Our Bet on Nokia’s Cash Pile Pays Off

Andy Snyder|April 30, 2021

We were in New York this week… on Wall Street, to be exact.

We were there to meet with a reporter, someone you’ve likely seen before. We discussed our favorite niche in the stock market right now.

It’s booming… with nearly 700 new opportunities this year.

We had a great interview, but we need to hold our thoughts on it for now.

We’ll let the tape speak for itself.

Right now, we must revisit something we sent you earlier this week.

We sure hope you followed our advice.

Cash Is King!

As you may recall, we ended our thoughts about cash-rich Nokia (NOK) on Monday with these words about its conservative financials:

For investors looking for a good bargain, it’s a sign the market may have shaved a bit too much off of Nokia’s price.

Perhaps we’ll find out when the company opens its books next Thursday.

Shortly after we left the NYSE building, the tech giant put a bow on its first quarter earnings and pushed them onto the wires.

The news – as our bullish take earlier in the week predicted – was quite good.

The stock soared… up 16% at yesterday’s open.

Again, we hope you paid attention to what we wrote on Monday.

Preparing for Battle

We can see the benefit of the company’s cash hoard throughout its earnings report.

Perhaps the most telling bit of commentary from the corner suite was the CEO’s promise to do “whatever it takes” to lead the 5G space. It’s those words that highlight why the company has been stockpiling cash in recent months and not handing it to shareholders in the form of dividends or using it to acquire other firms.

That’s the thing with a stash of corporate cash. It was the aim of our piece earlier in the week.

Cash in the bank is a powerful tool. Too many investors overlook its power. Many more think it will be washed away by inflation.

In the long term, they may be right.

But a short-term pile of cash is a wonderful thing.

In the case of Nokia, building its reserves has been quite strategic. It cut its dividend last year, specifically stating its intent to focus strongly on building positive free cash flow.

It worked. Cash on hand has risen from $5.7 billion in 2019 to more than $10.6 billion today.

It equates to roughly half the company’s valuation.

In just the last year, net cash (that’s cash minus debt) has surged by 180%. That’s huge.

But now is when the company must make good on its promises.

5G or Bust

Its growth depends heavily on the rollout of 5G throughout the globe. It’s a trend that has stirred plenty of impatience amongst investors – and not just Nokia’s investors.

Reading through the company’s stated risk factors, nearly all of them hinge on 5G and its stiff competition.

It’s why cash is so important.

The 5G race isn’t about who has the best product or the better margins. No, it’s all about who gets to market the fastest. The company that creates the largest coverage blanket will win.

And the way to do it… is by spending money.

That means there’s just one metric to watch from here. We know Nokia has the cash. But does it have the guts and the smarts to spend it wisely?

If shares are to rise from here, it must start spending some of its cash.

No matter what the future holds… congratulations on a big and quick gain.

If you followed our advice on Monday, you’re sitting on a nice, quick, Manward-style win.

P.S. The truth is we’re not much of a fan of 5G. The rollout is too slow, and a new and better technology is already roaring across the horizon. We recently detailed the whole situation and how you can play it… here.