Tag Archives: INVESTING

BlackBerry($BBRY) Z10 UK Performance

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BBRY is having another good day today, a high of $16.89, but has now pulled back to $16.24. That being said, I would like to talk about some new data that came out.

Deutsche Bank conducted a survey in the UK to try and get an idea of how the new BlackBerry Z10 is performing. Analysts called 30 cell phone carriers in the UK and asked the same questions a new user who is in the market for a smartphone would ask. The negative that came out of the survey is that the BlackBerry Z10 isn’t being promoted much by carriers. The survey also found that sales representatives weren’t educated in using the new phone so they are hesitant in promoting something they aren’t sure how to use. This is not a good sign for BlackBerry. Below are some notes from the survey:

Results:

  • The iPhone 5 and Samsung Galaxy III are still the most recommended smartphones.
  • Out of the 30 phone carriers surveyed, only 2 recommended the BlackBerry as a smartphone.
  • A few sales representatives said they weren’t trained on the new BB10 operating software.
  • One sold have sold out of the Z10; some have sold many; and others have sold a few.
  • Reviews where mixed when they were asked to do a comparison between the iPhone 5, Samsung Galaxy III and the BlackBerry Z10.

After looking at these results, I’m more skeptical about the success of BBRY. The new phones are not released in the the US yet, so BlackBerry can still fix these issues that they’re facing abroad and not make the same mistakes when it gets to the US. I think the main reason carriers aren’t promoting the new BlackBerry Z10 is because they are not educated on all the new features of the phone. In my opinion, this is a mistake on BlackBerry’s part. Having unveiled this new phone so late in the game, BlackBerry should’ve held training sessions for sales reps. This way, sales reps would be familiar with the phone and would truly know why this phone might be better than any other smartphone currently on the market. Being familiar with the phone, they will be more likely to recommend the phone to users because they are able to explain all of the positives. Users with be more likely to sign a two year contract if they receive good reviews from the sales reps than if they don’t. Based on the survey, sales reps are currently recommending the iPhone 5 and the Samsung Galaxy III more often than the Z10.

That being said, I would look to take advantage of the volatility in the stock by using options to profit. However, I still am not 100% convinced that BlackBerry will be successful. I will still continue to see how BlackBerry deals with these problems and keep you updated on any new developments.

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Is Blackberry($BBRY) back?

Today, the company formerly known as Research in Motion (RIMM) became BlackBerry (BBRY). On Friday, RIMM had closed at $13.03. Today, BBRY opened at $13.71, up 5.22%. Throughout the day, BBRY continued to perform extremely well despite a declining market. At the end of the day BlackBerry closed at $14.98, up 15.02% for the day. In after hours trading BlackBerry is trading up $0.15 or 1%. Overall, BBRY had a great day while the market heads lower— Dow down 0.93%, S&P 500 down -1.15% and the Nasdaq 1.51% lower.  So why did BlackBerry end up 15% higher today? Was the Super Bowl commercial that good, or does this company really have value? Let me lay out what I think every investor should know about BlackBerry before they take out their checkbooks and invest in this stock.

After numerous delays and development issues, BlackBerry finally unveiled their new phones on January 30th, 2013. On that same day, they also decided to drop the Research in Motion name and just simply be BlackBerry. The two phones are the BlackBerry Z10 and the BlackBerry Q10. The Z10 is 4.2 inch touchscreen smartphone, similar to the popular smartphones currently in the market, such as the iPhone. The Q10 however  still contains the iconic physical BlackBerry keyboard. Both will run the company’s new operating system, BlackBerry 10. Looking at the graph below, you can see that on the day of the announcement BlackBerry actually decreased. The reason, I think, is that investors have been waiting for BlackBerry to come out with a new phone for almost 18 months now, and this just wasn’t big enough to restore faith in BlackBerry. In addition, the fact that the phones wouldn’t be available in the US until March might have discouraged investors as well. This sent BlackBerry stock back into the $13 range, which is great entry point for the stock based on a Discounted Cash Flow (DCF) valuation (valuing the stock at $20) and relative valuation. However, I am a little skeptical to whether or not BlackBerry will be successful in the future.

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Today, when BlackBerry started trading under the new name and ticker, BBRY, we saw it end the day up 15%. When i was trading BBRY today, it seemed as if I was trading an IPO. BlackBerry had been on a downtrend ever since the unveiling of the two news phones, and today, as soon as it started trading under the new ticker we see it do extremely well. I read an article today that said that sales in the UK seem to be strong. Some places where running out of the phone, and most where seeing strong demand. According to a note obtained by Forbes, an analyst at Jefferies stated that “We estimate sell-in to be at least several hundred thousand units. To put that in perspective, the iPhone had first weekend sales of 5 million+ in the U.S. The U.S. is five times larger so continued strong sales could bode very well for Blackberry.” If this holds true, BlackBerry will see their stock jump higher than the 15% we saw today.

