[Beginner's Guide] 'Samsung Electronics' That Shook Donghak Ants... Is This Really the Right Time to Pick Up?

Editor's Note[Beginner's Guide to Stock Investment] is a smart investment guide for 'Joorini' (stock + beginner). We will kindly and easily explain stock stories that are unfamiliar to beginners.

[Asia Economy Reporter Kwon Jaehee] What is the favorite stock of individual investors?

As everyone expects, it is Samsung Electronics.

Even in last year's bear market, individual investors purchased Samsung Electronics stocks worth nearly 16 trillion KRW.

Despite the passionate love from individual investors, the returns did not meet expectations.

Nevertheless, the securities industry is naming 'Samsung Electronics' as the leading stock this year.

Will Samsung Electronics' stock price live up to individual investors' expectations this year?

Leading Stock of the Year: 'Samsung Electronics'

Asia Economy conducted a survey targeting 13 securities firms (Mirae Asset Securities, NH Investment & Securities, Korea Investment & Securities, Hana Securities, Samsung Securities, KB Securities, Shinhan Investment Corp., Meritz Securities, Kiwoom Securities, Daishin Securities, Yuanta Securities, Hi Investment & Securities, Hyundai Motor Securities) (reported on January 2) and identified 'semiconductors' as the key industry leading the stock market this year.

Among the semiconductor sector, 'Samsung Electronics' was selected as the leading stock.

This is because digitalization is advancing in most industries, and semiconductor demand is structurally increasing.

Also, due to interest rate hikes and recession concerns, semiconductor stocks have fallen significantly, highlighting their undervalued appeal.

Performance of Individual Investors Who Bought 'Samsung Electronics' Last Year

However, it might be puzzling for individual investors who consistently showed love for Samsung Electronics last year.

Individual investors purchased Samsung Electronics stocks worth a total of last year (January 3, 2022 ? December 29, 2022).

This is an overwhelming scale, more than five times the amount of NAVER, the second place, which was 3.23 trillion KRW.

On the other hand, Samsung Electronics' return during this period fell by 29.37%.

This decline is even steeper than the KOSPI index's 25% drop during the same period.

Has Samsung Electronics' Stock Price Hit Bottom?

Samsung Electronics, which made individual investors cry last year.

Moreover, on the 6th, Samsung Electronics announced its preliminary Q4 earnings, recording an 'earnings shock'.

Samsung Electronics announced that its consolidated Q4 preliminary results showed sales of 70 trillion KRW and operating profit of 4.3 trillion KRW.

Compared to the same period last year, sales decreased by 8.58%, and operating profit plummeted by a staggering 69%.

This is the first time in about eight years since Q3 2014 (4.06 trillion KRW) that Samsung Electronics' quarterly operating profit fell below 5 trillion KRW.

So why do experts still consider Samsung Electronics a 'top pick'?

It is because of the expectation of a 'turnaround' (performance improvement).

In fact, Samsung Electronics' stock price rose 1.37% on the day it reported the earnings shock.

Given the stock price characteristic of reflecting bad news in advance, the poor performance due to the semiconductor downcycle was already anticipated, so it did not lead to further stock price declines.

Rather, the dominant interpretation is that the bottom has been confirmed and there is a high possibility of future stock price increases.

Kim Dongwon, Head of Research at KB Securities, analyzed, "Semiconductor stock prices tend to lead by about six months, and the current stock price can be seen as reflecting inventory improvements starting from Q3," adding, "Except for systemic risks such as prolonged global recession, almost all bad news has already been priced in."

The securities industry expects the semiconductor sector to reach a turning point for a rebound in the second half of this year.

In fact, the market size for data center server DRAM and memory semiconductors is gradually expanding.

There is also analysis that the stock price is at a low point.

Samsung Electronics' historical low PBR (price-to-book ratio) is about 1.1 times, and currently, Samsung Electronics' PBR is around 1.35 times.

Kim Rokho, a researcher at Hana Securities, said, "Although earnings forecasts were revised downward this year, Samsung Electronics' PBR is close to the historical lower band at 1.1 times," adding, "It is analyzed that the stock price has bottomed out."

This article is from Asia Economy's weekly publication [Beginner's Guide to Stock Investment]. We explain not only stock-related financial news but also complex economic stories in an easy and friendly way so that stock beginners can understand. By clicking subscribe, you can receive articles for free.

☞Subscribe