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Blackberry cut to strong sell


Luckyone77
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http://finance.yahoo.com/news/blackberry-cut-strong-sell-layoff-181006813.html

 

Maybe there'll be a happy ending here but I'm simply not seeing it. Feels like they're counting on some kind of Hail Mary pass to bail them out of this mess. This is looking more and more like a not so good cigar butt. Serious question, has any technology investment worked out yet for Fairfax?

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http://finance.yahoo.com/news/blackberry-cut-strong-sell-layoff-181006813.html

 

Maybe there'll be a happy ending here but I'm simply not seeing it. Feels like they're counting on some kind of Hail Mary pass to bail them out of this mess. This is looking more and more like a not so good cigar butt. Serious question, has any technology investment worked out yet for Fairfax?

 

So they were at strong buy at $10.82 but a strong sell at $9.71?

http://www.zacks.com/stock/news/159098/blackberry-limited-bbry-an-offtheradar-potential-winner

 

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Meh - I rarely pay attention to anything released by Zack's, the Street, or the Motley Fool.

 

If software revenue doesn't come in over the next two quarter's results like Chen suggested, then you can be relatively confident that this was a poor investment all around. If software revenue does come in, then purchasing shares and convertible debt with a strike price of $10 will likely prove a stroke of genius.

 

Time will tell.

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Meh - I rarely pay attention to anything released by Zack's, the Street, or the Motley Fool.

 

If software revenue doesn't come in over the next two quarter's results like Chen suggested, then you can be relatively confident that this was a poor investment all around. If software revenue does come in, then purchasing shares and convertible debt with a strike price of $10 will likely prove a stroke of genius.

 

Time will tell.

I don't disagree with that. However, in the Annual letter it seems Watsa clearly states that the reason they got into it didn't pan out (bad analysis) and it's no longer the reason why they still own it. Now they're just hoping for the talent of Chen to pull a rabbit out of the hat. Hopefully, he can. 

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Would this be a decent opportunity to purchase calls rather than the actual debt or equity? You mentioned it will likely be known within the next two quarters why not purchase some Jan 16 calls, just lazily looked at yahoo finance and they are going for around 1.25 for a 10$ strike. Just throwing the idea out there, haven't followed blackberry at all.

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Would this be a decent opportunity to purchase calls rather than the actual debt or equity? You mentioned it will likely be known within the next two quarters why not purchase some Jan 16 calls, just lazily looked at yahoo finance and they are going for around 1.25 for a 10$ strike. Just throwing the idea out there, haven't followed blackberry at all.

 

If you want the lottery ticket, it is better to buy OTM calls like $12-$14. If BBRY's hail mary works, then the stock can be significantly higher given the size of the industry they are playing in. If not, then why lose a lot of premium? Also I would look out further than Jan16. In the short medium term I feel they have to buy some small technology companies to improve their software offering, so cash balance which is source of comfort for many in the downside scenario will have to reduce significantly.

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..."Watsa was asked why his firm, known for value-oriented strategies, put money into BlackBerry. He said, "These things go in cycles," adding that "BlackBerry used to be $140 (a share). Every stock analyst loved it. Today it's $10. Few stock analysts like it." Conversely, Watsa pointed to Apple Inc. (NASDAQ: AAPL) as a point in how companies can move in the opposite direction."

 

There's a good reason why only a few stock analysts like it. Watsa's logic here sounds very strange and CYA to me. Especially using Apple as a model of a tech turnaround. Hardly a normal company or normal outcome. Kind of like saying so and so won the lottery and so can I. Yes, things do go in cycles but in technology that circle can look more like a vertical line straight up and straight back down.

 

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Yes, there are very few turnarounds in tech. One can only hope that this will be one of the few. But that's not a good investment thesis by itself.

 

If I judged Watsa based on BBRY, I'd not invest in Fairfax. :) IMHO, it was not a wise investment. I'll be happy if it works out though, I prefer that over the alternative. :)

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  • 3 weeks later...

Would this be a decent opportunity to purchase calls rather than the actual debt or equity? You mentioned it will likely be known within the next two quarters why not purchase some Jan 16 calls, just lazily looked at yahoo finance and they are going for around 1.25 for a 10$ strike. Just throwing the idea out there, haven't followed blackberry at all.