I would be very skeptical when trying to trade BlackBerry. Early indicators such as UK sales, tell us that they might have a good product and people might like it. However, we have to keep in mind that it might be a little too late for them. People have already fallen in love with the iPhone and the Galaxy, so it might be tough trying to win these users over. Also, the US will be the biggest test to see if BlackBerry will comeback and be successful. Since the new phones will not be available in the US until end of March/early April, it will be tough to see if they can regain some market share. I will continue following BlackBerry and see how the new phones perform in the UK and Canada. This will give me and idea of how the phones might perform in the US once they are released here.  That being said, I think that BBRY does have potential but I’m not 100% convinced yet. I would continue trading this stock at small blocks or even options. This way, you will not be risking much and at the same time you will not miss any big moves, like the one today. I will keep you guys updated as more data comes out.

 

 

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Gun Control Sells Guns

Gun control is not a new issue. Guns have been a part of the American culture since our Revolutionary War. Shooting was an important past time and a rite of passage for young men. Gun control laws have followed close behind the ever-changing American gun culture. Control and regulation has long been a hot-blooded issue in American Politics.

Let’s ignore politics and focus on the facts. With the re-election of President Barack Obama, and his recent executive actions (23) to strengthen gun laws, gun sales have soared. Obama being enlisted for a second tour of duty has led to a gun scare. This is not a fear of guns, but a fear of no guns. Many Americans are afraid that his administration will restrict ownership. This has been a trend since his first election. In fact, in 2009, a Gallup survey showed that 41% of respondents believed that the President would prohibit gun sales. Recently, the NRA has grown suddenly by 250,000 members. The heightened discussion has polarized the issue of gun control.

What does all of this mean for the gun industry? Gun stores and manufactures have seen a drastic increase in sales. Most stores are not able to keep their shelves stocked. They face a constant rush from open to close. Members of the public who have contemplated buying a gun, or buying another gun, are buying now, as they are afraid that their right to buy firearms may not exist in the future. Gun manufacturers have reported a major increase in sales. Smith and Wesson Holdings Corp. has seen 20% sales growth in 2012. They are not the only ones Sturm, Ruger & Co. has seen a recent spike in stock price, with an 11% increase over the past 5 days.

Firearms and ammunition face a sin tax. The government collects an excise on the sale of these items. With the increase in sales since Obama’s election, and the growing concern of gun control, tax revenue has seen sharp growth. Without any major changes, just mere discussion and fear, tax collections have increased.

Is this part of Obama’s stimulus package? Could the heightened discussion be a ploy to help small businesses (i.e. gun stores), or increase government tax revenue? Regardless of motives, this trend will be washed away like Coney Island in the wake of Hurricane Sandy. Discussion will either result in major changes, hurting the industry, or will work its way out of the headlines and the minds of Americans as a new issue takes it place.

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Rory Mcllroy’s New Deal & Nike’s Stock Price

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In this day and age it is not uncommon for professional athletes to make more from their endorsements than they do their actual athletic performance. In fact, more often then not, big time athletes enjoy endorsement deals equal to two or three times their contract value. Consider the case of Rory Mcllroy. Over the course of his five-year career, Mcllroy has accumulated earnings totaling slightly over 29 million USD. Initially, this appears to be a significant amount of money but this past week Rory signed an endorsement deal that will makes this money seem like chump change. His ten year deal with Nike Golf is valued at close to 200 million USD, or 100 million dollars every five years. Normalized for time, this is roughly three and a half times his current performance salary. From the perspective of Rory Mcllroy everything is well. He gets to wear the latest Nike gear and gets to use the best Nike clubs, but from the perspective of Nike Golf, is this substantial investment in Mcllroy worth it?

What better way to answer this question then to examine Nike’s stock price movement during their sponsorship of golf great Tiger Woods. During his decorated 21-year career, Woods has 74 career PGA tours wins, 14 majors, and spent 623 weeks atop the world golf rankings. With that being said, if anyone could drive the price of Nike’s common stock via the Nike Golf business, it would be him.

Historically, Nike Golf has fluctuated around 3.2% of total Nike revenue. Using this logic, in 1996 when Tiger signed his first Nike Golf endorsement contract, Nike Golf revenue was around 68 million USD. This past fiscal year, Nike Golf reported revenues of 726 million USD. During this time frame, the split and dividend adjusted price of Nike common stock increased from 10.44 USD to around 48.44 USD. This is a 364% increase and if we assume Nike Golf contributed roughly 3 percent of the increase, Nike Golf is responsible for increasing the price of Nike common stock roughly 11% from 1996 to 2012. Using basic math, this means that each of Tiger’s 74 PGA tour wins is responsible for increasing the price of Nike common stock .15%.

Using what we know about Rory’s young career, we can project the number of victories Mcllroy will have during his 10-year deal with Nike. Since turning pro at the age of 18, Rory has won on the PGA tour 6 times. From this, it makes sense that Rory has 1.2 PGA tour victories per year. Assuming Rory can maintain this victory rate, he will have 12 PGA tour wins during from the start to finish of his deal with Nike. Using what we know about how Tiger’s victories affect Nike’s common stock price, it can be concluded that Rory’s 12 victories will increase the price of Nike common stock 1.8%. Using this information, Rory will add .96 USD to the dollar value of Nike’s common stock. Assuming no stock splits (which is unlikely with Nike), this .96 USD change for each of Nike’s 901 Million shares will increase the market cap of Nike by 865 million USD.

At this high level, it is clear that Nike’s 200 million USD investment in the worlds number one is well worth the money.

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