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Korea Calling...It's for You

08/18/2006 12:00 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Mark Skousen, economic guru, as well as renowned stock picker, is an expert at finding great investments throughout the world. In a recent issue to subscribers, he wrote of a telecom company in a blossoming part of the Far East…


“G. Paul Matthews is one of the world's top Asian fund managers. The performance of his Matthews Korea Fund has pummeled its peers over the past six years. And lately he has been loading up on shares of SK Telecom (SKM NYSE). That may surprise some folks who noticed that South Korea's largest wireless carrier just reported a 20% drop in its second quarter profit. But Matthews is looking forward, not back.


“The company’s higher marketing expenses and stiffer competition put a dent in SKM's bottom line last quarter. But things are about to get a lot better, not worse. Let's start with Cyworld, wholly owned by SKM. Cyworld is an electronic social network that allows users to message each other—and send music, photos, etc. —instantly. In South Korea, there are more than 18 million Cyworld members—more than a third of the country's entire population.


“That membership base makes Cyworld's per capita penetration in South Korea greater than even the wildly popular MySpace in the United States. And Cyworld is selling nearly $300,000 in virtual items each and every day. Cyworld spent the last year launching in China (where it already has 1.5 million users) and also in Japan. And this month, Cyworld is launching in the United States. (For the past eight months, a team in San Francisco has been working feverishly to adapt the product to a US audience.)


“This is hardly the only plus, however. For starters, Cyworld has 19.8 million wireless subscribers. And the company is gaining thousands more subscribers every day. In addition, Cyworld manufactures digital handsets, provides international calling services, and offers state-of-the-art satellite multimedia broadcasting. This is a stock that is poised to blast higher. And while we wait for it to move back to its 52-week high of nearly $28, we'll collect a 3.5% dividend too. So buy SK Telecom today at market. And place a protective stop at $17.50. If you prefer to play this one more aggressively, try the March $25 calls.”

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