Join        Login             Stock Quote

Investing In State-Owned Monopolies

 March 20, 2012 02:46 PM

Just why is it that so many people are bad at the game of monopoly?

Growing up, our family monopoly games were raucous affairs with a lot of shouting (and when necessary, wrestling). My younger brother John was always in charge of the cash because no one else was deemed trustworthy.

In retrospect, most of my six siblings never really got the game at all. They carefully managed their cash and picked up random properties. This allowed them to stay in the game for a long time but made ultimate victory impossible.

As for me, I always went for the kill with a strategy of feast or famine.

It was either a great monopoly, like Boardwalk and Park Place, or I would crash and burn and then bolt to play basketball with the neighborhood gang.

[Related -Why Apple (NASDAQ: AAPL) Could Jump To $700 In 3 Months]

Just why is it that so many people are bad at the game of monopoly?

I think it's because we're taught at a tender age that tycoons adept at cornering markets are the greedy bad guys. This belief is compounded when we go to college and economics professors rant about evil monopolies and the need to "regulate" the free market.

Enter Carlos Slim

Apparently, Carlos Slim, the wealthiest tycoon in the world according to Forbes, never studied economics.

Carlos Slim's fortune was built on the back of Mexican telecom monopolies and, as a hobby, he bailed out TheNew York Times. Companies controlled by Slim have captured 80% of Mexico's telephone lines, 70% of the cellphone market, and account for an incredible 34% of the value of the country's entire stock market.

[Related -Apple Inc. (AAPL): The Best Is Yet To Come For Apple]

Maybe monopolies aren't all that bad?

Lasting monopolies are tough to find in America, but there are plenty of them in emerging markets.


The best way to convince government regulators to protect your market is to be owned by the government itself.

And there are many of these monopoly-like state-owned and -controlled giants in emerging and frontier markets.

China Mobile: The Poster Child

The poster country of this "state capitalism" is China and one high-profile monopoly is China Mobile (NYSE: CHL). The government's 70% ownership stake is a strong incentive to protect the company's dominant market position.

So despite my strong personal distaste for state capitalism, now may be a good time to look at China Mobile when many are questioning the country's growth prospects.

For 2011, the company's customer base grew 11.6% to reach 650 million with profits of $19.9 billion. As a defensive consumer business with a 4.1% dividend yield, CHL should hold up rather well in the toughest of markets.

This stock has done a lot better than that so far in 2012 – up 15.5%. Despite this impressive surge, the stock is trading at only a bit over ten times 2012 expected earnings.

China Mobile's trump card is a $50-billion stockpile of cash reserves ($13 per share) that is sure to cover (or buy out) even the most intrepid of its competitors.

So don't be shy about investing in monopolies. After all, only one company (Parker Brothers) makes the game of monopoly.

Good Investing,

Carl Delfeld



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

article imageThe Single Best Place To Invest Your Money For Retirement

It was never supposed to be this daunting. At least that's what we were read on...

article imageNegative Blowback From Negative Interest Rates

The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.