Samsung Electronics (005930.KS)

Hard to know what 2024 landscape will look like in the western world. Hard times already felt in China and Asia, so this is a bit of a bet on Asia-Pacific. Mammoth company. Largest DRAM (memory) chip maker. Second to TSM as a foundry, 59% share vs. 13%. Samsung wants to double its share in 5 years. Great report. Yield is 2%.

No ADR. Trades on the London Stock Exchange. Buy in thirds at $1360, $1300, and $1200.

Semi-conductor market feeling lots of pain - resulting share price a good opportunity for investors.
Large diversified business with excellent product range.
Good long term prospects as demand for product not going away.
Very strong brand name.

Intel has been a mixed story. Lost its sheen. They've massively underperformed. Business is solid, but it may be dead money. He'd pass. Instead, look at Samsung, which has a ton of semiconductor exposure, a good suite of products, and an accessible valuation.

He bought it earlier this year and now wants to get out of it. Like Apple, this is so huge, it's better to buy one of the parts of this conglomerate. Because conglomerates like Apple and Samsung are so big, it's used as a pawn in these trade wars. So, buy a semis stock, for example.

(A Top Pick May 31/17. Up 3.92%.) She still likes this. It hasn’t done much in the last quarter even though their earnings season was very, very strong.

The largest smart phone manufacturer in Asia in terms of volume. More importantly, they now have the other side of the business, OLED screens, D RAM etc. Very inexpensive. Dividend yield of 1.7%. (Analysts’ price target is KRW3,000,000.)

They’ve had a number of negative things, such as exploding phones and a corruption probe. When looking at the financials, you see a big line item that comes from semiconductors, which is one of their big drivers. Ultimately though, that is a supplier to the phones, smart devices and a lot of other related paraphernalia. If there is a slowdown in the phone segment, then you definitely get a slowdown in semiconductors and their ability to use the semiconductor division to derive additional revenues through third-party relationships. It has been a fabulous stock, but at this point it is too rich.

They dealt with their exploding battery situation very well. Did a very big recall and a big write down, because they recognized that the risk to their reputation was too high. She likes this as it is no longer a cyclical business. A few years ago, this was basically smart phones or D-RAM memory. Today they are much more diversified. Also, corporate governance has improved. Dividend yield of 1.6%. (Analysts’ price target is 2,800,000 KRW.)

It is a great company with good exposure to the semi conductor business. If you are optimistic in both telecom and semiconductor industries, this one could do well for you. If it sold off he would get more interested.

They were a very secretive big conglomerate in Korea. Now, the son has taken over the leadership and it has become very different. Much more open and focused on return of capital. This used to be and still is mostly about their phones. Mobile devices are just over 50% of revenue, and they make the chips. The way they dealt with their Note7 problems was very impressive. They announced a global recall, no questions asked and gave you a little bit of a bonus back. They have already taken a $5-$6 billion of a write down, and there is probably a little more to come. They’ve also discontinued the line. This company generates cash flow. About 27% of their market cap is cash. Last year they generated roughly 5 trillion Won of cash flow, roughly $28 billion Canadian. They are spending just under 40% of it on a buyback this year. It is probably not going to grow that fast anymore, but now the D-RAM is growing very quickly because their competitors love their components. Very inexpensive. Pays a relatively attractive dividend for an Asian stock.

This has had a fabulous run, even adjusting for the Cdn$. The phone is the major driver of the asset, and the semiconductor business, which has a pretty positive outlook, in many cases as a loss leader cutting R&D for the phone segment. There are many cases where the phone companies are no longer around and this business could definitely come down. CEO is being investigated for bribery and corruption charges. He would wait for a pullback.

They’ve had their problems, but ultimately this is a really good company. A dominant player in telecom and semiconductors, and one can’t really ignore them. If it got cheap enough, this is something he would consider. He is starting to see signals coming out of management of improved corporate governance.