Sometimes stocks fall into obscurity for a long while then burst onto the scene in a big way. Nokia (NYSE:NOK) last year dipped into levels dating back 23 years. That’s not stuff that get investors excited but this all changed this year. NOK stock recently shot up to the moon and out of nowhere.
Today we will discuss if it’s worth owning for the remainder of 2021 or not. Keep in mind that there isn’t one right answer to fit all investors. We don’t all have the same time frame or risk tolerances. But there are common themes and absolute realities that span the gamut.
A good investment usually starts with a viable thesis. Betting on the upgrade to 5G was supposed to be big last year. Alas, Covid-19 had other plans for us. It is reasonable then to assume that 2021 will be when this migration takes hold. All major telecommunication companies have it and are spending heavily advertising it.
The growth in the 5G business should be huge and Nokia will have a sizable chunk of it. Don’t take my word for it, it’s the seventh-largest stock in the Defiance 5G Next Gen Connectivity ETF (NYSEARCA:FIVG).
We’ve waited so long for 5G that I fear there will be a let-down effect. But according to Nokia’s website I shouldn’t worry too much. By 2030 they believe it “will deliver $8 trillion in value around the world.”
A carrot this big is reason enough for investors to own NOK stock at least through 2021. They are ready to capture the commercial and retail sides of the expansion when it happens.
Trade NOK Stock in the Meantime
For that purpose, buy-and-hold works just fine. But active investors can trade around the big swings in the meantime. It’s a great feeling to catch a trade at the exact right time. Back in January of 2020 and after Nokia had rallied 25%, I warned against staying long. That marked an exact top before the massive slide into the pandemic lows. NOK immediately fell 8% then bounced one last time before the crash. From top of my note to the March bottom it lost 44%.
Luckily for the bulls it recovered all of it and then some by September. That rally also failed and the stock fell below $3.50 per share. Although my article from January 2020 had a bearish tone, I promise you I have nothing against the stock. In fact, last November, I wrote that Nokia stock was poised for a surprise comeback in 2021. What happened next was astonishing. From the low of my note to the January high it rallied 167%.
So now what? I made the point earlier that it’s reasonable to expect more upside as 5G rolls out. There is nothing imminent but what happened recently leaves me wondering if it could happen again. So it’s worth it to hold some shares for another month. The company survived an extremely tough year so it’s earned some benefit of doubt. The chart is a complete mess because of that recent mega-spike.
What is clear is that it has support under $4 per share. This is comforting for shareholders as they wait for the swing higher.
The profit and loss statement shows growth but nothing flamboyant yet. On the other hand, the NOK stock price-to-sales is 0.92x. This means that investors don’t even give it credit for one year worth of sales. Those investors are harder to spook on tough days. You can’t disappoint someone that doesn’t have a lot of expectations.
Consequently, time is on the side of the long term investor. I should not make it my entire thesis to hold it for a super-spike. This one happened because of a particular situation stemming from the shenanigans with GameStop (NYSE:GME).
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.