Analyst & Banks Buying Shares in Nokia, Despite Warning Others Not to Invest

| November 22, 2012 | 29 Replies

It seems that the so-called Investment advisers and banks can’t make up their minds, although most credit companies have rated Nokia’s stock at “junk” or at best “don’t buy” that doesn’t seem to have stopped them from making a move themselves. I’ve watched enough “Shark Tank” to know that it’s not uncommon to feign disinterest in a product/company just to get a better deal for yourself, and it seems that might be exactly what’s been going on.

Some of the largest names in financials and banking have increased their stakes in Nokia in surprising amounts:

In the face of extremely negative sentiment, two investment banks, namely Morgan Stanley (MS) and Goldman Sachs (GS), increased the number of Nokia shares they were holding in the last quarter. In the beginning of last quarter, Goldman Sachs held 61 million shares of Nokia. As of the end of the last quarter, the investment bank holds 116 million shares of the company. This indicates an increase of nearly 90%. As for Morgan Stanley, the bank held 4 million shares of the company in the beginning of the quarter, whereas, it ended up holding 32 million shares by the end of the quarter. This is an increase of nearly 700%.

Seems like an awkward decision to increase your stakes so much in a “Junk” company; on the other hand today Nokia’s stock broke the 3 dollar mark, which it has been flirting with for the past two months or so, closing at a respectable 12% increase for $3.31 a share. Are things starting to look up or is this just a passing trend? Fingers crossed for the former.

Via thanks for the tip viktor von d.

Category: Lumia, Nokia, Windows Phone

About the Author ()

Hey, my name's Ali- Currently a fifth (and final) year Dental Student from Chicago; studying in Jordan. I love all sorts of gadgets almost as much as I love my cookies! Be sure to follow my Twitter handle @AliQudsi and Subcribe to my Youtube for the latest videos - no pressure. Thanks.
  • 8million

    merger and acquisitions…

  • nn

    Well, even junk can be under priced and in the case of Nokia it was known for long time that the pieces are worth more than the whole.

  • Harangue

    1. Underrate the stock
    2. Wait for the company to show a slight sign of coming back
    3. Buy back into said company
    4. Rerate the stock to a buy option
    5. Watch the stock price rise
    6. Sell your own shares
    7. ???
    8. Profit

    Troll science at work :P

  • Glass

    I wanted to see what it would do today, but it seems the Americans are too busy eating turkey to open the stock market.

    • viipottaja

      About to, rather. Just took ours out of the oven. :P

  • dss

    is Microsoft going to make move ?

    • viipottaja

      Nah. On HTC if anyone.

    • viktor von d.

      nah, just wall street acting like crooks again. it shows that all the downgrading wasn’t fair, even with all the problems. stock prices were driven down artificially to allow these big players to buy more shares cheaper. nokia is here to stay, and they will outgrow their problems, i have no doubt. one way or the other they will recover, and when they will do these thieves will cash in on their exploits

      • spencer1978

        Investment banks are well-known that they are foxy, so intelligent investors don´t usually listen to them. Intelligent investors do researches themselves, for example they read all the details in the companies´ earnings results (they don´t just watch economy news and listen to the media alone, or read articles only). They also consider the all-rounded strategy of the company, the insight of the company´s future and the value of the sum of parts of the company compared to the current stock price.
        Take my friend, Caleb Evans, for example, he is only 23 year old, but he has the ability to see the whole situation of the company and not just certain part of the company. He actually has made many people rich by 21% in just 5 days (Nokia share rose 21% in just 5 days!). The share is now still a buy according to him.
        Here what he has written:

        Short interest as of the end of October had been running at around 313 million shares on a base of 3.75 billion shares outstanding, or roughly 8%.
        This 8% is just the number in NYSE.
        November 20, in Helsinki, the short interest was over 10% (and this number was only counted with the investors with over 0,5% short interest, because the law in EU does not allow to give the names of investors with less than 0.5% short interest).
        Nokia´s 3.75 billion shares outstanding,
        covers both Helsinki and New York.
        In other words, the short interest in NOK has been around 20% on a base of 3.75 billion shares.
        This is a significant figure to note, because for example, shares of Apple have been short sold only about 0.5%, Samsung over 2% and other telecom companies about 4% in general.
        Therefore, the real short covering of NOK is still to come yet.
        Enjoy the ride!

