by Traders Reserve | March 29, 2013 8:04 am
Over the past several years, smartphones have become not just something cool to own, but a must-have digital accessory. In addition to traditional phone calls, these devices allow text messaging and e-mail communication, and perhaps more importantly, the smartphones of today provide you with a sort of mini-tablet computer. Indeed, larger screens and faster processors make smartphones the go-to device for social networking applications such as Facebook (NASDAQ:FB) and Twitter, as well as for navigation and mapping functions.
The strong demand from consumers for faster, bigger and better smartphones from Apple (NASDAQ:AAPL), Samsung, and Microsoft (NASDAQ:MSFT) has unleashed a virtual war between the biggest smartphone makers for market share, but just who is winning that war?
To find out, I looked at the latest smartphone industry survey conducted by 451 Research’s ChangeWave service.
According to the group’s December survey findings, there’s been an explosive wave of buying momentum catapulting Samsung to an all-time high in the North American smartphone market. “Consumer buying intent for Samsung smartphones has been extraordinary to start the year,” said Paul Carton, of 451 Research’s ChangeWave service. “Considering the Galaxy S III has been out for several months we’d normally expect a slowdown by now – but it’s still red hot,” added Carton. The December survey of 4,061 respondents also looked at mobile operating systems, and found a few other surprising results.
For investors, the battle for smartphone supremacy is an investable event—if you know which stocks stand to benefit most. Here are 5 stocks set to win the smartphone wars.
The logical choice for investors betting on the continued demand for Samsung smartphones is to buy Samsung shares. Unfortunately, it’s very difficult to own Samsung directly because it’s a South Korean company listed on the South Korean stock exchange. Also, there is no American Depositary Receipt, or ADR, that trades on a U.S. exchange.
For most investors, it’s just not practical to own Samsung directly. Although it is technically possible to buy the stock from a full-service brokerage, there are a lot of additional costs associated with the process.
I think the better way to gain exposure to Samsung shares is via the iShares South Korea (NYSE:EWY). This country-specific ETF is dominated by Samsung shares, and makes up about 22% of EWY. By comparison, the next highest allocation is Hyundai Motors, which represents just 5.3% of the fund. If you want to gain exposure to Samsung, and you want to play the Galaxy boom then a great way to do so is with EWY.
A smartphone like the red-hot Samsung Galaxy doesn’t do much good — nor much at all — without a great operating system, and it has just that in the Android OS. Of course, the Android isn’t a Samsung creation; it’s a Google (NASDAQ:GOOG) creation.
The leader in Internet search and advertising also is the company behind the Android, and every time someone buys a Samsung smartphone, or another smartphone that uses the Android OS, Google rings the register. If you’re an investor who wants to come out victorious on the smartphone wars, then buy what makes the popular Android-powered smartphones buy—and that’s Google.
Computer-networking equipment maker Aruba Networks (NASDAQ:ARUN) is certain to be a winner in the smartphone wars. That’s because Aruba makes the networking gear that permits companies to embrace what’s been called the “bring your own device” to work wave. This is where employees of a company are increasingly using their own smartphone and tablet devices and linking them up to corporate networks. To make this happen, you need specific networking gear, and that is precisely the stuff Aruba sells.
The company has seen strong earnings growth, and demand for its networking gear is expected to continue surging in 2013. That expected demand is due to the growth in usage of mobile and tablet devices by not just consumers, but by corporations. That growth potential is one big reason why Morgan Stanley just upgraded the stock to “overweight” from “equal weight,” while also raising its 12-month price target on the stock to $28 from $18.
One very interesting, and somewhat unexpected, finding in the ChangeWave smartphone survey was the potential breakthrough for what is often thought of as an “old guard” software firm, Microsoft (NASDAQ:MSFT). The company might be best known for its Windows PC operating system, but it’s quickly becoming a favorite in terms of customer satisfaction in the smartphone operating system market.
The survey results showed that users of the Microsoft Windows Phone 8 operating system said they were quite satisfied with the software. In fact, some 53% of Windows OS smartphone users reported they were “Very Satisfied” with the operating system. By comparison, this bested Google’s popular Android system, which came in with a Very Satisfied rating of 48%. It also easily bested the extremely old guard Research in Motion (NASDAQ:BBRY), which registered a 26% Very Satisfied rating for its OS. If this satisfaction rating stays high, it could be a much-needed shot in the arm for Microsoft’s revenue, and MSFT shares.
When it comes to customer satisfaction ratings, you can’t do much better than the 800-lb. gorilla in the smartphone space, Apple (NASDAQ:AAPL). In the ChangeWave survey, 71% of iPhone users said they were Very Satisfied with the iOS that powers their device. Coming out on top of a customer satisfaction survey is common for Apple, as its products engender fierce loyalty among owners. That loyalty has translated into Apple becoming one of the biggest corporate success stories of all time.
Now, lately the stock has been way off its all-time high set last September. But given the insatiable appetite for bigger and better smartphones, you can be certain that Apple has the intellectual power and the capital to come out with a new device to satiate consumer smartphone hunger.
Sure, Samsung has become the leader in this space of late, but according to ChangeWave’s Carton, “With this level of consumer interest, Apple is perfectly capable of producing a large-screen smartphone that’s virtually a tiny tablet – they could call it an ‘iTab’ – and have it on the shelves for the next Holiday season.”
If Carton is correct, then investors who get in on the recent pullback in AAPL shares could ultimately be the biggest winners in the smartphone wars.
Source URL: http://investorplace.com/2013/03/5-stocks-to-win-the-smartphone-wars-msft-aapl-bbry-arun-goog/
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