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One of the stocks in my virtual portfolio is Nokia.
When I screen for technology/telecom stocks, quite often the telecom stocks come out looking much more attractive than the technology stocks. Then, when I make a virtual portfolio with the combined sectors, the telecom is overweighted and tech is underweighted. It gets a bit more interesting, as I find that many of the attractive telecom stocks are global companies that are involved with the emerging markets. So it's from my opinion, that perhaps a bit of international exposure would be a good idea, and if I'm feeling rather pessimistic of the economy, then perhaps a bit more international exposure is a very good idea.
So, I chose Nokia (NOK). I remember growing up as a kid and wearing Nokia boots. Then the Finns took those boots and they had boot throwing competitions. Then came the cellphones and Finns took those and started having cell phone throwing competitions. I wonder what NOK will make next, as I'm curious to see what the Suomalainens (Finn people) throw next.
Quant-wise, international telecom looks nice. In particular NOK recently had some nice earnings, as they beat the analysts and their EPS momentum continued. It was nice to note that the MSN 'StockScouter' summary gave them a score of 9, and they received a Fundamental score of 'B', and a Valuation score of 'A'. I like that. I thought it was also nice to see that their PE was at 15, the forward PE was at 20, the gross margins were at 32%, problems at Motorola helped them, and their market share grew from 36% to 38%. Nice.
DCF
I ran a DCF of NOK and came up with about $33. My EPS estimates matched those of the analysts, and with my terminal ROE at 8% and sales growth at 5%, and I got an estimate at around $33. That's not that far off from the current price, but I think it's feasible that it could gain at least 10% during the course of the competition.
Risks
I might be culturally biased. Currency sensitivity and corporate governance are possible risks, as it's a global stock. With growth and nice margins, can they keep it up?
Saunas
As it's a Finnish stock, you need to watch out for those naked Finns running into saunas with their cellphones. Don't even get me started on how much hotel saunas suck. Folks are so concerned about lawsuits and people electrocuting themselves, that their saunas are always cold and no one is ever able to throw water on the rocks. Come on! The stove is probably made by someone in Sweden/Finland. No one in their right mind would make a stove you can't throw water on! Very infrequently have I ever had a decent sauna in a hotel. I can't believe how many of the fancy 4-5 star hotels can't seem to get their act together and make a decent one. Want to see how it should be done in a hotel? Go to the Tuckamore Lodge http://www.tuckamorelodge.com
in Newfoundland. Check out the moose, whales and icebergs in the area and then relax in a their sauna. They have an electric one, but more importantly they have a nice wood burning sauna that you put the wood in. I sat in there when I had it stoked at 125 celsius (255 farenheit) Now that's what I would pay nice $$ for. Note to Four Seasons, Fairmont, Ritz Carltons of the world -- go check it out. Make a sauna like that in your place and I might just book more than one night, and if you happen to be a hotel with a nice sauna, let me know -- I'd like to drop by sometime and stay the night.
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