Like I said recently, the number of BlackBerry (BBRY) shares sold short as per the latest NASDAQ data has reached record levels and stands at about 147 million shares.
The problem, however, with this trade, is that it's going against the tide. If there was ever a time for investors to follow the time trusted saying of "the trend is your friend," it is with the BlackBerry trade. BlackBerry has been up about 100% over the past several months, and more or less all those trades are underwater.
Many of them are probably hedged you say, but who says hedging is free? And what proof do we actually have that they are hedged? We don't have any. Many people simply assume that they are. And you know what happens when one assumes wrong.
For one thing, if you assume the wrong thing in the markets - without some proof to back your investment or trade thesis - chances are you will lose money. And many people have been assuming that the BlackBerry Z10 would be DOA (dead on arrival) and have shorted the kitchen sink.
Most BlackBerry shorts should be very nervous by now. Not only are they mostly underwater, but if they all decide to cover, chances are that the stock will pop over 30% in a single day (my assumption). I can't recall how many times I have seen the headline: BlackBerry DOA. Not only by newsletter writers and many buy-side analysts at big brokers, but especially from the Apple (NASDAQ:AAPL) crowd.
Remember what I said about the Apple crowd, they are as fanatical and dogmatic as the gold and silver crowd. And in my book, when one has a dogmatic view of things in the market, in the long run he will lose money. It's not every day you hit a home run with a stock like Apple - assuming you bought and held onto it from several years ago. Luck stretches so far in this game, the rest of the time you actually have to do research and try to stay in touch with the trend.
So for all those Apple shareholders, sell-side analysts and newsletter writers that thought BlackBerry was dead as a company, I have a chart for you:
This chart does not look so DOA to me, but rather like a wildfire spreading.
Another thing that doesn't seem so DOA is the purchase order that BlackBerry announced it received yesterday, that was the largest in the company's history:
(Reuters) - BlackBerry's volatile shares surged on Wednesday after the smartphone maker said one of its established partners had placed an order for 1 million BlackBerry 10 smartphones, with shipments set to begin immediately.
Now a one million handset order might not be a big deal for Apple, but it is for BlackBerry. And if one million units is the largest order the company ever received, it means the company is doing better than expected and will also do better than most imagine in the future.
Remember my investment thesis for BlackBerry from the start. BlackBerry does not need to become Apple or Nokia (NYSE:NOK) or Microsoft (NASDAQ:MSFT). All BlackBerry needs to do is come back from the dead and shareholders stand to make a lot of money. I think yesterday's one million unit purchase order confirms the company is coming back from the dead and in no way is the Z10 DOA as many thought.
As such, I continue to think this stock is still undervalued and that there is still the possibility that BlackBerry might be a $56 stock in 12-24 months from now. Please note I am not bashing Apple - I love Apple and all things Apple. My first computer (that I still proudly display in my office) was an Apple Mac Plus of 1986. I am simply trying to point out that investing is not about ideology but about facts and trends.
On a purely technical note:
The stock's chart has regained its bullish upward trend. Volume over the past several days has increased and the MACD indicator is trending upwards once more. Also, overnight price action shows that the stock is trading up by about 3%-4%, so today the stock should continue to experience upward pressure.
Finally, to all those BlackBerry short-sellers out there, BlackBerry longs salute you, the stock couldn't have risen this high without you …
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.