Buy 300 Shares of China Mobile (CHL) on 9/9/2013

I’m making my first purchase for my $150,000 portfolio and admittedly, this is a bit impetuous because I just started thinking about this stock over the weekend. I recorded this purchase for you to watch (see below) and as this was my first time buying on the TD Ameritrade website, you can tell that I wasn’t quite sure where to get the purchase information after the trade was executed. (oh well, I now have it all figured out for the next time) 

I ended up getting 300 shares of CHL at $56.15. The trade was free because I just opened the account and I get free trading for 60 days.

Reasons I Bought China Mobile

1) As I mentioned above, I kind of rushed to buy this stock and the reason is because of the very strong likelihood of an agreement being announced on September 11 between them and Apple. I follow Apple stock very closely (I own it in another portfolio) and I believe there is more than a 95% chance that such a deal between the two companies is real and will be announced. 

Obviously, with China Mobile having more than 700 million subscribers, a deal would be great for Apple and Apple stock has been going up on the rumors. CHL is HUGE and that is why Apple investors are so excited.

But wouldn’t an agreement with Apple be good for China Mobile too? I think so. How can it not be? Up until now they have not had the iPhone while their two biggest rivals have. Any such deal has to be good for BOTH Apple AND China Mobile. The new and cheaper iPhone 5C will surely be going to China and and that should give CHL a big boost in the months to come.

2) Reports are that China Mobile has been readying a new TDD-LTE  network for the iPhone. This means they are gearing up with new technology that will allow their subscribers to get the latest smart phones including the new iPhones. Even if this network is delayed a month or two, I’m buying this stock for the future and am willing to wait and not worried about any delay.

3) CHL has a 4% dividend that appears very safe. The only negative here is that this is NOT a quarterly dividend but is one that is paid out twice a year. 

4) China Mobile has very little debt which is of course good.

5) A bit of speculation – as big as China Mobile is and as long as this deal took to be reached, it might mean that they were able to get a better deal with Apple than other carriers have. Apple really NEEDS a deal with China’s largest carrier and might have been willing to give them a better price. If this is true it would be good for China Mobile stock. 

Isn’t The Apple Deal Already Priced Into The Stock?

China Mobile has gone up from about $53 a share to its current price ($56) on the rumors but that is not really much of a jump. I would have thought that a possible deal with the mighty Apple would have popped the stock more so perhaps investors are holding back until it is official.

I’m anticipating that once a deal is formally announced, investors will start to think about what it can mean for both companies and both stocks will start to go up. Then of course I want China Mobile to successfully sell the iPhone to the Chinese public and hope that it is extremely popular because of the lower price point. 

What Can Go Wrong?

Obviously, if no China Mobile – Apple deal is announced on September 11 that would pretty much negate the whole reason I bought the stock. I would assume the share price would immediately go down if that were to happen. 

9/11/2013 Update: Well, things did go wrong as NO China Mobile deal was announced yesterday AND the unsubsidized price of the iPhone 5C was much higher than most everyone thought it would be. CHL stock today is down in early trading about 3%. Not good! The high 5C iPhone price is a worry to investors who now feel that even if a deal with China Mobile is announce later this year, the phone is too expensive to penetrate the lower end of the market and will not be affordable for a majority of the Chinese people. I will still be hanging on to these 300 shares as I explain below.

Another scenario is that there will be a deal but it won’t be announced quite yet until the new LTE network is completed and everything is ready to do. That might mean November or later. 

Either way, I will be holding on to my 300 shares of CHL stock at least until the future is clearer. I like the dividend and chart history and think the stock is a relatively safe play.  

11/21/2013 Update: Obviously, this stock pick has not work out well for me so far. This is one I wish I hadn’t made but I am still holding on. The Wall Street Journal is reporting that China Mobile might announce a deal with Apple on December 18, 2013 and it would be nice if that comes true.

12/5/2013 Update: The Wall Street Journal has now reported that Apple and China Mobile have agreed to a deal but no confirmation by either company has been made yet. The stock went up yesterday and continues to climb today. If true, the December 18 date is probably when the agreement will be officially announced.

12/18/2013 Update: Well today was the day, according to the WSJ, that China Mobile would announce a deal with Apple. But it never happened and Apple stock immediately tanked, although it did climb back and minimize the losses later in the day. China Mobile stock was up for the day as it announced their 4G network and said it hopes to sell 190 to 220 million smart phones in 2014. 

4/11/2014 Update: What started out as a short term idea has turned into a long term investment due to the decline of CHL. I am hanging on as the stock has started to show some life as of late and I anticipate once the infrastructure rollout at China Mobile is complete, better earnings will follow.

Additionally, it is widely speculated that the new iPhone 6 will have at larger screen size(s) and should compete well with Samsung. Many polls have shown that the Chinese people like phones with big screens so the iPhone 6 should do better than the iPhone 5S did. I hope/believe there is a lot of pent up demand for the bigger iPhones and that China Mobile will be in a good position to capitalize from that.

2 Responses to “Buy 300 Shares of China Mobile (CHL) on 9/9/2013”

  1. Denise M says:

    Hi Bruce,

    Thanks for the video, it makes buying stock look really easy. I had wondered what happened to the initial 150k that you have put into your account. What was it invested in? A money market makes sense. If you had made this purchase on the 61st day, what kind of fees would you have seen? Would it have been a flat-rate or would it have been pro-rated based on the number of shares you purchase? Also, do you have quarterly or monthly broker fees?


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