Author Topic: SSNLF - Samsung Electronics  (Read 19788 times)

constructive

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SSNLF - Samsung Electronics
« on: November 11, 2013, 11:23:36 AM »
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.)


LC

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Re: SSNLF - Samsung Electronics
« Reply #1 on: November 11, 2013, 11:37:56 AM »
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?
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constructive

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Re: SSNLF - Samsung Electronics
« Reply #2 on: November 11, 2013, 11:51:32 AM »
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.

APG12

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Re: SSNLF - Samsung Electronics
« Reply #3 on: November 11, 2013, 01:21:04 PM »

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?

constructive

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Re: SSNLF - Samsung Electronics
« Reply #4 on: November 11, 2013, 01:58:43 PM »
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.

constructive

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Re: SSNLF - Samsung Electronics
« Reply #5 on: November 11, 2013, 02:18:04 PM »
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.

constructive

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Re: SSNLF - Samsung Electronics
« Reply #6 on: November 11, 2013, 05:47:12 PM »
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"

Liberty

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Re: SSNLF - Samsung Electronics
« Reply #7 on: November 28, 2013, 11:48:06 AM »
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."
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Nnejad

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Re: SSNLF - Samsung Electronics
« Reply #8 on: November 30, 2013, 12:07:59 AM »
Anyone run into any issues purchasing this? I've heard US retail investors may have difficulties trading Korean securities.

Liberty

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Re: SSNLF - Samsung Electronics
« Reply #9 on: January 06, 2014, 08:42:04 PM »
http://www.bloomberg.com/news/2014-01-06/samsung-profit-misses-estimates-as-high-end-handset-growth-slows.html

Quote
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.
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