$3.50 Stock For Sale: “I think this is an easy double”
Dear Rich Lifer,
Ever since the COVID crash began in earnest, I’ve been giving you a rare window into my own personal trades – with regular updates on some of the investments I’ve bought, ones I’ve subsequently sold, and additional strategies I’ve been employing to hedge my bets.
At this point, I have seriously lightened my exposure to stocks overall. Yes, there are still several positions I bought near the March lows and continue to hold. But there’s only been one stock that I’ve purchased SINCE the majority of the rally took place.
The reason why? I think it’s a unique case.
I wouldn’t be surprised to see it double at any point from here on out – possibly overnight and no matter what the broad stock market is doing.
In fact, rumors have been swirling that the company is working with investment bankers to fend off a possible hostile takeover by a private equity firm.
Recent Movement On This “Stock For Sale”
When you look at a chart of the company’s stock, it’s easy to see why it might be an attractive target for just such a move …
As you can see, the shares have been cut in half over the last several years … with a particularly deep plunge last fall and then another one as the COVID selloff accelerated.
Now, what if I told you we were looking at the chart of a company with extremely important technology and serious backing from a national government?
What if I also told you the company just posted a small quarterly profit yesterday?
It becomes easier to see why this company might be a target.
Yet that’s still just the beginning of the story.
What’s The Story On A $3.50 Future Money-Maker?
Let’s start with the technology.
In a nutshell, this company is one of the most important players in the imminent rollout of so-called 5G wireless service.
Here’s how Forbes explains it:
“The fifth-generation wireless data evolution is what keeps many technologists up at night these days. It will be the most significant data network advancement to date. 5G promises to connect everything around us to a network that offers the speed, responsiveness and reach to unlock the full capabilities of technologies such as virtual reality, artificial intelligence and the internet of things. In addition to supplying the final piece in the puzzle for self-driving cars, 5G will enable real-time participation in live concerts and gaming. Your phone will become a supercomputer with instinctive, high-bandwidth connection.
“When it comes to autonomous vehicles, the speeds and data processing capabilities needed to mimic the timing of human reflexes are incredible. Dr. Joy Laskar, co-founder and CTO of Maja Systems, believes the future self-driving car will generate approximately two petabits of data—the equivalent of two-million gigabits.”
So 5G is truly going to change our world in many ways.
And just a handful of companies hold the keys to 5G.
Obviously, many companies in Silicon Valley are working on 5G technology – chips, devices, and everything in between.
Meanwhile, Chinese firms like ZTE and Huawei – as well as other Asian companies like Samsung, Sharp, and LG – are doing the same.
But this there’s a third area at the top of the technological pile – Scandinavia.
Mobile phone companies in places like Sweden and Finland have massive portfolios of patents related to 5G wireless technology that rival any U.S. or Asian firm … including the company I’ve been talking about today: Nokia (NYSE: NOK).
Nokia holds critical patents related to 5G technology, and patents are where Nokia makes most of its money these days.
NOK & The 5G Boom In A Nutshell
I don’t have enough room here to go into a deep dive on those patents or all the different ways they could pay off during the 5G rollout.
For now, I’ll just say that Nokia could end up earning as much as $3.50 on every single 5G handset that hits the market … on top of fees from carriers, infrastructure developers, and others.
During its first-quarter earnings call on April 30th, the company said its small profit of one euro cent per share was driven by demand for new 5G equipment. It also expects strong results in the second half of the year – after a coronavirus-related hit in the current quarter – and should post a yearly profit somewhere around 24 euro cents.
There is also a leadership change taking place, as current-CEO Rajeev Suri gets replaced by former company executive Pekka Lundmark in September.
With so many things happening, I personally believe the reward potential far outweighs the risk in Nokia at current levels … and that assessment includes a worst-case scenario on the COVID side of things.
What about the buyout rumors?
Well, the Finnish government actually began buying Nokia shares back in 2018 and now holds roughly 4.3% of the company’s stock in its Solidium investment fund.
At the same time, U.S. government officials – including U.S. Attorney General Bill Barr — have been suggesting that Washington should consider taking a majority stake in a company like Nokia as a way of protecting U.S. interests in the wireless space.
Nokia and the Finnish government have brushed off the idea.
But could there be a connection between Barr’s comments, made in February[nm3] , and the new buyout rumors that have surfaced?
It’s anybody’s guess, but even a remote possibility only adds to my bullish feelings about the stock’s overall prospects.
At the very least, massive distrust of Chinese firms from various Western governments will help Nokia continue to win market share as the 5G rollout gains steam.
I’m in at $3.46. We’ll see what happens from here!
To a richer life,