Top picks 2013: China Mobile

Investing screens based on Buffett, Lynch and O'Shaughnessy all like this telecom.

By TheStockAdvisors Jan 5, 2013 2:19PM
Global communication Maciej Frolow Brand X Getty ImagesBy John Reese, Validea Hot List Newsletter

China Mobile Ltd. (CHL) is my higher-risk pick for 2013; this Hong Kong-based mobile telecom giant ($234 billion market cap) has a customer base of more than 700 million, and has raked in more than $87 billion in sales in the past 12 months.

And my Warren Buffett-inspired Guru Strategy, my Peter Lynch-inspired model and my James O'Shaughnessy-based value model all like this stock.

I think its shares are a bit higher-risk because of China's slowdown (though there are signs that is starting to reverse), and because, while China has moved increasingly toward a free market system, its Communist government is still a wild card that should be taken into account.

That being said, there's much to like about China Mobile.

My Buffett-model likes that the firm has upped earnings per share in each year of the past decade, and that it has more than four times as much annual earnings ($20.4 billion) as it does long-term debt ($4.6 billion). It also likes China Mobile's stellar 21.4% 10-year average return on equity.

My Peter Lynch-model sees CHL as a "slow-grower" because of its long-term 9.3% EPS growth rate (based on the average of the three-, four-, and five-year EPS growth rates).

Slow-growers are primarily attractive to this model for their dividend yields, and China Mobile is offering a good one -- about 3.8%.

It also has a yield-adjusted price-to-earnings-to-growth ratio of 0.88, which comes in under the 1.0 threshold my Lynch-inspired model uses. That's a sign the stock is a bargain.

Finally, my James O'Shaughnessy-based value model is also high on CHL. When looking for value plays, O'Shaughnessy targeted large firms with strong cash flows and high dividend yields.

China Mobile is plenty big enough, and its $8.95 in cash flow per share and that solid 3.8% yield also make the grade.

More from
Tags: CHL
Jan 6, 2013 1:24PM

China Mobile was good play in the past, profits to boot...

But the Chinese Government, started leveling the playing by I think subsidizing others...?

And competition became more fierce for CHL....Was good time to leave and run elsewhere.


Maybe now is a time to revisit and look at them going forward again??

My petname was Chili-Tel..

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.