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Maikelmike's  Instablog

Maikelmike
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Graduate of Stockholm University, Masters degree in Finance, Second degree bachelor in Economics, Focusing primary on writing analysts on Telecom companies but may also on occasions provide articles on the stock market as a whole.
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  • Invest In What You Know

    One important part when analyzing stocks - that is often being overlooked - is the part comparing the particular company's product against its competitors. How does example the Lumia line stand against competitor products such as the Samsung Galaxy III or Iphone 5 ?. This concept is very important at least when we talk about a highly innovative dependent industry, such as the telecom.

    One of my all-time favorite stock pickers is the former Magellan Fund manager Peter Lynch. He popularized the concept of" investing in what you know". This concept implies that every investor - Professional or amateur - should place his money in industries or companies that he understands. Other famous investors' following this concept is Warren Buffet, who simply does not invest in tech-stocks because he does not understand them. This important but simply concept is however often overseen by most of investors. Most investors wants to make fast money and falls into the trap of investing in companies they do not understand, companies that are dubbed as the new rockets on the market or the new IBM´.

    Unfortunately, it seems that this concept is also being overseen by most so-called professional analysts.

    For not a long time ago, I was reading a sell recommendation on the Nokia stock. This recommendation contained as usually some quantitative arguments on hypothetical situations leading up to their sell recommendation. So far so good.

    However this recommendation also tried to back its recommendation by providing some negative comments about the hardware specs. of Lumia 920. It stated simply that the 920 was lacking behind its competitors in hardware specs. Worth noting is that this recommendation was coming from one of the biggest and well-known investment banks in the world. I stop to read it immediately.

    How long had this analyst been researching? I do not know.

    Did this analyst know Nokia? I do not think so.

    Had this analyst been investigating the competitors' products? I do not think so.

    Had this analyst been researching the industry he was supposed to analyze or the company he was recommending people to sell, he would have known that the Lumia 920 either possess better or on par hardware specifications as its competitors. However this analyst took the easy way, and overlook the important concept of research.

    --

    One other important concept is to look for how the products are received by the customers. I like to bump into the review charts on Amazon wireless from time to time;

    Nokia has 4 mobiles in the top 5, 7 in the top 10 and 9 in the top 20.

    (click to enlarge)

    Disclosure: I am long NOK.

    Jan 29 10:19 AM | Link | 4 Comments
  • Nokia Liquid Assets Not Appreciated

    As we all know Nokia last week revealed its corporate earnings for the fourth quarter - respective for the whole year of 2012. After having reported losses for seven consecutive quarters the Finnish mobile kings were once again able to show green in the bottom.

    Despite this, the stock has fallen dramatically since the earnings call last week. After having risen with nearly 160% percent since it hit the bottom in July 2012, the stock has just in the last couple of days fallen with more than 10%. The explanations to this decline are many, as it usually tends to be. One explanation relates to the decision of not handing out any dividend this year. Although this was rather remarkable to investors - as it was the first time in its history the company had decided to not give out any dividends - it should however not come as a shock for most people knowing the company and the industry it acts in.

    The telecom industry is as we all know a highly competitive industry. Cash is therefore in this particular industry a highly competitive asset, and maybe the most important one. Cash usually enables companies to take on more risk in its operations but also to become more flexible, both in terms of marketing and innovation, something that is more important in an ever-changing telecom industry.

    Looking at the report from last quarter we see that Nokia Corporation strengthened its cash position by approximately 800 million EURO (sequentially). We also see that the group ended 2012 with a strong balance sheet and solid cash position. The gross cash was 9.9 billion EUR and the net cash was 4.4 billion EUR.

    This news has somehow been disregarded by the stock market. The company strengthened its cash position this quarter, however the stock yet declined. Put it in relation to the prior concerns relating to its liquid assets and cash burning rate and I would suggest that the market have punished the Nokia stock.

    Disclosure: I am long NOK.

    Jan 29 7:35 AM | Link | Comment!
  • Nokia Q4 Earnings A Plus

    As we all know Nokia last week revealed its corporate earnings for the fourth quarter - respective for the whole year of 2012. After having reported losses for seven consecutive quarters the Finnish mobile kings were once again able to show green in the bottom.

    Despite this, the stock has fallen dramatically since the earnings call last week. After having risen with nearly 160% percent since it hit the bottom in July 2012, the stock has just in the last couple of days fallen with more than 10%. The explanations to this decline are many, as it usually tends to be. One explanation relates to the decision of not handing out any dividend this year. Although this was rather remarkable to investors - as it was the first time in its history the company had decided to not give out any dividends - it should however not come as a shock for most people knowing the company and the industry it acts in.

    The telecom industry is as we all know a highly competitive industry. Cash is therefore in this particular industry a highly competitive asset, and maybe the most important one. Cash usually enables companies to take on more risk in its operations but also to become more flexible, both in terms of marketing and innovation, something that is more important in an ever-changing telecom industry.

    Looking at the report from last quarter we see that Nokia Corporation strengthened its cash position by approximately 800 million EURO (sequentially). We also see that the group ended 2012 with a strong balance sheet and solid cash position. The gross cash was 9.9 billion EUR and the net cash was 4.4 billion EUR.

    This news has somehow been disregarded by the stock market. The company strengthened its cash position this quarter, however the stock yet declined. Put it in relation to the prior concerns relating to its liquid assets and cash burning rate and I would suggest that the market have punished the Nokia stock.

    Fourth quarter 2012 highlights:

    Nokia Group non-IFRS EPS in Q4 2012 was EUR 0.06; reported EPS was EUR 0.05.

    - Nokia Group achieves underlying operating profitability, with Q4 non-IFRS operating margin of 7.9%.

    - Nokia Group strengthened its net cash position by approximately EUR 800 million sequentially, of which

    approximately EUR 650 million was generated by Nokia Siemens Networks.

    - Devices & Services Q4 non-IFRS operating margin improved quarter-on-quarter to 1.3%, due to an increase in

    gross margin as well as a decrease in operating expenses.

    - Nokia Siemens Networks non-IFRS operating margin improved quarter-on-quarter and year-on-year to a

    14.4% in Q4, the highest level of underlying operating profitability since its formation in April 2007, primarily

    due to an increase in gross margin.

    Full year 2012 highlights:

    Nokia Group full year 2012 non-IFRS EPS was EUR -0.17; reported EPS was EUR -0.84.

    - Nokia Group achieves underlying operating profitability, with full year 2012 non-IFRS operating margin of

    0.4%.

    - Nokia Group ends 2012 with a strong balance sheet and solid cash position. Gross cash was EUR 9.9 billion and

    net cash was EUR 4.4 billion, after incurring cash outflows related to restructuring of approximately EUR 1.5

    billion and dividend payment of approximately EUR 750 million.

    - To ensure strategic flexibility, the Nokia Board of Directors will propose that no dividend payment will be made

    for 2012 (EUR 0.20 per share for 2011). Nokia's Q4 financial performance combined with this dividend proposal

    further solidifies the company's strong liquidity position.

    Disclosure: I am long NOK.

    Jan 29 7:33 AM | Link | Comment!
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