constructive Posted November 11, 2013 Share Posted November 11, 2013 I think it's time to open up an eastern front in the ongoing Apple/Blackberry flame war. Samsung trades at just 7.6x trailing earnings, 5.6x cash flow, 10.8x free cash flow and 1.45x tangible book. 20% of their market cap is in cash and short term investments and 45% is in current assets. As noted in the Apple thread, they are a formidable competitor in mobile devices and chip manufacturing among other things. Margins and ROI are high (not as high as Apple but comparable to Qualcomm, Intel, Taiwan Semi and others). The fumbling strategy of many competitors (HTC, LG, Nokia/Microsoft, Motorola/Google and Blackberry) has likely contributed to their dominance. But I believe Samsung has built a substantial competitive moat and has the scale, technical expertise, strategy, etc. to continue to grow and rake in profits. One reason for the low multiple is likely the dynamics of the Korean exchange, where Samsung is by far the largest company. It is a fairly closed market without much foreign capital at work. And given their size, indexes and money managers probably hesitate to overweight them, keeping the price low. http://markets.ft.com/research/Markets/Tearsheets/Summary?s=A005930:KSC The UK and German listed GDRs are liquid, but my understanding is that individual US investors are not allowed to buy GDRs. SSNLF on the pink sheets is less liquid but appears to be improving. Another option is buying Korean shares, through Etrade Korea or another local broker. You wouldn't think it would be so difficult to buy a $170B market cap company which files its financial statements in English. http://markets.ft.com/research/Markets/Tearsheets/Summary?s=SSNLF:PNK (Unnecessary disclosure: I own shares of AAPL and have never owned an Apple, Samsung or Blackberry product.) Link to comment Share on other sites More sharing options...
LC Posted November 11, 2013 Share Posted November 11, 2013 Samsung came in and copied apple to the greatest extent and with the lowest costs. Eventually as you say the other tier 2 players dropped off. Where is the moat, and what is there to prevent another player doing to Samsung exactly what Samsung did to Nokia, blackberry etc? Link to comment Share on other sites More sharing options...
constructive Posted November 11, 2013 Author Share Posted November 11, 2013 Samsung came in and copied apple to the greatest extent and with the lowest costs. Eventually as you say the other tier 2 players dropped off. Where is the moat, and what is there to prevent another player doing to Samsung exactly what Samsung did to Nokia, blackberry etc? Vertical integration, scale, financial strength, technological expertise and brand. So what if they copied Apple? That angle is way overplayed. Now Android and Samsung are more grown up and phone development is not all a one way street. Link to comment Share on other sites More sharing options...
APG12 Posted November 11, 2013 Share Posted November 11, 2013 Vertical integration, scale, financial strength, technological expertise and brand. So what if they copied Apple? That angle is way overplayed. Now Android and Samsung are more grown up and phone development is not all a one way street. It's always easier to be a bear than a bull but I just don't see how any of those are moats. The Samsung brand is essentially non-existent, in my opinion. How many of those strengths did BBRY have 5 years ago? Value investors are continually shocked by the speed at which technology changes. It seems like everyone throws around the word 'moat' today. Just because a brand is recognizable doesn't mean the company has a moat. Of course you can make money investing in tech but it's a race with four foot hurdles. There are 2 foot hurdles out there so the most important question is, why bother? ??? I guess this gets back to a question I have about some threads on this board. Why does everyone want to argue about these marginal situations where the value is completely unclear because both sides have valid points? Link to comment Share on other sites More sharing options...
constructive Posted November 11, 2013 Author Share Posted November 11, 2013 One attraction of the technology sector is that winners can win very big. The potential for high growth, margins, and return on invested capital is better than in many other sectors. There is a tradeoff in high reward vs intense competitive risks. I guess this gets back to a question I have about some threads on this board. Why does everyone want to argue about these marginal situations where the value is completely unclear because both sides have valid points? There is something to argue about in almost every situation. Obviously what appears marginal to you may not appear marginal to other people. And strict Graham or Buffett philosophy is not the only way to approach the market. Link to comment Share on other sites More sharing options...
constructive Posted November 11, 2013 Author Share Posted November 11, 2013 I appreciate the idea that tech stocks are too unpredictable. But I would argue that dominant, high growth, multiple product category tech stocks trading at very low earnings multiples are not as unpredictable as many value investors seem to think. For most of the past century, dominant high tech companies have traded at 30x earnings or more. In that kind of pricing environment no wonder Buffett avoided investing in technology, and in this kind of pricing environment no wonder he has bought a huge stake in IBM. Link to comment Share on other sites More sharing options...
constructive Posted November 12, 2013 Author Share Posted November 12, 2013 Some recent news: http://www.reuters.com/article/2013/11/06/us-samsung-investment-idUSBRE9A500U20131106 "Lee said the $50 billion war chest was being prepared for "significant investment" in strategic technologies, mergers or acquisitions, suggesting the company could loosen its purse strings as it chases the next big thing in mobile technology. "I know we have been somewhat conservative in M&A but it may be different in the future. Based on this, I don't believe the current level of net cash balance is excessive," he said." http://www.nytimes.com/2013/11/06/technology/samsung-takes-steps-to-lift-stock-price.html "Our management feels that our current price-to-earnings multiple does not fully reflect our profit growth and our leadership position in the I.T. industry" "Mr. Lee said Samsung was also considering another step, a listing of American depositary receipts" Link to comment Share on other sites More sharing options...
