Buying Nokia and JDS Uniphase
[Excerpt from The Motley Fool]
By Matt Richey (TMF Verve)
February 14, 2000
"Fools, for over a month, we hinted that something new was on the way in the 'ol MakerPort. We weighed our options, we did our due diligence, and, yep, we finally got our act together.
What better day than Valentine's to tell of our love for two new Rule Makers. Tonight, we're excited to announce that in the next five trading days, the Rule Maker Portfolio will purchase shares of Nokia (NYSE: NOK) and JDS Uniphase (Nasdaq: JDSU).
If you've been following along in our nightly columns for the past two months, these decisions won't be the least bit surprising. As such, we're bucking the trend of issuing the
usual buy reports because we've essentially been writing the buy reports bit by bit over the past couple of months. It's all available for your perusal in the RM Archives.
Below, I've summarized the rationale behind our decision making, as well as links to the relevant back articles that support our decisions.
To recap, when we started our search for potential new companies, our primary goals were to:
a) Stay true to our Rule Maker selection guidelines, especially the financial criteria;
b) Look for potential emerging Rule Makers that might add some extra octane to our port; and
c) Be sure that any new additions are additive to the quality of our overall portfolio. Based on those three goals, I'm confident that Nokia and JDS Uniphase fit the bill perfectly."
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NOKIA -- I think it's clear that Nokia is making rules in the wireless world -- a critical component of the new economy that we'll want to have exposure to in the RM Port. Based on my personal experience with the Palm VII and a Nokia phone, I envision a day when everybody carries these things around and does everything on them. That's powerful.
Nokia in brief (trailing 12 months):
Market Cap $240 Billion
TTM Sales $19.8 Billion
Sales growth 48%
Gross margins 38% (trending higher)
Net margins 13% (flat)
OCF margins 15.7% (trending higher)
FCF margins 8.8% (trending higher)
Net Cash $3.1 billion (trending higher)
Cash-to-debt 3.9x
Flow Ratio 1.19 (trending lower)
The margins are on the skinny side, but everything else is schweeeet. Nokia's global market, I think, is unprecedented in size and scope. In sum, Nokia is a true blue Rule Maker -- a global consumer powerhouse with expanding possibilities galore and tight financial management. Bill and I have explained our liking for Nokia in several recent Rule Maker
columns:
Why Nokia Rules the Roost, by Bill Mann (1/26/00)
The Mobile Information Society, by Matt Richey (1/31/00)
Nokia's Bang-Up Earnings Report, by Bill Mann (2/2/00)"
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SEE COMPLETE ARTICLE AT THE MOTLEY FOOL
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