Samsung: A Hidden Gem
02/18/2005 12:00 am EST
One of the great benefits of the Money Shows is the chance for all attendees to meet face-to-face with the advisors, and the opportunity for an impromptu dinner with Mark Skousen was a highlight of my week. Here, he talks about his favorite tech stock - Samsung.
"Our favorite tech stock is Samsung Electronics (listing information detailed below) . We view this as the ‘hidden gem’ in the tech industry. In fact, it’s the most profitable tech stock in the world. They just declared record profits. Sales are growing like crazy. And while the shares are up 40% since we first recommended them, we’re predicting a long-term triple, so we still think we’re early in the game.
"Samsung products were everywhere during the holidays. In addition, at the giant consumer-electronics show in Las Vegas this year, Samsung unveiled an array of new products, including a mobile phone that converts speech into text messages, and scans business cards into phone directories. In fact, I believe the mobile phone may well be the key to Samsung’s success in the near future. The company has ambitious plans to expand the number of premium telephone products that can attract higher profit margins.
"What about the future? Chief Executive Yun Jong Yong announced plans to raise capital spending by 34% in 2005, more than double last year’s pace and outspending rival Intel. Yong, by the way, again made the Business Week list of one of the ‘best managers’ of a publicly traded company. One big reason for the firm’s success is that Samsung is staying ahead of the competition in terms of investing in its future. The company recently signed an agreement with Intel to provide state of the art chipsets in notebook computers, and is the first to sign a long-term strategic agreement with the most advanced European nanotechnology research firm to build better and smaller communications products.
"What’s the best way to buy this stock? Samsung does not trade on the New York Stock Exchange or the NASDAQ, but on the Korean exchange (#005930). The best strategy is to have your broker buy the stock on the Korean exchange, which is done through their foreign stock desk. Because of the price of the stock, the minimum investment is typically $5,000 to $10,000, and the commission is 2%-3%. All major brokerage firms can buy this stock. Another convenient alternative is to buy the Korea Fund (KF NYSE), because 30% of the fund is invested in Samsung. I’d add that the Korea Fund is also selling at a discount to net asset value.
"Finally, I believe that Samsung will trade on a US exchange within the next two years. In fact, one of my arguments for buying Samsung is not only that it’s profitable and selling at a third of the valuations of its competitors, but that following a US listing, its valuation will probably match the p/e of its rivals."
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