Short Sale Of The Week: Research In Motion

| About: BlackBerry Ltd. (BBRY)


The greatest recent invention known to man since Square will be released Wednesday and people will wake up at 4 AM to drive all the way to Best Buy (NYSE:BBY) or Target (NYSE:TGT) to buy it. Workers will "get sick." Students will skip school and your current girlfriend will break up with you if you don't bring her a BlackBerry 10 before the end of the day.

Leave your wallet and all your credit cards at home. Except the one that you are going to use to buy your new phones. Wednesday your chances of getting mugged will increase exponentially. Mara Salvatrucha's employees need their new smart phones too.

This article explains to you how to make enough cash to buy enough smart phones for all your teenage daughters in just a few weeks or days. This article assumes that you know what a short sale is. If you don't know then I suggest you to see the films Casino Royale starring Daniel Craig and The Taking of Pelham 123 starring Denzel Washington.

The short-term trade

There are two sides in this economic war against or in favor of Research in Motion (RIMM). On one corner there are the longs: They believe, like me, that Research in Motion is undervalued and they also believe the new BlackBerry 10 will be a huge success worldwide and will sell enough phones to claim the number four OS position behind Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT). On another corner there are the shorts: They believe nobody will buy the BlackBerry 10 and the company will be acquired within 18 months by Lenovo of China, Nokia of Finland, Dell or HP of the United States of America, Umbrella or Weyland-Yutani.

You can read more about potential buyers of Research in Motion here or here.

The logic is simple: If the BlackBerry 10 sells then the stock goes up. If the BlackBerry 10 does not sell then the stock goes down. People will watch very closely any news about sales and will react as usual buying a lot of shares Wednesday. I expect a volume of at least 100,000,000.

This extraordinary volume will get a lot of press coverage and the stock will be the second most traded stock in the Nasdaq behind Intel (NASDAQ:INTC). Extremely good news or extremely bad news about another company could send Research in Motion to the third place; that is highly unlikely but still possible.

As soon as the stock goes up by more than the rest of the Nasdaq more and more individual shareholders will buy a few shares in small quantities and the price will go up by a lot. If the stock goes up then people will buy more shares.

At some point the institutional investors will calculate the company is now overvalued and they will sell short the company. This does not mean there is something wrong with the company or that they do not believe the BlackBerry 10 will be a success. Their long-term strategy for the company is still the same as yesterday. Buy low Sell high.

You can reach me in real time and I can tell you exactly when to cover your position. All I need from you is the price you paid for the shares, the commission from your broker and the number of shares. I only have 13 followers. I read everything you send.

How do I make money?

Sell short Research in Motion Wednesday and cover after a few weeks or days. Remember, this is only a short-term trade. I still believe Research in Motion is undervalued and I still believe the BlackBerry 10 will sell. Unfortunately, millions of individual shareholders will do exactly the same trade.


Institutional investors already invested in Research in Motion a few weeks ago and they are sitting this one out. They are not going to rush to buy shares Wednesday. Only individual shareholders will be trading. Many shareholders will be scared after their shares drop because a few individual investors sold some of their shares and at that point in time is when we cover our positions.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.