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Research In Motion: An Opportunistic Play For Long-Term Investors
Posted by: Anh Hoang (IP Logged)
Date: September 28, 2012 02:09PM

Research in Motion (RIMM) has been a controversial stock for the last 2 years. Historically, RIMM made a lot of money for investors from 2004 to 2008, but it has also evaporated billions of dollars of shareholders’ wealth since 2008. Here is RIMM’s stock chart in 10 years:



What a roller coaster! In 2004, RIMM’s stock price was around $10, and then it shot up to nearly $145 in June 2008. In those 4.5 years, it was a 14-bagger stock. Since then, its price has been fluctuating on the way down. In 2008, it was $80 billion company, and now the market capitalization is just around $3.7 billion, a destruction of more than $75 billion in shareholders’ wealth.

The shareholders’ wealth destruction is due to eroding competitive advantages of its mainstream products, Blackberry, in the smartphone market. The popularity of Apple’s (AAPL) iPhone and other smartphones running on Android system has replaced Blackberry growth. According to International Data Corporation (IDC), Android and iOS had 85% of all smartphones shipped in the second quarter of 2012, marking a new high for mobile operating systems from Google (GOOG) and Apple. The former leaders of the smartphone market including Blackberry and Symbian saw their market shares decline to below 5%. IDC commented: “BlackBerry, one of the pioneers and former leaders in the worldwide smartphone market, reached share levels not seen since the first quarter of 2009. BlackBerry has lost significant share to other operating systems in the consumer and enterprise segments. Now that RIM has delayed the release of new BlackBerry 10 smartphones out to 2013, BlackBerry remains vulnerable to the competition.”

However, there is always an opportunity in any crisis. Is RIMM a great opportunity for long-term investors? Many investment gurus are bullish on RIMM. Prem Watsa, Chairman and CEO of Fairfax Financial (FRFHF.PK), in Fairfax Financial Dinner in May, said that RIMM remained number 1 in many markets. It had $2.1 billion in cash and no debt. He thought Mike Lazaridis was a genius. He also likes Thorton Heins and he was happy to be RIMM’s shareholder. Francis Chou, from Chou Associates Management, claimed that RIMM’s patents alone were worth $13 per share. In addition, according to gurufocus.com, Donald Yacktman, Joel Greenblatt, John Burbank and John Keeley have been buying RIMM for their portfolios.

Yesterday, RIMM just reported a narrower loss than analysts’ projections. The positive outcome has come from the growth of Blackberry subscribers in overseas markets such as India, Indonesia and South Africa. Analysts expected that RIMM’s loss in the second quarter would be 47 cents on average, but it turned out to be only 27 cents. Blackberry’s subscribers are increasing from 78 billion to 80 billion globally. In Q2, revenue was $2.9 billion, a 2% increase from $2.8 billion in Q1. Operating cash flow was $432 million, and cash increased to $2.3 billion. An analyst of Veritas Investment Research commented that RIMM didn’t burn through cash, which was calming investors down. “Investors are thinking: Perhaps they have a chance to come back.” It seems that although RIMM lost its US market share to Apple’s iPhone and Google’s Android software, it could gain customers in lower income markets.

After the positive Q2’s operating result announcement, RIMM’s share price jumped more than 20% in aftermarket trading. It closed 27th September trading day at $7.14 per share. Currently, RIMM is trading at only 1.4x P/CF and 0.4x P/B. It is definitely the cheapest compared to Apple, Google and Nokia (NOK).

Valuations P/CF P/B P/E
RIMM 1.4 0.4 N/A
AAPL 12.3 5.7 16
GOOG 15.7 3.8 22.3
NOK 7.7 0.9 N/A

Investors who buy in RIMM might be opportunistic. RIMM has been widely considered as a liquidation or buyout play. Of course, nobody can time the market. I think at the current price, RIMM could be a good stock for long-term investors to hold and wait for good news of the buyout or improvement in RIMM’s business operating performance.

Dislosure: Long RIMM




Guru Discussed: Donald Yacktman: Current Portfolio, Stock Picks
Francis Chou: Current Portfolio, Stock Picks
Stocks Discussed: RIMM, AAPL, GOOG, NOK,
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Rating: 3.3/5 (27 votes)



Re Research In Motion An Opportunistic Play For Long-Term Investors
Posted by: roark1 (IP Logged)
Date: September 28, 2012 03:52PM

I purchased a small position in RIMM a few months ago. The stock has been (justifiably) crushed. At this price, seems to offer asymmetric outcomes- little downside and significant possible upside. I don't feel confident making a large bet (like Watsa has), but I feel comfortable holding a small position in my portfolio as a speculation.