        • spencer1978

          Nokia is now a good bargain buy and hold for the long term or medium term. Here are the reasons why:

          1. Nokia Siemens Networks is profitable and growing strongly (over 300 million euros profit in 3Q). Nokia and Siemens have decided to make it independent in these few years, therefore Nokia shareholders will have two companies´ shares in their hands, quite a good bonus.

          2. Navteq is profitable as well, and it is expanding its business as the world´s leading maps maker, with City Lens and Earthmine´s 3D mapping, Nokia will have a bigger slice of this pie yet.
          Right now, Navteq already has big clients such as Yahoo, Facebook, Amazon, Oracle and almost countless car companies.

          3. Nokia´s patent portfolio earns about 500 million euros a year.
          Samsung is paying Apple for intellectual property rights; HTC is paying Apple; Vringo is suing ZTE; Nokia is suing HTC; and APPLE IS PAYING NOKIA FOR INTELLECTUAL PROPERTY RIGHTS!
          Thus, it is only a matter of time when Nokia will sue Google and Samsung, if they still don´t agree to pay Nokia for its patents.

          4. Nokia´s featurephone division is doing well with Asha phones

          5. The only 1 out of 5 Nokia´s business parts, which is not profitable, is smartphone business, but
          new Lumia generation looks promising.
          Lumia 920 has features like:
          Floating-lens PureView camera with optical image stabilization
          Wireless charging
          Super sensitive and bright screen that can be used with gloves or finger nails
          Premium GPS that can be used also without internet
          Augmented reality City Lens
          Free music with no ads
          NFC
          Rich sound recording in vids
          Fastest screen on a smartphone

          Nokia also bought Scalado, the imaging technology firm in Sweden. Therefore, apart from NAVTEQ and NSN, Nokia is no doubt going big with PureView imaging technology. Some authors compare Nokia to Kodak, I think it is almost the opposite.
          Kodak was the old era and Nokia is starting the new evolution with smart-phone imaging, when consumers won´t have to carry another gadget (camera), for example during traveling.

          6. Considering now the total loss is about 17 million euros, it got much better from the 290 million (2 prior quarters each) loss.
          Nokia´s current 3.6 billion euros net cash should be enough for Nokia´s transitional period before WP8 phones take off.
          Nokia is also getting more cash from convertible bonds and selling its headquarters and other non-core assets.

          Morningstar´s analysis about Nokia:
          Share price assumption at this moment: 2.40 euro.
          Best scenario (if WP8 phones go well): the stock price will go to about 7.70 euro per share.
          Worst scenario: no bankruptcy, because Nokia would be sold in parts before that.
          Estimated price for this: intellectual properties over 1 euro per share; other business parts (smartphones, featurephones, NSN) at least over 1.50 euro per share.
          And NAVTEQ´s price not included (Nokia bought NAVTEQ with 5.7 billion euro). All in all, even in this case, Nokia share price would be at least over 2.50 euro, excluded NAVTEQ.
          In other words, the sum of parts of Nokia is worth much more than its market cap now, which means NOK share is right now heavily undervalued. Caleb Evans

          • spencer1978

            Nokia Is a Wide-Ranging Company and The Stock is With Hidden Value Right Now

            Nokia does not only make phones.

            Nokia´s feature-phone division is doing well, because of Asha phones.

            Nokia has not lost about 1 billion dollars a quarter like the media says, because Nokia has 5 business parts and 4 of them are profitable. Therefore, the exact number is much much smaller.

