However, automatic forced asset sales aren’t a part of the deal as was once feared. That, coupled with aggressive expansion into other Latin American markets such as Brazil and Columbia, should allow America Movil SAB de CV (ADR) (NYSE:AMX) to stay profitable.
New entrants in the Mexican market will erode profit margins, so the company most likely won’t show the same growth that it did earlier this decade. That’s not to say that there won’t be growth; it will just be more modest.
Aside from the legislative obstacles that America Movil faces, its outlook is very promising. It has aggressively expanded into new markets both within Latin America and outside of the region. The company even owns a 23% stake in Telekom, an Austrian telecommunications company. This is reflective of America Movil SAB de CV (ADR) (NYSE:AMX)’s geographic diversification strategy, which has seen it attempt to purchase controlling interests in several European corporations. Investors should expect this strategy to start paying off, or at least offset much of the negative effect from the Mexican legislation.
Foolish bottom line
Bill Gates is in a far better position than Carlos Slim to increase his fortune. Microsoft Corporation (NASDAQ:MSFT) is poised to dominate the console-gaming market for years to come, and recent investments made on the company’s part reinforce this idea.
Not only that, but its P/E ratio indicates that high earnings are to be expected in the future. This is a good sign for any investor, especially when Microsoft Corporation (NASDAQ:MSFT)’s free cash flow gives it a lot of flexibility in terms of spending and investments. It’s time to buy Microsoft. This is a stock that you can retire on—even when a new product release failed (Windows 8) it still managed to post remarkable gains by riding on the back of another (the new Xbox). I see this stock soaring, and it’s time to hop on the bandwagon before it’s too late.
That being said, Carlos Slim will most likely see increases in his wealth as well. America Movil is well positioned to diversify its operations, which should mitigate some of the deleterious effects of regulation in Mexico. As the company increases its market share in Latin America and North America, we should see earnings rise accordingly. If Slim succeeds in purchasing large shares of European corporations, that’s a bonus.
For now, America Movil SAB de CV (ADR) (NYSE:AMX) is a stock to hold. Stockholders should be wary when the Mexican regulation actually takes place in 2014. America Movil will be hurt then, but not critically. Regardless, Carlos Slim will walk away a winner, though not quite as much a winner as Bill Gates.
The article Why Bill Gates and Carlos Slim Are Getting Richer, and Why You Should Care originally appeared on Fool.com and is written by Hunter Hillman.
Hunter Hillman has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Hunter is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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