after a 12-month roller coaster that saw several double-digit swings, with some as large as 40%.
While revenue has been steadily gaining since 2010, it still hasn’t returned to pre-crisis levels. The retailer also is expected to post a loss in the upcoming quarter, making for a 40% drop in profits year-over-year, while the current quarter is only expected to bring 5% growth on the earnings front.
Recent fourth-quarter numbers weren’t much prettier either, as earnings slipped 45% on higher costs and the lingering effect of superstorm Sandy, while full-year same-store sales climbed under 1%. Still, the company beat on the top and bottom lines, so the stock gained on the news.
Stake: $28.6 million
52-Week Returns: 9%
Another holding is Philip Morris International (NYSE:PM), the Altria (NYSE:MO) spinoff that’s enjoying a killer start this year.
PM has enjoyed a market-beating 10% climb year-to-date and got a boost recently after reporting profits that grew thanks to higher sales volumes in its largest market of Asia and in Eastern Europe, Middle East and Africa.
While there are obvious concerns for cigarette manufacturers in the face of health risks and increasing regulations — such as Russia’s ban of public smoking, which in turn forced PM to offer higher rates on a recent bond sale — revenue has continued to climb in recent years, in part thanks to the company’s growing emerging market exposure. Of course, a global presence can cut both ways, especially as the U.S. dollar continues to rise.
Also, like most tobacco companies, Philip Morris’ yield is tempting (at 3.7%), and the company has consistently raised its dividend since the spinoff.
However, while tobacco companies traditionally have sported lower valuations, they are hardly cheap at current prices. PM trades for 14 times forward earnings — that’s not only more expensive than the average S&P 500 stock, but more than Philip Morris’ sectormates.
Stake: $99.4 million
52-Week Returns: -51%
For our fifth and final Slim investment, we have Argentine oil company YPF (NYSE:YPF).
Shares of YPF were trading for more than $50 at the start of 2011, but have since fallen to under $15 thanks to Argentina’s nationalization of the company. The company came under government pressure when the nation became a net importer of oil despite YPF’s large reserves, and soon after, Argentina’s whole oil sector was declared to be in the public interest.
Slim received shares of YPF as collateral after a loan default — starting with around $345 million, or an 8.5% stake in the company. Now, Bloomberg reports just a $99.4 million stake … and it’s easy to understand that shrinkage. YPF has run up 25% since Slim’s stake was revealed in June, and Slim apparently sold out of most of his position, putting him on the right end of this deal.
Investors should take the hint and stay away from YPF. Argentina is just shy of another crisis and possibly another default. And in the end, there’s too much risk in a government-owned company — especially when the government itself is struggling.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.
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