            Nokia´s loss is only 17 million euros any more (compared to Reuters´s consensus 277 million and Nokia´s last two previous quarters about 290 million each), this was much better.

            Nokia Siemens Networks is doing very strongly (over 300 million euros profit in 3Q. More business to come in the future: 3G in developing countries, 4G in developed and emerging countries)

            NAVTEQ was also profitable, NAVTEQ´s number might be better in 4Q, because of the deals with Amazon, Yahoo, Oracle and many car-companies.

            Nokia´s patent portfolio earns about 500 million euros a year, and the number is still increasing.

            Nokia has cut expenses (which saves about 1 billion euros a year) and in the future Nokia does not have to spend so much in R&D either, because it has teamed up with Microsoft.

            Nokia´s WP 8 devices will hit more markets, for example the Middle-East countries (Lumia phones have not been in these countries yet till now).

            New Lumia generation looks promising.

            For example Lumia 920 has features, such as:

            Floating-lens PureView camera with optical image stabilization

            Wireless charging

            Super sensitive and bright screen that can be used with gloves or finger nails

            Premium GPS that can be used also offline

            Augmented reality City Lens

            Free music with no advertisements

            NFC

            Lumia 920 does not only have a great low-light camera, but also has exceptional audio recording quality due to the 3 HAAC Rich-recording microphones.

            Right now, there is no way to compare Nokia to Apple among most smart phone consumers, but there is hope in the future.

            For example, Nokia just signed the contract with China Mobile (who has about 660 million subscribers, which is about 70% of all subscribers in this world´s biggest nation), and even though iPhone is very popular in the US and Europe, Windows Phone OS already surpasses iOS in the world´s biggest countries beside China, such as Brasil, India and Russia. Even though in these countries more low price point phones are sold, but these are the most important emerging giants in the world where Nokia´s position and brand are still quite strong. And it may be sooner than we think when more people in these countries are able to afford high end smart phones.

            Nokia has not lost about 1 billion dollars a quarter as the media says, because its other parts of business are profitable (while 1Q´s and 2Q´s total loss 290 million each, 3Q´s total loss only 17 million euros any more). Therefore, 3.6 billion euros net cash should be enough for Nokia´s transition period before WP8 phones take off. There is still enough room for a third ecosystem in this world, beside emerging markets Europe has adopted WP phones in a very encouraging way (for example Italy has already over 10% market share for WP phones, considering the Lumia debut has not been a year yet, since last November only. WP OS has already grown a lot faster compared to iOS and Android in their first quarters). Lumias were sold 9,9 million units under a year. The number is small compared to Iphones and Androids sold today, but it is not a bad start. It is more fair to compare the numbers among the 3 in their first year.

            Now when the DOWS and S&P have almost hit all time highs, investors start to think more about cheap and potential value stocks. NOK is now only about 0.8x book value, and usually NYSE stocks are on an average about 2x book value (Apple about 6x book value). Therefore, I think NOK is cheap enough for its values. Another reason is NOK has been already shorted massively about 19% of its total shares.

            Apart from Vertu and so on, Nokia still can sell its patents, since it still has about 30 000 patents in its own hands (in case Nokia needs more cash).

            If the stock price still goes cheaper and cheaper, one day some rival would bid for Nokia, just for its patents ( Motorola was acquired by Google with 12 billion dollars, this is good to remind people who underestimate intellectual properties´ value).

            Microsoft will bid for Nokia with higher premium if some company really bids for Nokia, because Nokia is in so close partnership with Microsoft that this also includes business strategies, business secrets and so on. Therefore, Microsoft won´t let any company acquire Nokia than itself. When it comes to Microsoft, it is still the net cash king in the world, after all its debts excluded, it still has a huge net cash about 50 billion dollars.

            About Nokia´s buy out: Motorola´s patents were worth about 5.5 billion, if some company bids for Nokia´s patents and Microsoft still does not acquire Nokia, Nokia will be sold in parts. Nokia has 5 business parts, therefore patent portfolio is only 1 out of 5. Now, you can count yourself how much are Nokia Siemens Networks, NAVTEQ, and feature-phone division worth.

