The Markets Up Chuck

While I have enormous respect for Jim Cramer’s marketing and promotional skills, I often have strong disagreements with his buy and sell advice.  I felt his recommendation to sell NII Holdings (NIHD) on his Monday show was not only wrong, but based on faulty reasoning and statistical manipulation of the facts and numbers.  To be fair, I hold a generally longer term investing perspective than Cramer that will naturally put us at odds regarding stock buy or sell recommendations.  Additionally, I focus more on fundamental values where investors like Cramer tend to be more price action oriented.  Consequently, I believe both NII Holdings (NIHD) and America Movil, S.A.B. de C.V. (AMX) are strong long-term buys based on fundamentals.

The adage that statistics don’t lie, but statisticians are damn liars applies to my objections to selling NIHD.  I felt Cramer really played with the numbers in ways that distorted the facts.  He didn’t lie, but I felt he exaggerated certain facts and left out other important ones.  For example, to state that NIHD is losing customers was way overblown and wrong.  Cramer stated that NIHD’s churn rate increased 40% from 1.5% – 2.1%.  the actual numbers are 1.8% – 2.1% which is a 20% not 40% increase.  Put in a more positive light NIHD had a 97.9% customer retention rate.  Considering the state of the economies in their market that’s pretty good.

I also took exception to his direct comparison to AMX.  In truth, they both sell wireless in similar markets, but each has their own niche.  NIHD markets to the business market and offers more feature rich communication protocols.  Their recent contract with Research In Motion (RIMM) to offer BlackBerry phones is an example. Their established relationship with Motorola’s iDEN technology that provides among others, a push-to-talk functionality that appeals to business users is another differentiator for NIHD.  AMX offers more basic service to the general population or retail user.  There is ample room in the market for both companies.

The following FRAT™ VidEx™ shows the attractive values and opportunity for both companies based on fundamentals.

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I believe the fundamentals argue strongly that NIHD is a compelling long-term buy.  There are other issues I had with Cramer’s take such as his opinion on 3G build out.  NIHD already has successful 3G build out experience in Peru.  NIHD has ample cash on their balance sheet and strong partners in Motorola (MOT) and Research In Motion (RIMM) interested in their success.  However, the bottom line is that to advise people to sell NIHD is in our opinion an injustice.  To invest in both NIHD and AMX makes a lot more sense.

Full Disclosure: Long NIHD at time of writing.