Blackberry Vs Guess?: How Did That Go?

| About: BlackBerry Ltd. (BB)

Summary

This article covers the result of yet another senseless comparison between two wildly disparate stocks.

One stock represented the bright future, the other, the obsolete past.

It seems like the obsolete past won. Again.

Guess? - -t was larger. It was growing faster. It was more profitable. It was massively cheaper. It looked better, too.

Back in May 26, 2017, I wrote an article titled “Blasphemy! Comparing Guess? To BlackBerry.” In that blasphemous article, I compared the BlackBerry (BB) “bringer of futures yet to come,” leader in security, leader in the connected car, to the Guess? (GES) “has-been” retailer. This was done in a similar fashion as to when I compared Apple (AAPL) to Kohl’s (KSS), a comparison which Kohl’s, another has-been retailer, had won at the time.

The comparison was made on fundamentals and valuation, and clearly Guess? had an advantage in all counts. It was larger, growing faster, more profitable and much cheaper.

This comparison, like Apple’s to Kohl’s, again brought out the cries that these things weren’t even comparable. These cries seem to depict a segment of the stock-buying public which hasn’t been thought the concept of opportunity cost, or hasn’t yet grasped how investing isn’t but comparing all investments to all possible investment alternatives. You can even compare any stock to simply holding cash. Or holding bonds. Or, of course, holding any other stock in any other sector.

Each time I make a comparison like this, it’s simply to highlight how a crowd’s obvious favorite isn’t always the winner in the end. The comparisons sound blasphemous because, I mean, how would anyone even dare to compare the “tech leader of the day” to a down-trodden soon-to-die retailer?

So How Did It Go This Time?

So, given the above, how did this comparison turn out? I’ll give you the results at the year mark, as well as today:

  • Guess? closed at a dividend-adjusted $10.91 back in May 26, 2017.
  • BlackBerry closed at $11.11 back in May 26, 2017. We don’t need to adjust for dividends, because uh, BlackBerry isn’t that old fashioned to pay them (and doesn’t produce free cash flow or earnings to be able to pay them, either, but that’s a side point).
  • Guess? closed at $24.43 one year later, on May 25, 2018. Thus, for the one-year period, Guess? had a return of 123.9%.
  • BlackBerry closed at $11.75 one year later, on May 25, 2018. Thus, for the one-year period, BlackBerry had a return of 5.8%.
  • Guess? closed at $22.03 yesterday (June 13, 2018). Thus, up until now Guess? has had a return of 101.9%.
  • BlackBerry closed at $12.33 yesterday (June 13, 2018). Thus, up until now BlackBerry has had a return of 11.0%.
  • As we can see, Guess? outperformed BlackBerry by an amazing 118.2% over a one-year period and 90.9% up until now.

Again, the underdog won. In fact, It didn’t just win, it crushed BlackBerry’s return.

What about looking forward? Were we to redo the exercise today, and Guess? would still look more favorable than BlackBerry. However, the margin of certainty to say it would outperform BlackBerry would be significantly reduced. Still, even now Guess? is more likely to outperform BlackBerry going forward, than not – but again, it’s not as easy to take that bet anymore.

Conclusion

As with the Apple/Kohl’s instance, the conclusion is again that not only can you compare different assets, but you should compare different assets.

If an asset looks superior to another by nearly any metric you can find, yet trades at a massively large discount to the alternative, that asset is likely to outperform. Guess? just did, vs. tech favorite BlackBerry, and by a massive margin to boot.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GES over 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.

Additional disclosure: I also have no position on BB, but could initiate a short on BB.