Samsung is a household name all over the world. The company’s smartphones dominate global Android phone sales and Samsung is a leading contender in many other markets. Global technology giants are often great investments, and Samsung’s leading position has many investors wondering how to buy Samsung stock.
Samsung is a South Korean company that does not trade on a major US exchange. That makes investment a little complicated, but it’s still possible. Let’s take a closer look at the company and at a few ways to invest in Samsung shares.
What is Samsung?
The Samsung Group is a South Korean company. It is what the Koreans call a chaebol, or diversified industrial conglomerate. The Samsung Group has multiple subsidiaries in many different lines of business.
Samsung Electronics is the largest and best-known subsidiary of the Samsung Group. Samsung Electronics manufactures mobile phones, memory chips, LED and LCD panels, laptops, appliances, and much more, and accounts for around 70% of Samsung Group revenue.
Other Samsung Group subsidiaries include the world’s second-largest shipbuilder, along with companies engaged in construction, insurance, health care, and many others.
Samsung is the largest company in South Korea by a wide margin. Its products comprise around 20% of the country’s exports, and its revenues account for 17% of the country’s GDP.
Samsung subsidiaries trade as independent companies. When we talk about how to buy Samsung stock we’re discussing shares in Samsung Electronics Inc.
Why Investors Want to Buy Samsung Stock
Samsung is one of the world’s largest and most dominant technology companies. That attracts investor attention. Let’s look at some of the reasons investors are considering Samsung shares.
- Forbes magazine ranked Samsung at #8 on its list of the world’s most powerful brands in 2020.
- Samsung Electronics is the 19th largest company in the world by revenues, according to Fortune’s Global 500 list.
- Samsung Electronics is ranked as the world’s #2 electronics manufacturer by revenue, behind only Apple.
- The Company is the world’s leading maker of Android smartphones, with 36.4% of the market. The next contender is China’s Xiaomi with 11.6%
- Samsung was the global leader in 2020 smartphone sales, with 18.8% of the market. Apple was second with 14.8%.
- Samsung is the world’s second-largest semiconductor manufacturer, behind only Intel.
- Samsung is a leading player in 5g connectivity and was the first company to have its 5G equipment approved by the US FCC.
These benchmarks reflect Samsung’s position as a global technology leader.
Update: On Jan. 30, 2023, CNN reported that Samsung has recorded its lowest quarterly profit in eight years, dragged down by low sales of laptops and mobile phones. The drop was expected, with analysts noting a weak market and slumping orders of memory chips and consumer devices.
Strength in Diversification
Samsung’s global reach and broad product line are illustrated in these charts.
Samsung Electronics Revenue by Segment (2016-2020)
Samsung Electronics Regional Portion of Revenue (2016-2020)
That diversity insulates the company against events that could affect one market or product line.
While the diversification of the company is remarkable, many of its segments trade independently. Most investors would purchase shares in Samsung Electronics, itself a highly diversified firm within the electronics niche.
Financial Strength
Samsung has been a dominant company for many years and does not show exceptional growth rates. However, the company is consistently profitable and has shown resilience even in the face of the COVID-19 pandemic
Samsung’s consistent profitability has been matched by a consistently high profit margin. Samsung’s Gross Profit Margin is typically within a band between 35% and 48%.
Samsung has a limited margin for growth due to its already dominant position: the company needs market growth to sustain revenue growth. Samsung compensates for this lack by offering a dividend of 1,444 Korean Won (US$1.14) per share, a yield of
1.97%.
A Potential Opportunity
Samsung stock has slumped considerably from its January 2021 peak.
The drop in the stock price reflects weak market conditions, but it’s also driven by unique conditions within the company.
Lee Kun-Hee, who was Chairman of the Samsung Group from 1987 to 2008 and 2010 to 2020, died in October 2020. His relatives inherited 4.18% of Samsung Electronics, 20.76% of Samsung Life Insurance, and smaller percentages of other units. South Korea imposes significant taxes on inheritance and the taxes on the inherited shares are estimated at close to 11 trillion Korean won, or close to $8.6 billion.
In order to cover this enormous tax bill, the recipients of this inheritance have been selling huge numbers of shares, pushing the share price down in a movement that has nothing to do with the Company’s fundamental strength.
How to Buy Samsung Stock
Samsung trades on the Korea Exchange (KRX). Unlike many major global companies, Samsung does not issue American Depository Receipts (ADRs) that trade on a US exchange. That limits the ways that investors, especially US investors, can buy and sell Samsung shares.
There are still options for those who want to invest in Samsung.
- Samsung Global Depository Receipts (GDRs) are available to non-US investors on the London Stock Exchange. US investors are prohibited from buying GDRs by SEC Rule 144.
- Buy shares in the Korean stock market. You will need to obtain an Investors Registration Certificate from Korea’s Foreign Supervisory Service and you’ll have to open an account with a Korean broker.
- US brokerage account holders can buy Samsung shares on the unregulated over-the-counter “Pink Sheet” market. There’s limited liquidity and you may not be able to buy and sell shares when you want to.
- Invest in an ETF. Samsung dominates the Korean market, and Korea-focused ETFs usually feature significant Samsung holdings. The iShares MSCI South Korea Capped ETF (EWY), for example, has over 20% of its holdings in Samsung. The Direxion Daily MSCI South Korea Bull 3X Shares fund is a leveraged ETF with 22.34 of its holdings in Samsung.
For most investors, the ETF route is probably the easiest and safest. Samsung’s success is often seen as a proxy for the success of the Korean market as a whole, and if you believe in Samsung’s prospects there’s an argument for investing in the broader Korean market.
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Should You Buy Samsung Stock?
All investments involve risk. An investment in Samsung is no different.
Samsung is relatively well insulated from many investment risks. The company serves an extremely wide range of markets with a very diverse range of products. Samsung is not immune to a global recession but the company is not likely to be seriously affected by upheaval in one market or in one product line.
That protection is not complete. The mobile phone market, in particular, is highly competitive and other manufacturers could introduce superior products that would reduce Samsung’s market share.
Samsung could be vulnerable to political upheaval or conflict on the Korean peninsula.
A greater concern for US investors may be that Samsung trades only on the Korean market, which limits buying from US investors. That has kept the valuation more modest than that of many tech leaders. For example, Apple’s 2020 P/E ratio was 38.67, while Samsung’s was a much more modest 18.9.
While the relatively restricted trading in the stock keeps the valuation reasonable, it also obstructs US buying, which could push the share price up.
You should consider all of these risks and more before investing. It’s always a good idea to consult a qualified financial advisor before making investments.
FAQs
Samsung is a South Korean diversified industrial company. Samsung electronics, the largest subsidiary of the Samsung Group, manufactures mobile phones, semiconductors, LED and LCD panels, appliances, and many other products.
Samsung Electronics is the world’s second largest electronics company and 19th largest corporation by revenue. The Company is the leading manufacturer of Android smartphones and was the leading manufacturer of all smartphones in 2020. Samsung is aggressively developing 5G and 6G mobile technology.
Samsung trades on the Korean KRX exchange. Non-US investors can buy Global Depository Receipts (GDRs) on the London Stock Exchange. US investors may need to open an account with a Korean broker or buy shares on the OTC Pink Sheet market. It’s also possible to invest indirectly in Samsung by purchasing a Korea-focused ETF.
Samsung is a global, highly diversified company, which insulates it against risks in any one market or product lime. The company is consistently profitable but has not generated high growth rates, which could constrain growth. It is difficult for US investors to buy Samsung shares, which could constrain the stock price.