            I know US is very important market, because Wall Street and US consumer trend give directions to market momentum around the world, still you can not neglect the power of BRIC and MIST these days.

            You can calculate yourself how many people living in these 8 BRIC- and MIST-countries. In these countries, in Brazil, Russia, India, China, Mexico, Indonesia and Turkey, Nokia´s position and brand are still quite strong (except South-Korea, but you know it is Samsung´s home-country and the smallest country among those important 8 anyway).

            Morningstar´s analysis about Nokia:

            Share price assumption at this moment: 2.40 euro

            Best scenario (if WP8 phones go well): the stock price will go to about 7.70 euro per share)

            Worst scenario: no bankruptcy, because Nokia would be sold in parts before that.

            Estimated price for this: intellectual properties over 1 euro per share; other business parts (smartphones, featurephones, NSN) at least over 1.50 euro per share.

            And NAVTEQ´s price not included (Nokia bought NAVTEQ with 5.7 billion euro). All in all, even in this case, Nokia share price would be at least over 2.50 euro, excluded NAVTEQ.

            Nokia also announced it is hiring more employees to work in Chicago (where NAVTEQ is). Who says Nokia is going bankrupt? Think twice before saying that!

            Nokia also bought Scaladon, the imaging technology firm in Sweden. Therefore, apart from NAVTEQ and NSN, Nokia is no doubt going big with PureView imaging technology. Some authors compare Nokia to Eastman-Kodak, I think it is almost the opposite.

            Eastman-Kodak was the old era and Nokia is starting the new evolution with smart-phone imaging, when consumers won´t have to carry another gadget (camera) during traveling.

            One of the reasons why Nokia is one of the most defensive stocks right now during bear markets is that Nokia has been already shorted massively about 19% of its total shares (while Apple only about 0.5%, Samsung over 2%, and other telecom companies about 4% in general).

            By the way, NAVTEQ just reported it is making navigators into 4 out of 5 cars (80%).

            And I hope Nokia will license City Lens to tablet makers like Amazon, Asus, Acer etc (at the same time it can turn Google maps users into using Nokia´s advanced mapping platform) soon.

            When also Nokia´s Devices & Services division is profitable as well, will you ever have a chance to buy NOK stock this cheap again? The answer might be: NEVER.

            Another aspect is, when now NOK has been already shorted massively about 19% of its total shares, bears could not go any further, because the share number that is available for borrowing/renting has already hit record high.

            If bears still dare to sell, there are plenty of happy buyers out there, for example Switzerland´s central bank has announced it had bought more NOK shares and has become the 5th biggest shareholder in Nokia.

            Considering now the total loss is about 17 million euros, it got much better from the 290 million (2 prior quarters each) loss.

            3.6 billion euros net cash should be enough for Nokia´s transitional period before WP8 phones take off.

            Nokia is also getting more cash from convertible bonds and selling its HQ and other non-core assets.

            Nokia is a big chance and good bargain at about 3 dollars, because Nokia Siemens Networks has grown so strongly and profitable that Nokia and Siemens have decided to make it independent in these couple of years. That means Nokia shareholders will have two companies´ shares in their hands.This is a bonus.

            The conclusion is Nokia is for long-term and medium-term investing not for short term. Just think about this, even when Apple and Google reach 1000 dollars, that is not even doubling, but in the long term Nokia has the opportunity to triple or even more. Caleb Evans

            • spencer1978

              Some people say Lumia 920 is thick and heavy, but those are only one aspects, just like iPhone 5´s map fiasco and its tiny screen. Besides, Lumia 920´s weight is only about Galaxy Note II. What is so heavy about it?
              Lumia 920 is a bit thick because of these features:
              Floating lens PureView camera with optical image stabilization
              Wireless charging
              NFC
              Super bright and sensitive screen with Gorillaglass 2

              And Lumia 920 has 32 GB storage + 7 GB Skydrive storage.

