The Smartphone Stock You Should Be Buying, but Aren’t

Just as no two versions of Android are exactly alike, no two Android handset makers are exactly alike, either. Right now, none look quite as good as Taiwan's HTC.

Most U.S. investors only know HTC for its Android partnership with Google (Nasdaq: GOOG  ) , which has yielded the hit EVO, Inspire, and Thunderbolt smartphones. The Thunderbolt, in particular, has outsold the iPhone in some locations and delivered scorching 4G download speeds in a recent test of Verizon's (NYSE: VZ  ) network.

But there's more to HTC than its handsets. Relationships with AT&T (NYSE: T  ) , Sprint Nextel (NYSE: S  ) , and of course Verizon helped the company record massive first-quarter earnings gains and overtake Nokia (NYSE: NOK  ) as the world's third-largest phonemaker by market value, Bloomberg reports.

Profits more than tripled to 14.8 billion in New Taiwan Dollars (NT$) in the first quarter, well above the 12.8 billion analysts were expecting. They're calling for NT$16.4 billion in second-quarter earnings, Bloomberg reports, some of which should come from its soon-to-ship Flyer tablet.

Frankly, there's only one problem with HTC. You can't buy stock in the company here in the U.S. unless you have a brokerage account that allows you to buy directly on the Taiwan exchange. HTC trades under the numerical ticker "2498" in Taipei.

Too bad. According to Capital IQ data, HTC outperforms Apple (Nasdaq: AAPL  ) in terms of returns on capital and equity. While the Mac maker trades for less -- 23 versus 36 times trailing normalized earnings -- it's hard to call HTC overvalued when the company is positioned to lead Android to a 50% global share of the handset market before the end of next year. If anything, the data have me wondering if I should open an account with the foreign trading privileges needed to buy HTC shares.

Do you agree? Disagree? Let us know what you think about HTC's results, the evolving Android market, and how Google will profit from it all using the comments box below.

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Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Apple and Google and has written Apple puts. The Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is off to the store to stock up on fruits and veggies.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 11, 2011, at 2:49 PM, deemery wrote:

    Well, you need to look at the longer term history of HTC. They're doing well now, but before they nearly took the big Suck Pill with their dependence on Windows Mobile.

  • Report this Comment On April 12, 2011, at 2:19 AM, TempoAllegro wrote:

    You can get exposure you HTC through two ETF's: EWT, iShares Taiwan, which has just over 6% of its assets in HTC, and DEM, WisdomTree Emerging Markets Equity Income Fund, which has just under 3%.

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