In just a couple of days, South Korean electronics maker Samsung will be releasing the latest generation of its über-popular smartphone, which it is calling the Galaxy S IV. This smartphone has really become popular over the past year, and it’s quickly replacing Apple’s (NASDAQ:AAPL) iPhone as the coolest kid on the smartphone block.
The company’s new flagship device is rumored to have a huge, 5-inch high resolution screen, a 13-megapixel camera, a much faster processor, and of course, the latest iteration of Google’s (NASDAQ:GOOG) Android operating system.
For traders, the evidence of Samsung’s recent appeal can be seen via the plunge in AAPL shares and the spike in GOOG. And while Google is a great stock, it’s not a pure play on Samsung. For that, you have to own the company’s shares directly. Unfortunately, there are a lot of issues with owning Samsung, as it is not really tradable on a U.S. exchange. To get to Samsung’s stock directly, you have to be in a position to buy stocks on the South Korean exchange.
For most traders, the process is too much of a hassle. It’s also not a very liquid play, as it’s hard to buy and sell this stock quickly with just a few mouse clicks. It’s also costly, as brokerage firms normally charge a high fee to trade stocks on foreign exchanges.
Click to EnlargeThere is, however, a way to get a lot of exposure to Samsung, as well as exposure to many other top-quality South Korean stocks, and that is via the iShares South Korea Index Fund (NYSE:EWY).
This exchange-traded fund (ETF) boasts Samsung shares—the ones that trade on the South Korean exchange—as its top holding. This one company makes up more than 22% of EWY. By comparison, the next highest allocation is Hyundai Motors, which only represents 5.3% of the fund.
For traders, the incredibly high allocation to Samsung makes EWY a fantastic way to play the Galaxy boom. The ETF is traded on the NYSE, and it is extremely liquid. That means you can get in and out of this fund whenever you want, and close to the current trading price. Perhaps most importantly, trading costs are minimal.
Technically speaking, we’ve seen a pullback in EWY in March, and the fund is well off the 52-week high it made at the beginning of the year. But if the Samsung Galaxy S IV is as big of a hit as the tech-savvy buzz merchants are predicting, then I think EWY will see a lot of buying in the weeks and months to come.
I suspect we could easily see a 10-15% surge in the shares over the next two months. Based on the current price of $59.86, that would put the upper end of that price target at approximately $68.84.
At the time of publication, Jim Woods did not hold a position in any of the stocks mentioned here.