Shares in the consumer electronics giant have recently struggled on the Korea Composite Stock Price Index (KOSPI), which this week slumped to a 5-month low given wider macro concerns across China and the US.
However, on a long-term basis managers are concerned about Samsung’s valuation and growth potential, particularly given saturation of smartphone sales across developed markets.
Speaking at the Portfolio Adviser Expert Investors Emerging Markets event today, Patricia Ribeiro, portfolio manager of American Century Investments’ Emerging Markets Equity Fund, said she has been cutting significantly, with the stock only recently having been her largest active holding (close to 7% in November).
“The driver was smartphones, but that has played out the way we expected and the opportunities now are much more in the replacement cycle in the West,” she explained.
“There are still opportunities for smartphone penetration in emerging markets, but the price point is still too high. There will be margin deterioration for Samsung, while we have been putting money into the supply chain for Apple as its replacement cycle comes through.”
Elsewhere, Paul Rogers, manager of Lazard Emerging Markets Core Equity Fund, praised the firm on its high levels of productivity though he too worries about its growth potential.
“Samsung has struggled and we have been trimming [from around 5%, the fund’s top holding] as we think its growth rate will slow to reflect its status now as a more mature and stable company.”