Liberty Posted November 28, 2013 Share Posted November 28, 2013 http://finance.yahoo.com/news/samsungs-marketing-splurge-doesnt-always-210653378.html "Samsung is expected to spend more on ads and marketing this year than the price paid by Google for Motorola." Link to comment Share on other sites More sharing options...
Nnejad Posted November 30, 2013 Share Posted November 30, 2013 Anyone run into any issues purchasing this? I've heard US retail investors may have difficulties trading Korean securities. Link to comment Share on other sites More sharing options...
Liberty Posted January 7, 2014 Share Posted January 7, 2014 http://www.bloomberg.com/news/2014-01-06/samsung-profit-misses-estimates-as-high-end-handset-growth-slows.html Operating profit was 8.3 trillion won ($7.8 billion) in the three months ended December, the Suwon, South Korea-based company said in a statement today. That compares with profit of 9 trillion won a year earlier, according to data compiled by Bloomberg. Sales of Samsung’s flagship Galaxy S4 have slowed amid the releases of the iPhone 5s and 5c, and competition from Chinese makers selling handsets for as low as $100. Link to comment Share on other sites More sharing options...
Guest valueInv Posted January 7, 2014 Share Posted January 7, 2014 Highlight of CES today: http://www.bloomberg.com/video/director-michael-bay-s-meltdown-during-ces-event-Oz_0SKa6S8CRvpcHlWJkAw.html Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 7, 2014 Share Posted January 7, 2014 Samsung: Unpleasant surprise http://www.ft.com/intl/cms/s/3/9d4a4080-7746-11e3-a253-00144feabdc0.html#axzz2peR8ivRx OK, whodunnit? Was it the won, with its export-damping strength? Has the world stopped buying new smartphones? Was last year’s turnround in memory chips really just another false dawn in a historically disastrous industry? Samsung Electronics presumably has a good idea why it just missed forecasts by almost a fifth, but it is not saying. This is frustrating. Samsung is the Asian tech giant that everyone loves, or at least they did. A higher proportion of analysts rate it a buy – 90 per cent, according to Bloomberg – than do those who cover Apple, Google, Facebook or any similarly sized Asian company. It also trades on just seven times its expected earnings, half the level of Apple. In Asia, it trumps only the poor ratings of China’s state-owned megabanks. That low valuation is partly due a discount attached to Samsung’s being part of a family-controlled chaebol and, more prosaically, to the fact that its one-fifth weighting in South Korea’s benchmark Kospi index means that single-stock limits imposed on many fund managers force them to be underweight the company. Nomura’s expectation, expressed last month, that Samsung would move in 2014 towards becoming a value stock with still-healthy growth and higher payouts is typical of the market view. That makes Tuesday’s short statement, which forecast Won 8.3tn fourth-quarter operating profit, the more disappointing. Expectations were for something nearer Won10tn, roughly in line with the third quarter, as better chip profits compensated for slowing premium smartphone sales. The vast majority of Samsung’s sales are overseas so the won will probably shoulder much of the blame, alongside some one-offs. All will be revealed later this month at its full presentation. In the meantime, Samsung’s fans can chalk up unhelpfully brief disclosures as another reason why their darling trades at such a discount. Link to comment Share on other sites More sharing options...
constructive Posted January 7, 2014 Author Share Posted January 7, 2014 Anyone run into any issues purchasing this? I've heard US retail investors may have difficulties trading Korean securities. SSNLF isn't available through IB or Fidelity, at least without an expensive broker assisted trade. Can anyone confirm other brokers that carry it? Is it DTC eligible? I haven't had much experience with unsponsored ADRs. Link to comment Share on other sites More sharing options...
yitech Posted January 7, 2014 Share Posted January 7, 2014 Anyone run into any issues purchasing this? I've heard US retail investors may have difficulties trading Korean securities. SSNLF isn't available through IB or Fidelity, at least without an expensive broker assisted trade. Can anyone confirm other brokers that carry it? Is it DTC eligible? I haven't had much experience with unsponsored ADRs. GDRs are trading in London Exchange (LSEIOB1) through IB: SMSD (preferred) and SMSN (common). Preferred is currently trading at around 3/4 of common. Link to comment Share on other sites More sharing options...