              Apple´s profit is high because of the expensive prices, but how long do you think that kind of high profit would last? Forever?
              Amazon´s and Google´s tablets are eating iPad´s market share, carriers are tired of Apple iPhone´s high margins. When Apple gets the pressure to cut down prices, it will show immediately in their results that the profit won´t be at the same high level any more, which will hit the stock downhill quarter after quarter.
              So, analyze and decide yourself.

              My friend sent me a short article from Dubai a few days ago. He used googletranslate to translate this article for me and sent me in an email. He said his father went to buy one and a half million more NOK shares, and his father´s friends are all planning to buy. So, it is very interesting to wait and see which ones will win, the young tigers or the rich people in Dubai.

              Here is the article:

              There is a big name behind the people who hope Nokia collapses

              Nokia shares are the most short-sold shares in Helsinki and New York. Last Friday, an updated list of the six U.S. funds have sold short more than seven per cent of Nokia shares in Helsinki and in New York over 300 million Nokia shares have been short-sold.

              Nokia short-selling funds, only one was not fund guru Julian Robertson’s younger followers. Robertson founded one of the world’s first hedge funds in 1980. The company’s name was Tiger Management, which is why the followers are called tiger puppies.

              Short seller to assume that the share price drops in the future. If the share price goes up, the value of their investment fall.

              Among them include the Blue Ridge Capital’s John Griffin, Maverick Capital’s Lee Ainslie, Andreas Halvorsen of Viking Global, and Lone Pine Capital’s Steve Mandel. All mentioned “tiger kittens” have shorted Nokia.

              Andreas Halvorsen has distributed more power to young portfolio managers.

              ABG Sundal Collier says in their report today that the Lumia 920 makes people interested in it and marks the comeback of the brand of Nokia.
              Caleb Evans

              • spencer1978

                One big question is: is it too tiring to wait Apple climbing the Mount Everest (1000 dollars), because that is not even doubling the stock price, while many cheap potential stocks would quadruple in the same time frame? Is Apple only for traders any more? Because considering holding Apple, the profit does not seem to be worth the effort and waiting. I mean almost a 6x book value stock, and waiting
                only for doubling, it is really NOT WORTH IT!

                Another question is: will Apple get the contract with China Mobile (the world´s biggest operator with about 660 million subscribers)?
                Considering US´s issue with Huawei and other Chinese firms, I think Apple won´t get the contract from China Mobile so easily.
                And China Mobile has already confirmed Lumia 920 arriving December.

                Apple´s profit is high because of the expensive prices, but how long do you think that kind of high profit would last? Forever?
                Amazon´s and Google´s tablets are eating iPad´s market share, carriers are tired of Apple iPhone´s high margins. When Apple gets the pressure to cut down prices, it will show immediately in their results that the profit won´t be at the same high level any more, which will hit the stock downhill quarter after quarter.
                So, analyze and decide yourself. Caleb Evans

                • spencer1978

                  I think Lumia 920 is being a big hit for this holiday shopping season, and will stay as a hit through out the year 2013 as well.
                  It will take Samsung and Apple at least a whole year to catch up all the new innovations in the Lumia 920. And I hope Lumia tablet will be launched at the beginning of next year. Lumia tablet will have its own enthusiastic buyers for sure.
                  Around 7 inch with WP8 is ideal, because it scales nicely with phones, and it does not have to compete with Microsoft´s Win8RT tablets.
                  Actually I hope Nokia would make two versions of this tablet, another one is around 200 bucks (which parents can easily buy for their kids, and also schools in emerging markets are starting to use tablets);
                  another one would be the pro version (around 400 bucks) with higher specs, such as HD+ resolution, bigger storage, sensitive touch screen that can be used with gloves etc, and front-face camera.
                  Marko Ahtisaari, the head of design in Nokia already said over half a year ago that he has been spending 1/3 of his working time designing a tablet. When I said launching at the beginning of next year, I did not mean they can release at once into the markets, instead they can introduce them for example as prototypes at CES or at Mobile World next year. Caleb Evans

