by Brad Moon | January 23, 2013 11:39 am
Apple (NASDAQ:AAPL) is one of the most popular stocks among tech investors — and investors in general — but there’s another big consumer electronics firm that can go toe-to-toe with Apple. In fact, it might well outperform Apple in 2013.
Competitor Samsung (PINK:SSNLF) puts up revenues in line with Apple’s. At 221,000 heads, it has more than three times the employees. It operates in many more markets than Apple does (besides computers and mobile, Samsung also makes home appliances, televisions, stereo equipment, computer chips, cameras and a host of other electronics). It’s already big in China. It’s making record profits — in Q3, Samsung’s earnings rocketed 91% year-over-year to $5.9 billion.
Samsung is hot — its forthcoming Galaxy S IV is hitting anticipation levels that used to be reserved for Apple’s iPhone — and its stock is hot, too, with shares gaining 30% to AAPL’s 12% in the past year.
Yet would-be American investors are feeling shut out of what could be the technology story for 2013.
That’s because the South Korean company’s stock isn’t listed on a major U.S. exchange. Yes, you can buy Samsung’s pink sheet-listed shares. But they’re going for north of $1,350 a pop (about triple AAPL’s price), sport a meager daily volume of roughly 150 shares and might even require additional charges just to trade, depending on your broker. So, expensive and illiquid — but sure, it’s an option.
As Jeff Reeves has pointed out, you also can invest in Samsung via ETFs heavily weighted in the stock, such as iShares MSCI South Korea Index Fund (NYSE:EWY), which currently dedicates 21.6% of its holdings to Samsung. Yes, you get exposure — but it’s also a play on 96 other stocks, not to mention, there’s ETF management fees, too.
So there’s two less-than-desirable ways to invest in Samsung. And don’t count on that changing anytime soon.
Samsung obviously hears the question “Why not list on NASDAQ or NYSE?” frequently. The company has an entire page on its website dedicated to the issue and the current options for foreign would-be investors. This is a long read that’s convoluted enough to require diagrams. And it’s pretty clear that U.S. just isn’t high on the company’s priority list, with a note that there’s “no plans to list Samsung stocks on any other exchanges at this time.”
In addition to its South Korean listing, Samsung stock already is offered as a Global Depositary Receipt (GDR) on the London and Luxemburg stock exchanges … so an eventual U.S. listing wouldn’t seem that farfetched.
However, European markets often are preferred over U.S. listings by foreign companies because it’s a less expensive and quicker way to broaden their investor base and access foreign capital. And considering Samsung now has plenty of capital (roughly $14 billion in cash), there’s little incentive in the near-term to jump through the additional hoops (such as filing annual reports that adhere to GAAP standards) and associated costs to gain an ADR listing in the U.S.
The only real pull remaining, then, would be the perceived prestige of being on the NYSE or Nasdaq, but Samsung doesn’t really need that, either.
So there you have it.
It’s not because of regulatory hurdles, legalities or any conspiracy to lock you out of a potential investment. Samsung is not intentionally making things difficult for U.S. investors; if anything, it’s displaying pragmatic indifference.
Thus, for the foreseeable future, you can buy a Samsung product at virtually any store in America … but to buy a chunk of the company, you’re going to need deep pockets, or a willingness to take on the risk of investing in other South Korean companies as well.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
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