We recently bought Nokia (NYSE:NOK) shares for long-term hold. There are many detailed arguments about why Nokia is a good investment in other articles; what tipped our scales was Nokia's history of turning things around and the aggressive pricing of the Lumia 920. $450 off contract for the top phone on AT&T (NYSE:T) is very competitive and almost half price of the top line Apple (NASDAQ:AAPL) iPhone.
Nokia has large revenue, a worldwide known brand, is in a growing industry, and has a history of turning around its business even if it means changing industry. Nokia's history started in 1865 when a mining engineer established a groundwood pulp mill in the town of Tampere, in southwestern Finland. Today, it is a long way from its origins. Nokia had a well-known wood and paper brand long before anyone heard about mobile phones. Then when analogue and then digital phones started becoming more popular, it decided to invest in a hand set business. In 1987, Nokia introduced one of the world's first handheld mobile phones. This allowed it to achieve the phenomenal growth from a Finish company to a global multinational. Later when the mobile industry became commoditized it fell behind its Chinese and Korean counterparts in the low end and Apple in the high-end smartphones.
Fast forward to today, and you can see it is in its DNA to take risks, with the exclusive focus on the Windows phone eco-system. The Windows 8 momentum, and Nokia's history tipped the risk reward ratio for us. Choosing Elop as a CEO may have been a mistake, but what is important is that Nokia is again trying a disruptive change. It may even enter the corporate tablet business. Putting this historical perspective into account, even with moderate success and avoidance of bankruptcy, it can return in access of 100% within 24 months. No other major brand can provide such return, with the exception of Research In Motion (RIMM), which I think is riskier. Microsoft has a higher chance of winning developers than RIM's Blakberry 10 OS. Further adding fuel to the value scenario is Nokia's patent portfolio, which eclipses Motorola in the field of mobile communications. Analysts have touted a value of >$4 just on the back of the patents.
For FIM investment house, Nokia's net cash and patent portfolio as well as its holdings in NSN and Navteq make one share in Nokia worth around four euros in total.
Historically the fact that Nokia is willing to change industry in pursuit of profits, makes Nokia a worthwhile turnaround story. Its successful fundraising also adds cash to the portfolio. Thus we are now long NOK for 5% of our portfolio.