Thesis & Catalyst For BlackBerry (BBRY)
A Compelling Long Case For BlackBerry
The rollout of BlackBerry's next generation software and devices was nothing short of genius. Releasing the Z10 to draw in new users from iOS and Android several months before the Q10 was a brilliant move. The Z10 has achieved what it set out to do, and drew more than 50% of its buyers from the iOS or Android user base.
Meanwhile, the Q10 remains a huge catalyst for the company. Due to the pent up demand, early reports from the U.K. and Canada have indicated sellouts in most locations.
With time, the comparisons between Steve Jobs and Thorsten will prove true. I would encourage you to watch the recent discussion featuring Thorsten at the Milken Conference (www.youtube.com/watch?v=dRaXfU_JgP8) regarding his vision for futuristic mobile computing.
The reason the stock remains depressed is two-fold. Years of poor management have led the company to lose money quarter of over quarter, until the last one, when BBRY reported a surprise profit by managing supply of BB7 phones exceptionally well and conserve cash.
Two reputable analysts, Ehud Gelblum and Peter Misek, of Morgan Stanley and Jefferies respectively, are both bullish on the stock.
So why does the stock remain depressed? There is strong evidence that short sellers, who control over 30% of the float, are manipulating the stock price, with the help of a few never-heard-of investment banks and analysts. These "analysts" have a knack for publishing "research reports", that have been typically speculative thoughts that have no basis in fact whatsoever; Most notably one of these analysts published a note claiming the Z10's "returns exceeded sales." (See: blogs.wsj.com/digits/2013/04/11/analyst-.../). Seeking Alpha contributor Michael Collins was the first to point out the ridiculous nature of the claim, and BBRY asked the SEC to look into the particularly egregious note, that likely has no basis in fact.
Having spent a good deal of time working on Wall Street, and armed with a pretty good idea of "how the sausage is made", I am personally of the belief that the bleeding short sellers are in cahoots with the small time brokerage houses to publish negative research whenever the stock is about to break past a resistance level. Research Analysts from reputable investment banks are less likely to engage in market manipulation for obvious reasons. However, in the increasingly competitive, commoditized world of institutional brokerage, these never-heard-of brokerage houses need to do everything they can to earn revenue from clients.
It's really hard to tell who these short sellers are, but my guess is that they are well-capitalized hedge funds. In addition, they are responsible for feeding negative information and reviews on various websites, and will go quite far to keep the stock down. The SEC does not have the bandwidth to crack down on this type of activity.
In any regard, the massive short interest on this stock provides a very real opportunity for bullish investors. The company is generating positive free cash flow and selling quality product; despite short sellers claiming the company is bleeding cash. In time, the shorts will have to cover, creating a domino effect. This could the mother of all short squeezes.
Disclosure: I am long BBRY.
Additional disclosure: I am long BBRY Calls and LEAPS