Although Nokia stumbled briefly in 2004, its market share of the cell phone market has recently shot back up over 35%. This year, Nokia will sell 320 million phones. That’s more than one phone for every single person in the United States.
Nokia has outperformed the S&P by well over 20% in the last six months, and recently displaced GE as mutual fund giant Fidelity Magellan’s number #1 pick:
Here’s why I think Nokia’s current position offers the perfect opportunity for Global Bull Market Alert subscribers to enter this high-growth, high-octane global blue chip stock:
With new CEO Olli-Pekka Kallasvuo taking Nokia’s helm this week, Nokia is in the midst of redefining itself. It’s best to think of Nokia as part Apple (AAPL), part Dell (DELL). Ten years ago, Nokia’s biggest competitor was Motorola. Today, Kallasvuo views consumer electronics companies such as Apple and Sony as the Finnish giant’s biggest rivals. Nokia’s new N series, with each phone focusing on a specific feature — iPod style player, a camera phone, a Blackberry style e-mail device — is Nokia’s answer to Apple’s strategy of high-end, high-margin products. Thanks to this convergence, Nokia has become the world’s #1 manufacturer of cameras virtually overnight. The numbers bear out the success of this strategy: Nokia is the only cell phone manufacturer that has increased the average price of its handsets sold in the last quarter, thanks to more expensive multimedia phones.
But with its efficient logistics and huge volumes, today Nokia is more like Dell than Apple. Indeed, 70% of the cell phone industry’s growth is coming from developing economies. Nokia’s cheapest handsets already dominate BRIC countries like China, India and Brazil. Nearly 35% of Nokia’s total handset sales came from emerging markets.
By combining high-margin iPod style products like the N-series with a huge market share in entry-level phones of which it sells hundreds of millions a year, Nokia is locking in consumers across the entire value chain. The logic is simple but compelling. Once you start with a Nokia, you are more likely to stick with it. Compare Motorola’s one hit wonder strategy with the V3 versus Nokia’s integrated marketing strategy and it’s hard to remain unconvinced of its prospects.
Finally, as a Finnish company that collects revenue from over 100 nations in the world, Nokia is an ideal hedge against the declining dollar. The stock itself is Euro-denominated. So every time the dollar goes down, smile, because your Nokia shares just went up. And investing in Nokia’s far flung cell phone empire replicates Warren Buffett’s new strategy of hedging against the dollar’s decline by buying into companies with mostly non-dollar revenues.
Nokia’s biggest weakness? North America. In the U.S., Motorola still dominates with a 29% market share, compared with Nokia’s 18%. Not to worry. Kallasvuo has pledged to spend one week a month in the U.S. to have his hand on the pulse of trendsetting markets that gave products like the Apple iPod its iconic status.
So buy Nokia (NOK) at market today, and place your stop at $18.75. To play the options, buy the October 22.50 calls (NAYJX.X). A word of warning: Nokia is highly news-driven and can be notoriously volatile for a large-cap stock.