constructive Posted January 7, 2014 Author Share Posted January 7, 2014 Anyone run into any issues purchasing this? I've heard US retail investors may have difficulties trading Korean securities. SSNLF isn't available through IB or Fidelity, at least without an expensive broker assisted trade. Can anyone confirm other brokers that carry it? Is it DTC eligible? I haven't had much experience with unsponsored ADRs. GDRs are trading in London Exchange (LSEIOB1) through IB: SMSD (preferred) and SMSN (common). Preferred is currently trading at around 3/4 of common. Yes, but according to Samsung, JPMorgan and other sources, US retail investors aren't allowed to buy GDRs. Link to comment Share on other sites More sharing options...
yitech Posted January 8, 2014 Share Posted January 8, 2014 Anyone run into any issues purchasing this? I've heard US retail investors may have difficulties trading Korean securities. SSNLF isn't available through IB or Fidelity, at least without an expensive broker assisted trade. Can anyone confirm other brokers that carry it? Is it DTC eligible? I haven't had much experience with unsponsored ADRs. GDRs are trading in London Exchange (LSEIOB1) through IB: SMSD (preferred) and SMSN (common). Preferred is currently trading at around 3/4 of common. Yes, but according to Samsung, JPMorgan and other sources, US retail investors aren't allowed to buy GDRs. OK. I am not based in US so wasn't aware of that. Global Depositary Receipts (GDRs): A Primer https://wwss.citissb.com/adr/common/file.aspx?idf=1525 "GDRs are usually offered to institutional investors through a private offering, in reliance on exemptions from registration under the Securities Act of 1933.These exemptions are Regulation S (Reg. S) for non-U.S. investors, and Rule 144A for U.S. investors that are Qualified Institutional Buyers (QIBs)." Link to comment Share on other sites More sharing options...
DCG Posted January 8, 2014 Share Posted January 8, 2014 I like the comment on Wired regarding Samsung pushing their curved TVs at CES: "People that live in geodesic domes are so stoked for curved UHD TVs". Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 9, 2014 Share Posted January 9, 2014 http://video.cnbc.com/gallery/?play=1&video=3000233698 Samsung CEO on CNBC Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 17, 2014 Share Posted January 17, 2014 https://www.npd.com/wps/portal/npd/us/news/press-releases/apple-and-samsung-grow-to-represent-68-percent-of-smartphones-owned-in%20the-u-s-according-to-the-npd-group/ Apple and Samsung Grow to Represent 68 Percent of Smartphones Owned in the US, According to The NPD Group Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 24, 2014 Share Posted January 24, 2014 Samsung Electronics fourth-quarter profit sags http://www.reuters.com/article/2014/01/24/us-samsung-earnings-idUSBREA0M25A20140124 Link to comment Share on other sites More sharing options...
thelads Posted January 24, 2014 Share Posted January 24, 2014 Hi, For anyone interested - you may want to look @ the pref shares for Samsung. They trade at a 25% discount to the common. with the amount of cash on the balance sheet and relatively little debt (I think net cash is now north of 40BN WON) it has a big impact on the EV. If you buy via the pref share (which is the same position as the common but with a) no voting right and b) a higher dividend - though non cumulative) you are buying @ less than 2x EBITDA/EV and under 3x FCF to EV. Kind of amazing no? Link to comment Share on other sites More sharing options...
Guest valueInv Posted January 24, 2014 Share Posted January 24, 2014 Hi, For anyone interested - you may want to look @ the pref shares for Samsung. They trade at a 25% discount to the common. with the amount of cash on the balance sheet and relatively little debt (I think net cash is now north of 40BN WON) it has a big impact on the EV. If you buy via the pref share (which is the same position as the common but with a) no voting right and b) a higher dividend - though non cumulative) you are buying @ less than 2x EBITDA/EV and under 3x FCF to EV. Kind of amazing no? Lets say that Samsung's earnings drop 10% for each of the next 3 years. How would the preferreds behave? Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 16, 2014 Share Posted February 16, 2014 Samsung's World of Possibilities Phone Giant Stands to Benefit From Industry Shake-out http://online.wsj.com/news/articles/SB10001424052702304434104579379460104418356?mod=WSJ_hps_MIDDLE_Video_Top Link to comment Share on other sites More sharing options...
gokou3 Posted February 16, 2014 Share Posted February 16, 2014 IB can accept korean stock orders. 5930 for common and 5935 for preferred. Whats the yield on the preferred and does the security behave like typical preferred in the US? Link to comment Share on other sites More sharing options...
muscleman Posted February 16, 2014 Share Posted February 16, 2014 IB can accept korean stock orders. 5930 for common and 5935 for preferred. Whats the yield on the preferred and does the security behave like typical preferred in the US? I use IB, and I know they cannot trade korean stocks. Are you talking about single stock futures? IB can do that. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now