Samsung is a South Korean conglomerate best known as a premier electronics and technological brand in the world. Even though Samsung is best known in the world of technology, it also deals in financial services, machineries, tourism and science. Samsung is a leading brand of smartphones in the market while the company has also ventured into artificial intelligence and virtual reality. Samsung has also entered the mobile payment arena by the launch of Samsung Pay. The high brand value of Samsung means that its shares are one of the best in the stock market.
Reasons to Invest in Samsung
- Samsung manufactures Dynamic Random Access Memory to store and process data and 3D NAND data storage which is better than conventional USB or flash. The demand for DRAM has increased all over the world and Samsung holds 45% of the share of global DRAM market. 3D NAND is likely to replace hard drives and Samsung will benefit immensely because the company has 34% global market share of 3D NAND.
- The market share of solid Organic Light Emitting Diode technology developed by Samsung’s display division will be 50% by the year 2020. This display technology for smartphones will propel the growth of the display division over the next few years.
- 2018-2020 shareholder return guidance of Samsung doubles the dividends paid to shareholders and makes distribution of cash to shareholders more consistent. Furthermore, cash balance and free cash flow are expected to grow well due to no mergers or acquisitions.
Thus, a combination of the above mentioned factors will drive the revenue growth and operating profits of Samsung. The price to earning ratio of the company is 6.2x and its valuation is high. Needless to say, Samsung is a top investment company.
An American citizen wanting to buy Samsung shares may find it impossible to do so because the company does not trade on any major US exchange and also does not have an American Depository Receipt. However, there are some ways for American nationals to invest in Samsung stocks.
If you are an American citizen looking for the best way to invest money in Samsung shares, the following methods are for you.
Buying shares through Korea Exchange
Korean Exchange is located in South Korea and in order to trade on KRX, the American investor needs to get an investor registration certificate issued by South Korea’s Financial Supervisory Service. In order to get the certificate, the investor needs to submit a copy of the passport, investment ID application, standing proxy agreement, registration of signature and resident status determination document. After obtaining the certificate, the investor can open a trading account with a brokerage firm based in South Korea. Thereafter, the investor simply needs to deposit funds and purchase Samsung shares. Merill Lynch International Inc. is one of the most prominent international brokerage firm. It has a branch in Seoul.
The American investor can invest in exchange traded funds in South Korean market. Samsung has a large share of the South Korean economy, thus many ETFs have the shares of Samsung within their makeup. For example, iShares MSCI South Korea ETF and Korean Fund Inc. have 20% of their holdings in Samsung for each ETF. Thus, investing in South Korean ETF is an indirect method of buying Samsung shares. It is also a cheaper method as compared to directly buying Samsung stocks.
Apart from ETFs, an investor can also invest in the best mutual funds in South Korea with shares in Samsung.
US investors can purchase over-the-counter Samsung shares in the Grey Market. The Pink Sheets published by National Quotation Bureau contain the bid and ask prices of OTC shares. Investors can used these sheets to purchase OTC Samsung shares. The investor who has purchased OTC Samsung shares will get dividend payments but not the voting rights. High difference between ask and bid prices and high liquidity are the major disadvantages of OTC shares because selling the shares becomes very difficult. An investor trading in OTC Samsung shares should use limit orders instead of market orders.
American investors often want to know whether buying Samsung stocks is worth it or not. One needs to remember that the fees and other costs associated with investing in Korean Exchange to buy Samsung shares can be significant. The investor will incur both standard trading costs and the currency conversion fees for converting US dollars to South Korean Won. There is also the headache of minimum order requirements. The high returns on investing in Samsung shares in Korean Exchange can be reduced due to the extra charges. High-grade US investors, however, reap high returns despite the extra charges.
An average American trader can do best by investing in ETFs that have equity in Samsung. This is because investing in ETFs does not entail spending time and resources on applying for IRC and working with a local South Korean broker.