How To Invest In Samsung Without Investing In Korea

by: Plan B Economics

Next to Apple (NASDAQ:AAPL) Samsung is the darling of the global communications hardware industry. Most reading this article may already be convinced of Samsung's merits, but for those who are new here are a few key stats (source: Yahoo! Finance):

1. Year-over-year quarterly revenue growth: 20.70%

2. Year-over-year quarterly earnings growth: 50.20%

3. ROA: 8.71%

4. ROE: 17.26%

5. Profit margin: 9.5%

6. Trailing P/E Ratio: 11.36x

7. Price-to-book: 1.74

The point of this article, however, isn't to dive deep into Samsung's investment characteristics. No, this article is about access.

You see, Samsung is not listed on a major US exchange making it very difficult for US investors to buy the stock. (Note: Samsung is listed on the US OTC market (OTC:SSNLF), but with a 3mth average daily trading volume of 80 shares and a share price that sometimes doesn't change for long periods of time, I believe the price discovery process is less efficient than what I would like to see. Also, with the stock not trading at all for periods of time I believe the ability to efficiently enter and exit a position is restricted. For these reasons, I prefer to avoid Samsung's US OTC listing. More sophisticated/active traders may be more comfortable buying Samsung on the OTC market.)

Most investors gain exposure to Samsung through ETFs that invest in the Korean market, such as the iShares MSCI South Korea Index Fund (NYSEARCA:EWY) which has 22% of its assets invested in Samsung. However, there are many investors who want exposure to Samsung but want limited exposure to the South Korean market. Reasons may include South Korea's proximity to unpredictable North Korea or little desire in the remaining MSCI South Korea constituents (e.g. Hyundai, POSCO, Kia Motors).

Fortunately, there are alternative ways to get access to Samsung without investing in the entire South Korean stock index (note: by default anyone exposed to Samsung will have some exposure to Korea since it is a Korean company):

1. iShares MSCI All Country Asia Information Technology Index Fund (NASDAQ:AAIT)

This ETF holds 18% of its assets in Korea's Samsung. However, the remaining assets are not isolated to Korea. In fact, over 73% of the fund's assets are spread across other Asian countries like Japan, Taiwan, China and India.

2. iShares MSCI ACWI ex US Information Technology Sector Index Fund (NYSEARCA:AXIT)

According to iShares, this ETF holds just under 15% of its assets in Samsung. Its remaining assets are invested outside of South Korea with its assets spread across various countries such as Japan, Taiwan, Germany, China and Sweden.

3. SPDR S&P International Technology Sector ETF (NYSEARCA:IPK)

IPK is more than 22% invested in Samsung. Over 74% of this technology fund is spread across non-Korean countries like Japan, Germany, UK, France and Sweden.

Outside of these three ETFs there are ways to invest in Korea through various global, emerging market and technology ETFs. However, AAIT, AXIT and IPK are three non-country-specific ETFs that provide a meaningful Samsung weight (i.e. >10%) for those looking for more targeted (i.e. less diversified) exposure.

Disclosure: I am long AAPL.

Additional disclosure: Data source: iShares, State Street Global Advisors, Yahoo! Finance. This is not advice. While the author makes every effort to provide high quality information, the information is not guaranteed to be accurate and should not be relied on. Investing involves risk and you could lose all your money. Consult a professional advisor before making any investing decisions.