Guru Discussed: Donald Yacktman: Current Portfolio, Stock Picks
Francis Chou: Current Portfolio, Stock Picks
Stocks Discussed: RIMM, AAPL, GOOG, NOK,
Rate this post:

Rating: 4.0/5 (1 vote)



Re Research In Motion An Opportunistic Play For Long-Term Investors
Posted by: ecotycoon (IP Logged)
Date: September 28, 2012 06:49PM

Great post Ahn Hoang, i just feel like Benjamin Roth during the great depression i wish i had more money to profit from this opportunity:

I recently bought the book "MOATS Competitive Advantages of Buffets & Munger Business" i read your chapter on Scott Fetzer and love that, thank for sharing Ahn Hoang :)



Guru Discussed: Donald Yacktman: Current Portfolio, Stock Picks
Francis Chou: Current Portfolio, Stock Picks
Stocks Discussed: RIMM, AAPL, GOOG, NOK,
Rate this post:

Rating: 5.0/5 (1 vote)



Re Research In Motion An Opportunistic Play For Long-Term Investors
Posted by: yhlbb (IP Logged)
Date: September 28, 2012 11:10PM

I bought 100 shares of RIMM on 10/21/2008 and sold them on 1/21/2011 (RIMM was still making good money when I sold the shares). Too stressful to own the stock.

I agree with Steve Jobs' observation about RIM (Oct. 2010):

"They must look beyond their area of strength and comfort, into the unfamiliar territory of trying to become a software platform company. I think it's going to be a challenge for them, to create a competitive platform, and to convince developers to create apps for yet a third software platform after iOS and Android. With 300,000 apps on Apple's App Store, RIM has a high mountain ahead of them to climb."



Guru Discussed: Donald Yacktman: Current Portfolio, Stock Picks
Francis Chou: Current Portfolio, Stock Picks
Stocks Discussed: RIMM, AAPL, GOOG, NOK,
Rate this post:

Rating: 1.5/5 (2 votes)



Re Research In Motion An Opportunistic Play For Long-Term Investors
Posted by: 20punches (IP Logged)
Date: September 29, 2012 12:04AM

If I am not mistaken, both Prem Watsa and Francis Chou are based in Canada and most of us are aware of the home market bias. I agree RIIM appears to be cheap now but it looks to me buying RIMM at this point is more like speculation than intelligent investing. The margins are deteriorating, which is often a screaming sign of value trap, the management is slow in reacting to the changing environment. Why not stay away from trouble and sleep better?



Guru Discussed: Donald Yacktman: Current Portfolio, Stock Picks
Francis Chou: Current Portfolio, Stock Picks
Stocks Discussed: RIMM, AAPL, GOOG, NOK,
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Rating: 0.0/5 (0 votes)



Re Research In Motion An Opportunistic Play For Long-Term Investors
Posted by: batbeer2 (IP Logged)
Date: September 29, 2012 02:32AM

Is it just me or was RIMM briefly trading at a discount to NCAV earlier this week?
NCAV now stands at 6.3B-3B => $ 3.3B.

1) A $ 3B NCAV bargain, half of that cold cash, 0 debt, and a guru on the board. That's a pretty rare beast. In fact, I can't remember seeing such a beast ever before.

2) RIMM spent more than $ 3B on Capex alone in the last four years.

Is the market knowledgeable enough to discount the future with enough certainty to justify a discount to NCAV?
With brilliant and shareholder-friendly capital allocators at the helm?
I'm not, so I picked up some shares.



Guru Discussed: Donald Yacktman: Current Portfolio, Stock Picks
Francis Chou: Current Portfolio, Stock Picks
Stocks Discussed: RIMM, AAPL, GOOG, NOK,
Rate this post:

Rating: 4.0/5 (1 vote)



Re Research In Motion An Opportunistic Play For Long-Term Investors
Posted by: ken_hoang (IP Logged)
Date: September 29, 2012 09:25PM

@Roak: yes, and it should be long term.
@ecotycoon: Thanks for your compliment. Hope you enjoy it. feel free to discuss investment ideas.
@yhlbb: you have to ignore the fluctuations in the market price. The more you look at it, the more stressful you are. It's hard to know anyway, but there is high probability (not certainly) of profits from RIMM investments at this price.
@Jianing: Just a part of the portfolio, tech is wild animals, you never know about tomorrow. Even Apple can be great, but who knows, RIMM was great before. Or Apple dated back 2000-2002.
@batbeer: true, NCAV, sounds crazy right? I was buying RIMM for nearly a year now.



Guru Discussed: Donald Yacktman: Current Portfolio, Stock Picks
Francis Chou: Current Portfolio, Stock Picks
Stocks Discussed: RIMM, AAPL, GOOG, NOK,
Rate this post:

Rating: 2.0/5 (1 vote)



Re Research In Motion An Opportunistic Play For Long-Term Investors
Posted by: marcolanaro (IP Logged)
Date: September 30, 2012 02:39AM

RIM really looks cheap but I believe that needs to change course, falling revenues are an indication that there is no other path than finding a new revenue model. Said that, the good news is that they have the resources to survive for quite some time while they work on BB10. And much depend on it. If it is successful the stock will shoot up, if not then liquidation or selling it self becomes a real possible outcome and in this case I still do not see how anyone buying at this level can lose money. Maybe not making any money but losing it is very difficult. Since I think everything depends on BB10 and that has to happen in a few months I bought calls options out-of-the-money at strike $20 jan 2014. I also bought fairfax stock which is a way to participate indirectly.



Guru Discussed: Donald Yacktman: Current Portfolio, Stock Picks
Francis Chou: Current Portfolio, Stock Picks
Stocks Discussed: RIMM, AAPL, GOOG, NOK,
Rate this post:

Rating: 0.0/5 (0 votes)





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