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LG Display: Watches to Big Screens
08/18/2015 10:00 am EST
Most of us spend hours a day staring at a computer screen or tapping a cell phone, followed by more hours in front of a big-screen TV, observes Martin Hutchinson, editor of Pacific Wealth.
LG Display (LPL)—a holding in our Aggressive model portfolio—is the world leader in the technology we stare at an increasing large portion of our lives.
Despite the highly competitive nature of the display business and the risk of technological obsolescence, LG Display’s leading position, solid financial standing, and relatively low valuation make it a highly attractive holding.
The display market has grown exponentially since the first TV monitors and now stretches across every facet of the information technology industry; it is also the principal supplier of displays for the Apple Watch and the clear leader in OLED displays.
The global display market is highly competitive, with massive Chinese competition, which LG Display counters by manufacturing scale and the ability to manufacture in its own Guangzhou plant.
LG Display’s stock price has been knocked in 2015 by fears that LED display prices are declining. But business is looking up.
LG Display’s selling price per square meter was up 4% in the first quarter of 2015 while shipments were up 18% from the previous year’s first quarter.
The company is also a major holder of intellectual property, with 26,518 patents that allow it to develop new products and technologies that stand apart from its competitors.
For example, in LCD panels, LG Display differentiates itself through its in-plane switching technology, allowing ultra-HD TV panels and curved monitors.
In OLED technology, it produced the first 55-inch OLED 3-D television and supplies curved ultra-HD panels for TVs, curved plastic OLED panels for smartphones, and round OLED panels for wearable items.
LG Display is attractively priced at 6.1 times trailing four-quarter earnings and only 5.5 times estimated 2016 earnings.
It also offers a modest 2% dividend yield. The company has little leverage, with more than $2 billion in cash and short-term financial assets.
Its share price has been weak in the last year and prices of its products are being squeezed, but the display business is central to today’s life. Plus, you’re buying market leadership cheap.
In terms of both market position and technological know-how, this Korean company represents the kind of Pacific Basin firm that every portfolio should hold.
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