BlackBerry (BB.TO)

For most people this is a Hold. He had high hopes for the company, but it is very hard to get your head around it. They are trying to grow their licensing division, and to a degree are succeeding, but it is slow. The last gasp on devices is their coupling with the android devices.

(A Top Pick Aug 21/14. Down 11.6%.) Reshaping themselves into more of a software company. They are maintaining their special talents and security. Has a new handsets coming, which is nice. Their balance sheet is more in order now.

It had a negative transit at EBV +1 so he sold and it is at EBV. His model price is $1.58 which is amazing since it will lose money this year and next. He thinks it is dead money. If there is any positive transit, it would draw his interest.

There is a reasonable chance of this doubling, probably by way of an eventual takeover. They have $3 billion in cash on the balance sheet, plus they have a massive amount of patents. The current price would probably be the breakup value of the cash and the patents.

You don’t know if it will be worth a lot of money some day. It is a coin flip. They aren’t making any money in handsets. He thinks the ship has sailed. It is hard to see how it rights itself. They are giving it a heck of a try, however.

Their market share on devices is negligible. It is trading for close to cash in the bank and they lowered their burn rate to near zero. Still, you can’t make money on it. He thinks they will never get traction now. Earnings tomorrow with BNN coverage.

(Has this as a Short.) Despite having its big cash balance sheet, they don’t really have a lot of earnings and they just spent some of that cash on a big acquisition. To own this, you have to have a view that the BV is supported by the value of their patents alongside their cash, and that they are not going to keep burning that cash. Very low ROE.

This company is holding its own. Have cut back significantly on costs and have just made an interesting acquisition. A very high risk situation, and can be very volatile at times. John Cheng is a very methodical type of manager and he is fixing things as he goes along.

They are trying to evolve toward more software solutions. Their user base has declined. If they can go enterprise that will help. Capital is impaired and there is no dividend, unlike energy producers where there is a road to recovery.

This is too risky for him to invest in, and from a dividend perspective it doesn’t fit his model. At this point the likelihood of it becoming what it once was is fairly low. Very speculative. Thinks there are better places to see a return on your investments in the next 6-12 months.

(A Top Pick Aug 21/14. Down 7.05%.) John Chen is very impressive, and is pretty while achieving what his plan set out to do. He has downgraded the hopeless handheld business. Has done something good in software in the QNX system in cars. His whole security theory and application is still totally superior. Somewhere ahead, there is some good information coming once again.

Thinks at some point they may be able to grow their revenue. John Chen did very well in the past at Sybase. There was a turnaround there and a take out. The bigger the boat is, the longer it takes to turn. He is happy holding this, but is not looking for anything happening quickly.

In the last couple of years, they have had new management, a shifting of focus and new products. Product has been somewhat lacklustre. Their phones are decent, but they haven’t had huge upticks. It is hard to compete with others. The issue right now is their transition to software focus, but that will take time. The good thing about this company right now is that they have a lot of cash. This will be more of a trading stock between now and the next little while.

This makes his list because it doesn’t have excess of debt, but it ranks in the bottom half of all the companies that he looks at. It wouldn’t be on his list of companies that he would be buying. There is no dividend. They seem to be really working hard to surface the value of the company.

John Chen is doing a good job of turning the business around. The hardware business continues to be very, very challenged, and it is a lousy business to be in. It’s a software game now and they seem to be making some good progress. Their security features are very attractive. The question is can Chen make something out of this. It is still very early days in a very challenged environment. He thinks the stock is worth not much more than $15. If there is some takeover speculation and the stock gains in strength, don’t believe it, but take your money and move on.