The largest name in the iShares MSCI Emerging Markets Index ETF (EEM, quote), Samsung (SSNLF, quote), is struggling with the overall heaviness in emerging markets.
This is a challenging call; Samsung Electronics is not as tied to the smartphone space as Apple (AAPL, quote) but has been as big a beneficiary.
Samsung also makes products that have room for growth in Asia, notably China. Samsung’s ASP (selling price) is the perfect barbell of high-end and lower-end. This is your best emerging market strategy.
Having said all that, Samsung reported last night and there are three key takeaways:
1) Guidance was conservative, if not defensive with no real look into smartphone demand, only citing seasonal weakness ahead. It doesn’t make me feel too good after the move Apple has had and uber expectations.
2) Competition remains intense, and Samsung could go from hunter to hunted in the battle royale with Apple. Samsung will become the hunted if/when Apple finally comes out with an unsubsidized iPhone for $200 or less. Samsung rules in China and Apple needs China Mobil (CHL, quote) to get in the game to have a shot.
3) Is Samsung also moving into a “value trap”? Well, if you believe this is same disease that Apple (and many before them such as MSFT, CSCO, and GOOG etc) is afflicted with, be careful. Valuation is very attractive but that may be telling you something: that they can’t grow at this level. Samsung is only 11% off the crest of Jan 2 in U.S. dollar terms.
Full disclosure: we love Samsung as a company, but we are short.