 

If you want the lottery ticket, it is better to buy OTM calls like $12-$14. If BBRY's hail mary works, then the stock can be significantly higher given the size of the industry they are playing in. If not, then why lose a lot of premium? Also I would look out further than Jan16. In the short medium term I feel they have to buy some small technology companies to improve their software offering, so cash balance which is source of comfort for many in the downside scenario will have to reduce significantly.

 

I always find it interesting.  What industries is Blackberry involved in?  There are a lot.  They are primarily after large financial companies where security is a big issue.  And they are attacking the medical industry by way of IoT.

 

And more .... but those can all be found on Blackbery's web site.

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Is prem adding in this level.

 

I would doubt it. He's already got quite a significant amount at stake in the company. His convertible debt helps cover him in the event that this investment doesn't work out, but the more common he buys the less protection it offers.

 

Ya, convertible debt (assuming conversion) already makes Fairfax something like a 33% owner.

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Dell, Blackberry, Greek Bank, Resolute Forest Products. Hmmm. That hasn't worked out...so far. I like the deflation hedges though they haven't worked out...so far. I like the shorting for protection though that hasn't worked out...so far. I like the India positions and it's potential for growth probably the most...TBD. They sure seem to be making lots of bad decisions lately. I did make a killing shadowing his ICO investment. That's one in the win column.

 

I find myself losing my religion as Fairfax is by far my largest holding. Getting harder to overlook all these "apparent" mistakes. Will time prove them to be visionary like in 08 or just wrong? Hard to figure out and, though I hold Watsa in high regard, it's increasingly difficult to overlook some of these things. With that said, the deflation hedges and shorting can go from looking stupid to "brilliant and legendary" in one day. Tough call.

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Dell, Blackberry, Greek Bank, Resolute Forest Products. Hmmm. That hasn't worked out...so far. I like the deflation hedges though they haven't worked out...so far. I like the shorting for protection though that hasn't worked out...so far. I like the India positions and it's potential for growth probably the most...TBD. They sure seem to be making lots of bad decisions lately. I did make a killing shadowing his ICO investment. That's one in the win column.

 

I find myself losing my religion as Fairfax is by far my largest holding. Getting harder to overlook all these "apparent" mistakes. Will time prove them to be visionary like in 08 or just wrong? Hard to figure out and, though I hold Watsa in high regard, it's increasingly difficult to overlook some of these things. With that said, the deflation hedges and shorting can go from looking stupid to "brilliant and legendary" in one day. Tough call.

 

You can't judge the decisions by the outcome - you have to judge them by the information available at the time they were made. I think most of these, with the possible exception of the equity hedges, pass this basic smell test.

 

Consider the following bet:

I have a deck of 100 cards numbered 1 through 100. I offer you $100 every time you play and pull a card that is not 1. You pay me $100 if you pull a 1. You can play unlimited number of times. Now let's assume that you do the odds, realize that it is hugely in your favor, and you draw. The first card is a 1 and now you owe me money. Tough luck, but you realize you can play again and the odds are still massively in your favor. We shuffle the cards and you draw again. Another 1. You now have lost $200 in a game that is seemingly impossible to lose. Was it bad choice to play? Would it be stupid to continue? Would it be stupid to stop? Can someone look at your result of $200 and determine that you were a fool to have participated?

 

Any intelligent person with the ability to play would have played the game but it still ended up badly for you.

 

I can't speak to Resolute forest products or Dell because I'm not all that knowledgeable on those situations.

 

Prem has already admitted the to early purchases of BBRY being a mistake. I think the fact that it's still around 3 years after people were calling for it's bankruptcy suggests that the story is TBD on the purchases from the last 3 years and the convertible debt is likely a great move. Even if BBRY goes the way of the buffalo, Prem will get paid and collect hefty interest on top of it. If they recover, a $10 price entry won't be too shabby.

 

The deflation hedges are smart risk management and still appear to be a very smart bet from a man who was years ahead of the rest of the world in worrying about deflationary outcomes. We're supposedly years into a recovery, with trillions spent on stimulus, and yet several developed countries are still experiencing negative growth, disinflation, and ballooning debts...and it appears to be getting worse and not better.

