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Forget Apple – Here’s How to Buy a Slice of Samsung

Full disclosure: I am long Apple (NASDAQ:AAPL) and I’m sticking with the stock, even though supply concerns and an earnings slowdown have weighed on shares.

But I’m also always looking for the next big thing, and right now Samsung is an intriguing bet in the consumer electronics space.

The only problem is actually buying this stock. It trades in Korea and London … but in the U.S. the only direct exposure is the pink sheets via Samsung Electronics (PINK:SSNLF) that trades for a staggering $1,250. Even more troubling: There are days the company doesn’t trade a single share — with average volume around 20 shares or so per session!

Thankfully, there are a few workarounds. But for starters, let’s discuss why anyone would want to buy Samsung in the first place.

Samsung earnings just hit a new record with roughly $6 billion in net profit for its most recent quarter ending Sept. 30 — up 91% from the previous year’s numbers and handily topping forecasts. Margins were robust on mobile devices like its Galaxy tablet and smartphone line, plus it has worked out the kinks in a troublesome TV and computer screen business. Samsung also is now the third-largest mobile phone manufacturer in the world, moving some 56.3 million handsets from July through September.

The company has a market cap of $178 billion, which would make it the No. 5 tech stock on Wall Street were it listed on a major U.S. exchange — behind Apple, Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM), and in front of Oracle (NASDAQ:ORCL) and Amazon (NASDAQ:AMZN).

It also has some powerful consumer appeal, with existing products building the company’s brand and newer products like its $249 Chromebook building nice buzz ahead of the holidays.

There’s a lot to like here … but again, how do you get into Samsung stock?

I would steer clear of the pink sheet-listed shares because that kind of illiquid investment is just crazy. What happens if you want to sell on a day when literally nobody is placing an order to buy? Even if you’re smart enough to avoid placing a market order, there still is going to be a mess on the pricing front. And God forbid you ever need to sell quickly and get stuck in this situation.

As a result, I’d recommend ETFs with major Samsung holdings. The massive market capitalization of this company makes it an overweight holding in cap-weighted indices — much in the way that Apple can be a huge chunk of domestic tech ETFs as a result.

The three big players in Samsung right now are:

iShares MSCI South Korea Index Fund (NYSE:EWY): This iShares fund is 22.1% weighted in Samsung Electronics right now. There’s also a 5.9% stake in Hyundai — another Korean stock that is logistically challenging for investors to buy, if you’re interested in that, too. Just remember that, as the name implies, this fund is focused largely on South Korea. Any geopolitical unrest in the region or localized economic turmoil could have a significant impact on your holdings, even if Samsung is looking decent. This South Korean ETF is up just shy of 10% year-to-date in 2012.

The iShares MSCI All Country Asia Information Technology Index Fund (NASDAQ:AAIT) has 18.6% exposure to Samsung, and is a good alternative if you’re prefer to play the sector instead of the region. Top holdings after Samsung include big-name tech stocks like Taiwan Semiconductor (NYSE:TSM) at almost 10% and Canon (NYSE:CAJ) at 5.3%.

Last but not least, the iShares S&P Asia 50 Index Fund (NYSE:AIA) is 13.4% invested in Samsung, making it the No. 1 holding here, too. Next in line are state-run banking giant China Construction Bank at 5.6% and telecom China Mobile (NYSE:CHL) at 5.4%.

Various other funds have exposure to Samsung under 10%, but these could be your best way to own the company — even if they aren’t a pure play on Samsung itself.

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he owned a long position in Apple but no other stocks named here.

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Comments
  • David Bain

    Better write and article about how to *short Samsung*. Samsung did not honor its 1-year warranty on my the Galaxy S II I got stuck with. If their tangle with Apple is any indicator (which cost them $12b), they would rather pay their lawyers and plaintiffs than follow the law. I will take them to small claims -or class action- court to get fair results.

    • David Bain

      Update: this is definitely looking like a class action. A quick search of Google reveals thousands of others having the same shoddy workmanship issues with the Galaxy phone– and lack of response by Samsung.

      • http://www.facebook.com/people/Dave-Maxwell/19606465 Dave Maxwell

        I just saw your post, I don’t know how I missed it. Yes, I think this is worthy of class action. I just hate being basically bilked out of a couple hundred bucks and then thrown through a blender of horribly mannered numbskulls. Bad business.

  • http://www.facebook.com/people/Dave-Maxwell/19606465 Dave Maxwell

    Let me just mention this as a possible indication. I purchased a Samsung Galaxy s3, moving from an iPhone for no other reason than I wanted a change and in the past, 7 years ago, I had a good experience with Samsung products. Not this time. Biggest. Mistake. Ever. I actually convinced my girlfriend, who has Verizon, Im on ATT, to purchase one too. We both have the same issues. Clunky, interface and design. One would expect that problems like, text messages being received out of sync, or the phone and contacts software/firmware freezing on a regular basis would have been solved in development. The Android market is truly a joke and even apps that are both on the apple app store and the android market are severely lacking and, guess what, freeze! One of the pointless gimmicky features is that you can flip the phone on its face to mute the speaker, which is on the back of the phone. How does that make sense? Would you want to have the speaker right side up to hear it, so why have the phone go on mute when its in that position? There are a whole other host of problems with the phone and with the company. I’m convinced I spoke with the same thickly accented, surly woman each time I was transferred through Samsung’s phone support maze and I didn’t end up getting a solution to anything, just a lot of wasted time. In contrast when I had an iPhone none of this. at all. period. totally opposite experience. In fact apple made having a great product seem so effortless I think I just assumed that there was no way that the basic problems I outlined above even existed with phones anymore. The funny thing the person who convinced me to get another Samsung product has never owned an apple product, phone or otherwise. They have no idea. I guess I am saying all of this to get to the point that even though Samsung has a whole host of products besides horrible phones, they also make decent TV’s, there is already a company that makes them better, and im sure they (apple) will get into TV’s. I too have seen the figures that Samsung’s new Galaxy surpassed sales of the iPhone in some places and I think its because of a similar circumstance to mine. We heard that apple maps was bad, and that there wasn’t really anything new about the 5 so we decided to switch. We took for granted the elegance and intuitive quality that had been designed into apple and took a leap. Now though my mind is made up and my opinion solidified. Samsung is no longer a company I would buy a phone from and I would hesitate to purchase anything else from them, especially if there was a parallel product from apple. So, from main street, this is my story that may be the foundation Samsung is building, a shaky one, and I wouldn’t try to build any financial investment on it.

    • http://www.facebook.com/people/Dave-Maxwell/19606465 Dave Maxwell

      Oh, I forgot to mention. I started talking about how both me and my girlfriend purchased the phone, me from ATT her from Verizon. WE have both had the same issues and she is just as disappointed with this purchase.

      • ej

        bought the galaxy s3 and no problems at all. love it

        • bn

          same here galaxy s3 is by far the best phone I have ever owned

    • Kristohper Carbone

      probably sees no problem standing in line 6 hours for iphone5, which is piece of crap, clearly your technologically challenged.

  • dwpbike

    tanks for the tip on ishares. judging from the other comments, i may be off point.