I wrote this today over on the Nokia Board. InCards is really into that stock and I love his analysis. You can check out the details over there if you are interested."Until today, in the last 6 years, NOK has never closed the week above $30." - InCardsWhat you have described is an excellent way to measure progress. Nokia's price first went over $30 for one day. Today it made that move again, but it ended the week there too. This can be taken two ways. Was today just another day or was it a weekly trend? We are close to a major high as you noted. Of course, we are still at only half of the $60 previous highs from 2000. Investors have paid a much higher multiple for Nokia in the past.Anyway, the next step is to end a month above $30/share...and then a year! The real question is, "What is the true value of Nokia shares?" That is my business. I try to spot value.http://quote.fool.com/chart.aspx?s=NOK&q=l&l=off&t=myIf we can simply ignore the three years of data from 1999 to 2002, we may see the real value building in Nokia. As the business grows, expands production, improves their designs, increases productivity and grows again, the underlying value shows itself in the share price. The exponential growth of the business becomes readily apparent. This is exactly what I love to find in any company that I own. Or, more accurately, I own the company because I can see this healthy pattern developing. This is sort of a chicken and egg paradox. Nokia's price may be a little high right now, but the future is looking great. I would not blame anyone for taking a profit here, but why? Do you have another place to put the cash where the prospects are better? A Compound Annual Growth Rate (CAGR) evaluation of this data shows a 17% average rate with the high CAGR at 20% and the low CAGR at 10%. However, I would ignore the data from May to September of 2004 as irrationally low...just as the data from 1999 to 2002 was irationally high. Mr. Market has a hard time with accurately valuing stocks when investors get irrational...and investors are irrational by nature. Anyway, if we ignore the short-term lows from 2004, the low CAGR is 14%, 17% is the average and 20% is the high. We are closer to the highs right now. Then again, we have more earnings reports to come. The nice thing about Nokia's 17% average CAGR stock price is that the earnings have been growing at about that same rate for years. Thus, the share price is presently rising at a reasonable, rational, and sustainable rate. This is boring to may investors who love excitement, but it is how many other investors get rich. By the way, this is another example of irrational logic on the part of short-term investors.It has proven to be rather hard to lose any money buying Nokia at $11/share in 2004...or at $14/share in 2004 and 2005. The dividend was over 4% at the time and has increased yearly ever since. The better news is the share price has increased at a CAGR of 39.7%! Thus, a buyer at the lows of 2004 has enjoyed a total annual return of over 40%. That's not bad for a company growing earnings at about 17%. Then again, there is nothing wrong with a 17% return plus a 2% dividend either. Like I asked earlier, where else can an investor get a better return?So, we should expect to see the price of Nokia end a year above $30/share in the future. Will this be the year? I have no idea but I know that Nokia is a great company and the stock has proven to be a great investment. Nokia seems to be on a sustainable roll and I see no reason to sell my shares until I find something that looks better.Maybe some of the readers here have some better ideas. I would love to hear them.
Jim, Thanks for taking the time to comment on NOK on the Nokia board (and here). Good post. I'll be hanging out the "Gone Fishing" sign in an hour or so but later this week I'll attempt to comment back over there on some of the points you made, because I think they are worthy of comment. Best to you and all here ... - Eric (InCards) -
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