                  • spencer1978

                    These are the features and functions that Samsung and Apple should catch up Nokia:

                    Floating-lens PureView camera with optical image stabilization
                    Wireless charging
                    Super sensitive and bright screen that can be used with gloves or finger nails
                    Premium turn by turn GPS that can be used also without internet
                    Augmented reality City Lens
                    Public transport timetables and routes
                    Free music with no ads
                    NFC
                    Rich sound recording in vids
                    Fastest screen on a smartphone
                    Wireless Purity Pro headphones
                    Wireless speaker that can charge your phone wirelessly

                    And how many apps do you use daily?
                    I have been using around 700 apps, that is really enough.
                    Besides, you can always get the things done with replaced apps.
                    Microsoft said WP8 has 46 out of 50 the world´s most used apps.
                    The apps in WP8 is now over 12 000, and the number is increasing by around 300 new apps per day.
                    And Microsoft´s Xbox is unbeatable.

                    Now, 32 GB Nokia Lumia 920 only 50 bucks at AT&T, and 32 GB iPhone 5 and 32 GB Galaxy Note II cost 300 bucks! Caleb Evans

  • kan

    Please don’t write about topics you know nothing about. The initial spike yesterday was shorts covering their position. Look at volumes they are about 5 or 6 times the daily average – the automated high frequency trading systems have kicked in which just compounds movemements.

    The initial spike was due to news on Lumia selling out – but no one has any clear numbers of actual volumes.

    It’s the old adage – buy on the rumour and sell on the news. Looking at fundamentals is something else – these price hikes have all to do with speculation than any fundamental change in the underlying business.

    • viktor von d.

      it’s not about the share price rising. it’s about what happened in the summer when they were downgrading nokia. one one front they were downgrading and gave bleak predictions, on the other side they were buying stocks like crazy. ali didn’t cover much in this post but if you go to the tips section where i posted some links it’s explained more

      • kan

        I know the investment houses were loading up on shares but they could have just as easily bought options. Sure they play the market but the sudden increase in share price has everything to do with shorts and high frequency trading.

    • larryg

      i was about to write the same thing.

      Thanks for this post

    • Keith too

      Covering shorts is minor blip compared to the investment houses loading up lately.

      http://wmpoweruser.com/morgan-stanley-increase-their-nokia-holdings-by-700-in-q2/

  • rwtertwret
    • twig

      That may be a very bad thing for google right now. They are talking anti trust suit again and one of the things is to take away its “monopoly” gotten gains. Every country is trying to raise money to keep themselves in power and google has a huge target on its back.

      • Noki

        but the company that has 95% of the desktop market does not have a “huge target on its back”?

  • stylinred

    glad i purchased when it was a lot lower :)

  • ms.nokia

    me so happy :)

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  • http://www.fonecrazy.wordpress.com fonecrazy

    They probably know that Microsoft or someone else is going to take over Nokia in the near future..the only reason I can see..

  • Bob

    So what does it mean when investment firms short a stock – does it mean, in simple terms, they think the stock will rise or fall?

    If I am right what I am reading about Nokia’s stock rising on the stock being shorted means, in simple terms, that a lot of big firms think that Nokia’s stock will actually collapse, and have positioned themselves accordingly by shorting Nokia stock.

    But just in case, as they see the stock rising slightly, they buy Nokia stock just to cover themselves – that act of buying Nokia stock to cover their short positions means that the stock rises higher again.

    In other words, Nokia’s stock rising now might not mean that the big investment firms actually believe that a recovery is coming – rather they are still shorting Nokia heavily because they think the share price will collapse further again… but by covering their short stock positions the are causing the stock to rise?

    So the rising price of Nokia now might look good to small investors but it is in fact a red herring?

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