NeuStar (NSR) is an obscure, Big Board-listed outfit that operates like a monopoly in the phone industry. With a vast database of phone numbers, NeuStar serves as an independent clearinghouse for North American Portability Management, a consortium of carriers: It routes calls between phone companies and transfers the numbers of users who want to switch carriers (all part of "portability"). NeuStar gets a fee of $1.05 per transaction. It also services the Internet Corp. for Assigned Names & Numbers, which allocates Internet addresses, by helping manage its server systems that provide directory control over the Net worldwide. Shares of NeuStar are on the rise -- from 27 in January to 32.85 now. John Bright of Avondale Partners sees the stock at 40 in a year, based on its fast earnings growth. NeuStar is profiting from the rapid technology changes in carrier networks that require updates in its database, says Erik Zamkoff of investment firm Morgan Joseph. He sees NeuStar earning 95 cents a share in 2006 and $1.15 in 2007 vs. 2005's 71 cents. He rates the stock a "buy."
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial