There is always at least one stock present in the market that is used as a trading vehicle by fund managers, brokerage houses and speculators - recently, that stock has been BlackBerry (NASDAQ:BBRY). However, the overall trend of BlackBerry has been upward in the past six months, and the stock has gained over 75% during the same period. Over the last three months, however, the trend has been negative and we have seen a decline of about 3% in the price.
The main reason has been excessive trading by some fund managers, speculators and brokerage houses. The brokerage houses are always primary beneficiaries of an actively traded stock in shape of commission, which gives an incentive to induce excessive trading. Nonetheless, savvy investors have made a considerable amount of money trading BlackBerry in the past six months, and the trend is expected to continue.
Short Interest Indicating Short-Term Trend
Short interest for BlackBerry has been rising gradually and stood at 33.2% of the total float in the middle of the last month. If we analyze the trend in short interest; we will see that more and more traders and investors are betting against the success of the company - the market believes that the stock is reaching a point where it will start to retract.
The technology industry is extremely competitive and it is especially difficult for companies to make a comeback in the smartphones market. As a result, it is normal for a large number of investors to be skeptical. However, an important fact is being ignored here - the company is managing its business and product portfolio extremely well, and it will not need to reach Apple's (NASDAQ:AAPL) or Samsung's (OTC:SSNLF) level to survive. BlackBerry can easily carve out a niche and become profitable in the long term.
A large short interest can be beneficial for the long-term investors or short-term traders with a positive outlook for the company. There can be a massive mismatch between demand and supply in case of a positive event, which will cause the stock price to shoot up. As I have mentioned at the start of the article, the overall trend over the past six months has been positive for the stock, and with the launch of new products over the year; we might not see a reversal - short sellers are betting against the trend. It might also suggest that these short sellers are seeing a decline in stock price in the short term, which they want to benefit from. However, even if there is a decline in the stock price in the short term; it will be temporary, in my opinion, and long-term investors might start picking up more shares considering the undervalued nature of the stock.
Q 10, Another Successful Addition to the Portfolio?
I mentioned in my previous articles that Q 10 will be a success as a lot of users are waiting for the handset with the traditional keyboard. The early sales of the handset are extremely encouraging - Q 10 is sold out in Canada and the U.K. The company has followed the same path as it used with the previous launch of Z10. Jeffries analyst, Peter Misek said in a note to clients that the handset was selling extremely well and has been sold out or seeing limited availability.
Users as well as reviewers have been extremely impressed by Q10, and positive response about the product drove the stock price. Furthermore, brokerage houses are also making positive noises about the stock. The company has not yet launched Z10 in all the major markets; we are still seeing Z10 being launched in new territories (Nigeria and Tanzania). So, the focus has been turned to Q10 but we cannot discount the sales from Z10. There will also be an increase in sales for Z10, which will result in substantially improved sales for the quarter.
The long-term future of the company is secure, in my opinion. The products are doing well, costs are under control and the strategy is efficiently executed. However, in the short term, the stock will continue to be a choice of traders as well as brokers. BlackBerry is one of the most actively traded stocks in the market, which makes it an easy target for traders, speculators, funds and brokerage houses. As a result, long-term investors will have to be patient in the short term as the activities of these players might impact BlackBerry negatively in the short term.
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.