It’s fair to say that the 2 picks that we have got wrong this year are Research in Motion& Nokia – calling Conviction Buys on both at prices of $13 and $2.50 respectively. We believed the brands, balance sheet cash piles, price to cashflow, price to book etc made them a raging buy at prices much higher (and as did many, much more esteemed and cleverer fund managers than us!). The market has given us a bloody nose on these and the question is whether to double up or fold one’s cards.
Tomorrow Nokia announce their 2Q results and many industry analysts are expecting another loss, eating further into their cash pile of almost over $4bn. Bearing in mind the current market cap us $2bn and sales for the full year are slated at $35bn, the cash adjust EV:Sales figure is a shade over 0.06 times, that’s right, the decimal place is not in the wrong area – 0.06. The brand alone has been valued at upto $25bn based on historic cash flows and is deemed to be in the top 10 most valuable brands in the world.
If I was Steve Balmer, offering $4-5 per share in Microsoft stock is a no brainer here – a nil cash cost that doesn’t even register on an equity dilution basis. to MSFT shareholders
What are we doing? We’re balls’ to the wall, triple up at this level which is, in our opinion, one of the biggest tech opportunities with upside skew I have personally seen in about 10 years.
Trading Buy call @ $1.67