Research in Motion Warns, But Do Individual Stocks Matter Anymore?

| About: BlackBerry Ltd. (BBRY)

So much for that early strength, but nothing matters until 3 PM. Things have gotten so dysfunctional in individual stocks that I have not looked at any of my watchlists since over a week ago. I have a series of about 12 watch lists, sorted by sector, with a few lists as "misc" (various sectors) and I sort it by best performance on the day to worst. In the old days I used to go look up the extremes (best and worst) for the day to see if there was news, what the charts looked like, are they breaking out, breaking down - is there a compelling buy? a place to begin to layer out?

Now? None of that. The only thing anyone looks at are indexes and ETFs. I'm the same. Why bother when 2 PE stocks can lose 50% and go to 1 PE stocks. Valuations have meant nothing; no sector leads for more than 2 days.Today it's a bogus rally in retail on the "hopes" of $1.50 gasoline and lower mortgage rates. Wow the exact same thesis that was told to us 3 months ago at $2.50 gasoline.

That worked out well. But today it's retail that is great to buy, whereas Monday this group was the hardest hit. This goes back to one of my 9 points - there is no leadership. You cannot own a stock and ride it for weeks or months anymore, outside of a handful of niche companies that are doing ok.

An excellent commentary from a gentleman I read on RealMoney.com - once again this market has taken everything anyone has learned for decades and made it moot. A person walking off the street and starting to "invest" today has the same skill set as most of us at this point in trying to handle this beast. To his point, we've been sitting in a large pile of cash for quite a while now. The piece of our portfolio we do expose to this market gets whipped around on a daily basis with zero rhyme or reason:

The current market has been particularly hard on anyone who has been trying to stick with a consistent methodology. Not only have most major approaches been rendered useless, but this very ugly bear market and the increased volatility make any sort of discipline a sure way to lock in losses. There simply is no way to avoid having reasonable stops triggered in a market that moves up and down as much and as quickly as this one. When the Russell 2000 index goes down 11% one day and up 5% the next, you can forget any sort of logic, unless you have a time frame of one day or less.

So what do we do? We acknowledge that we are in a period where most normal trading or investing methodologies won't work well. We just have to stand aside and let it play out. Eventually things will shift and more normal trading will resume, but it may take a while.

Unfortunately, way too many investors refuse to be patient when things aren't working. They try to come up with new styles and approaches and probably end up making things even more volatile than they already are.

It will help tremendously if you simply admit that this is not a market that you can approach like a normal bull market. It won't work, and it will likely lead to a steady stream of losses.

We need to be consistent in making sure we do things necessary to protect our capital, and in a market that is as inconsistent as this one, that means staying out of the way and not doing what we normally might.


Anyhow the point is, at this time I miss a lot of individual company news because in the old days when a stock was down a lot, there was usually a reason. A news event. Now, it just gets lost in the mess - stocks are down 15% for no reason other than the market is open that day. You can't tell any news flow from stock action - it is so haphazard. I did catch this Research in Motion (RIMM) warning only because it's on the front page of every financial media site - but the stock was up earlier on the day (now flat to slightly down); par for the course in the market.

  • BlackBerry maker Research in Motion Ltd. on Tuesday lowered its forecast for its third-quarter revenue and earnings per share, citing the impact of the strong dollar and the weak U.S. economy.
  • The Waterloo, Ontario-based company said it now expects its adjusted earnings per share to be in a range between 81 cents and 83 cents for the quarter that ended Nov. 29. That's down from its initial forecast of between 89 cents and 97 cents per share.
  • It said it now expects third-quarter revenue to be in a range between $2.75 billion and $2.78 billion, down from a previous range of $2.95 billion to $3.10 billion.
  • RIM said two-thirds of the difference in the revenue forecast was due to lower-than-estimated unit shipments of existing products, which it attributed to the weak U.S. economy and shifts in product launch dates within the quarter.
  • It said its gross margin for the quarter would be between 45 and 46 percent, which it described as lower than expected.
  • But it cited strong customer response to its new BlackBerry phones launched in the current quarter and noted "strong momentum" in recent weeks.

Some analyst reaction:

  • "Basically, Research In Motion is experiencing the effects of the slowing economy like other vendors of handsets and general consumer electronics devices," said First Analysis Securities Corp analyst Scott Pope.
  • Investors and analysts have long worried that the slowdown in the economy could prompt corporate customers to delay upgrading their BlackBerry models from earlier versions in a bid to clamp down on costs.
  • "Since Research In Motion has entered the consumer space ... they are going to experience a revenue hit from slowing consumer spending," Pope said.
  • "There's a sense out there that RIM has too many products on the go simultaneously," said Duncan Stewart, technology analyst at DSAM Consulting in Toronto, adding the lower outlook announced on Tuesday night was "pretty much built into the market expectations."

Disclosure: Long Research in Motion in fund; no personal position

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