This Mobile Company is Rewarding Patient Investors

Anh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The most important quality in investing is patience. I have been investing in some opportunistic stocks, including Research in Motions (NASDAQ: BBRY) when it was falling down heavily. Since September 2012, RIMM’s shareholders must be feeling very happy, as its stock price has gone from only $6.03 per share to $17.90 per share currently, marking a threefold gain in around 4 months.

My Simple Investment Thesis on RIMM

My investment thesis behind RIMM was quite simple. It was not totally about the Blackberry sales, it was not about the new products, but it was about the assets that RIMM was holding. I agree with the opinion of Prem Watsa, who is known as the “Canadian Warren Buffett.” In May 2012, Prem Watsa noted that RIMM remained the number 1 position in many markets, and it had around $2.1 billion in cash. As of November 2012, the cash and short-term investments have increased to more than $2.73 billion. In addition, RIMM is a debt-free company, with $9.34 billion in total stockholders’ equity and $225 million in deferred taxes liabilities. Francis Chou of Chou Funds also noted that RIMM patents alone would be worth more than $13 per share.

New Attractive Features

Furthermore, RIMM might get much more value from the new Blackberry 10. Because of the lack of the users friendliness and browsing convenience, Blackberry has lost its customers to Google (NASDAQ: GOOG) and Apple (NASDAQ: AAPL). Blackberry 10, with its Blackberry Hub, Blackberry flow, and time shift, might improve the users’ experience. In addition, Blackberry is known for its high security level. As the Blackberry 10 had already won the certification for government usages, US government agencies could use it to share and transfer sensitive information. The other decent feature is the Blackberry balance, which could be used to set up the firewall between work data and personal data. The firewall function, along with the “customized service menu” for users, could fit well in the “Bring Your Own Device to Work” trend.

Software Licensing Could Help Gain Market Share

RIMM’s share price shot up significantly to $17.90 per share after Chief Executive Thorsten Heins commented that RIMM could review to sell its handset business or licensing its software to other smartphone companies. In an interview with the German newspaper Die Welt, he said: “Before you licensed the software, you must show that the platform has a large potential. First we have to fulfill our promises. If such proof, a licensing is conceivable.” He also mentioned that RIMM has visited more than 100 network operators in person to introduce the new Blackberry 10. The feedback has been quite good and it could be considered a neat alternative to the iOS and Android. Indeed, licensing software could help RIMM regain its lost market share. According to IDC, Google’s Android was the market-leading operating system in the smartphone’s market. In 2012, it accounted for 68.3% of the total market. iOS ranked second with 18.8% market share. Blackberry was third, with 4.7% of the market. However, IDC expected that in 2016, Blackberry had only 4.1% market share, whereas the Windows Phone from Microsoft (NASDAQ: MSFT) was expected to grow to 11.4% market share in 2016.

The Cheapest Among Peers

With $8.95 billion market capitalization, RIMM is valued at around 4.17x EV/EBITDA. It seems to be the cheapest valuation compared to Apple, Google and Microsoft. Apple is the largest company among the four, with $481.26 billion. The market is currently valuing Apple at 7.62x EV/EBITDA. Google, which has a market capitalization of $245.8 billion, is valued the most expensive with 12.25x EV multiples. Microsoft is trading at $27.50 per share, with a  total market capitalization of $231.54 billion. It is valued at around 6.07x EV/EBITDA.

Foolish Bottom Line

I am quite confident that there would be a lot of more positive signals coming from RIMM. However, investors need to be patient and are not affected by the short-term high volatility of the stock price. 

hoangquocanh owns RIMM and Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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