Fear And Greed In The BlackBerry Jungle

Mar.20.13 | About: BlackBerry Ltd. (BBRY)

Fear and Greed in the Jungle

I follow all the stocks I hold closely. In order to do so, I keep my portfolio relatively small and track my holdings several times each day. Generally the news, analysis and opinion pieces are balanced for my holdings. I read bullish, bearish and neutral reports as it all informs the buy and sell decisions.

BlackBerry (NASDAQ:BBRY) is a Different Creature Than Most Stocks in the Jungle

I have taken up the challenge of writing a viewpoint piece on BlackBerry to counter the massive number of pieces available on the web that are decidedly bearish. Some present logical analysis and discuss real risks but far more are inaccurate, biased or misleading (often all three) Instead of offering insight, the articles are plain and simple "fearmongering." When financial data / facts are included they tend to be backward looking.

Bulletin Boards - Virulent Pieces

Occasionally, I like to check out a few bulletin boards. The boards themselves do not generally offer much insight but often supply a link to breaking news, some country specific event or a tidbit (or perhaps a timbit) of analysis. What got my ire recently were some particularly virulent comments made by both bears and bulls on some well known bulletin boards. Over time, I realized the comments were simply mirroring the fear and greed of the investors.

The same fear and greed has been appearing in the more traditional internet media outlets. A few weeks ago, no one knew how the new BlackBerry devices and OS would do. For a few days after the release, even BlackBerry's executives had to wait for UK data to come in.

In the days after the release, I noticed a campaign of fear and misinformation (or at least poorly interpreted information) all over the web. It seemed to me that "forces" were trying to kill the new BlackBerry's before they had a chance to hit the shelves.

Campaign of Fear

The shorts attempted a pre-emptive coup by spreading innuendo about BlackBerry stock, management, phone, operating system and lack of apps. It was implied that the phone wasn't good enough. Consumers had moved on, there was too much competition in the enterprise space, etc. I was looking for balanced pieces that I could use to evaluate my investment decision. It was rare to find a balanced piece of writing / analysis.

Short Positions

Many shorts made their bets months ago. Depending on when they went short, some have made a very healthy profit and some are underwater. Recently BlackBerry was in the $18 range, so there are recent shorts that have done well.

In October, BlackBerry had bottomed and was moving upward - this was perceived by some to be the classic "dead cat bounce." Shorting BBRY was seen as a "no brainer." If BlackBerry didn't tank on its own - the uncertainly of its prospects combined with any one of the following events ...

  • an uncertain election result
  • the Greek/Euro crisis
  • a hard landing in China
  • a questionable jobs/housing outlook
  • the potential for a change in Fed direction under a Romney Presidency
  • the sequestration
  • the Iran nuclear device crisis
  • the North Korean thing
  • a general market reversal
  • and the Cyprus banking issue (not to belittle the issues in Cyprus, its population is 1/4 that of greater Detroit)

... would allow a convenient and profitable exit strategy.

If You Were Short and Confident (Knowing)

If your were short and had insight that regular folks just didn't grasp, wouldn't you let this stock run? Wouldn't it be nice to let the longs believe that BlackBerry was going to take over the entire smartphone space, let the stock run way up, then short the heck out of it when real data made it clear to the "little people" that BlackBerry was a flop.

Why the fear tactic - The shorts don't know any more than you or me. They rely on a few analysts and available data. The difficulty in their positions is that they were taken before a great deal of positive data was available. It was a case of deciding if you should swing at the pitch before the pitcher has finished his wind up.

The fear tactics started early. Before the launch and after we read:

  • That the lack of apps would make it nearly impossible for Blackberry to succeed - while research challenges that view.
  • The user interface was not intuitive. I'd like too counter that view as well. - Ever played Peek-a-Boo with a three old? They can easily hide behind a curtain and make themselves invisible. Sliding the curtain they reveal themselves. Good for hours of fun. The BlackBerry hub / message centre works just as intuitively. In fact, at one time I had a cat that played Peek-a-Boo. If my cat can do it - most users will figure it out too.
  • Consumers would not buy it in numbers. Really?

Contrarian Indicator

The overwhelming number of negative articles about BlackBerry suggests that we are witnessing a contrarian indicator of massive significance. Several weeks ago, in a piece entitled Doing the Little Things Right, I proposed that BlackBerry's staggered and continuous releases were providing a tremendous guerilla marketing effect.

It seems that early success of the Z10 induced a huge counter attack in the investment news world. I've counted as many as 68 Yahoo links in a singe day. However, the shear number or pieces has backfired. Instead of one or two well written/researched pieces to create doubt in the minds of investors, the volume of poorly researched and articulated pieces exposed their positions and made their objectives known >>> To ensure that anyone searching for BlackBerry news would come up with negative press daily. To kill the BBB (BlackBerry Beast) in its infancy.

In the Art of War, by Sun Tzu it is written:

"Be extremely subtle, even to the point of formlessness. Be extremely mysterious, even to the point of soundlessness. Thereby you can be the director of the opponent's fate."

Another wise man, my father said,

'Son when you are playing poker, it's best not to let me see your cards.'

The Next Several Quarters

BlackBerry's stratified product release by product, by country and by time sequence has allowed for scaling of production and inventory. Initial sales data in one country enable right sizing of product release for the next. As this process is repeated over the next several quarters, country by country, and product by product we can be assured of one thing. A graph of the numbers that BlackBerry will be releasing each quarter will be sloping upwards.

Short Squeeze - Bear Hug

I don't think we are going to get a classic, sudden, bombastic short squeeze - instead I see a gentle "bear hug" that slowly lets the air out. In a follow up article, I'll suggest how I'd play it.

Endnote: This article was intended for release before the market opened Wednesday March 20.

Disclosure: I am long BBRY. 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.

Additional disclosure: I haven taken a long position, but re-evaluate my position daily as information becomes know. This stock can be very volatile. Whether long, short or hedged >> proceed with caution.