 

The equity hedges are somewhat indefensible. I understand his reasoning, but it does seem like they were put on too large, for too long, and have cost a lot! I don't have an issue with them hedging, but to go to 100% hedged on top of deflation hedges when equity markets were still relatively reasonably priced does seem strange. That being said, at current levels, I don't mind that that they're 80-100% hedged, but I think I cede this point to you. 

 

The Greek investments were fine until the Syriza party was elected. You'll recall that Prem purchased his equity stakes long before them and that Greece was actually doing relatively well and was even running a primary surplus in recent quarters. His recent purchases seemed to have coincided with the near bottoming in values back in March/April meaning he could be up 20-30% on those purchases despite all the BS that has happened since the end of Q1. You can't blame him for the unexpected outcome of an election. 

 

 

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Dell, Blackberry, Greek Bank, Resolute Forest Products. Hmmm. That hasn't worked out...so far. I like the deflation hedges though they haven't worked out...so far. I like the shorting for protection though that hasn't worked out...so far. I like the India positions and it's potential for growth probably the most...TBD. They sure seem to be making lots of bad decisions lately. I did make a killing shadowing his ICO investment. That's one in the win column.

 

I find myself losing my religion as Fairfax is by far my largest holding. Getting harder to overlook all these "apparent" mistakes. Will time prove them to be visionary like in 08 or just wrong? Hard to figure out and, though I hold Watsa in high regard, it's increasingly difficult to overlook some of these things. With that said, the deflation hedges and shorting can go from looking stupid to "brilliant and legendary" in one day. Tough call.

 

You forgot Sandridge . . .

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Dell, Blackberry, Greek Bank, Resolute Forest Products. Hmmm. That hasn't worked out...so far. I like the deflation hedges though they haven't worked out...so far. I like the shorting for protection though that hasn't worked out...so far. I like the India positions and it's potential for growth probably the most...TBD. They sure seem to be making lots of bad decisions lately. I did make a killing shadowing his ICO investment. That's one in the win column.

 

I find myself losing my religion as Fairfax is by far my largest holding. Getting harder to overlook all these "apparent" mistakes. Will time prove them to be visionary like in 08 or just wrong? Hard to figure out and, though I hold Watsa in high regard, it's increasingly difficult to overlook some of these things. With that said, the deflation hedges and shorting can go from looking stupid to "brilliant and legendary" in one day. Tough call.

 

You forgot Sandridge . . .

 

Oh yeah! Ouch! Not sure how I forgot that one. That shadow didn't work out well at all. Probably the biggest single loss I've ever incurred. I somewhat blame myself for that one as I'm from OKC originally. I made a couple of calls back home and friends familiar with that situation told me it was bad news and very suspect CEO but I didn't listen. Basically the same thing happened with Blackberry. A very good friend way up the food chain in technology looked at me like I was crazy when I told him I was buying Blackberry before they introduced their new phones awhile back. He said it'll never happen. He was right about the phones.

 

Why can't these guys see this stuff? What's happened to their analysis of these companies? Maybe they need to start trying to hit singles and doubles instead of aiming for the fences with these flawed companies and losing their butts. Cigar butts, that is.

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Blackberry is not much of an issue.  I've been following them closer than most since I bought in a few years ago.  And I have to tell you, I am not worried at all about the future.  They are throwing a lot of mud on the wall and for none of it to stick would be a statistical anomaly.  And the thing people seem to ignore is that a lot of that mud is sticking.

 

They are onto their growth phase.  We might even start to see commercials again!  Don't get gung ho though.  The commercials will be on CNBC and if financial districts of bigger cities and doctor trade publications.  They are going to go after enterprise users, not consumer.  And that is fine.  I'm still curious of what the Samsung deal is regarding the next slider that BBRY is coming out with this year.  Oh, and the rumored Android device (low end) for emerging markets that is rumored to come out in 1-2 months.

 

And I also own Sandridge.  That one actually has me REALLY worried.  I hate to say it but wit ha strong US dollar, Sandridge is toast.  I didn't understand their business and how it works.  The strong US dollar means lower gas prices which means those expensive wells of Sandridge are not profitable.

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I would like to see calculation of FFH's long term investment performance, exl financial engineering (selling equity over book and buying back below book)! I think that picture is not pretty. One of the most overrated investors of all times! IMHO

 

Interesting comment... Why do you think the 15 year numbers in the last Chairman's letters aren't good enough?  (11.6% for Fairfax hedged equities vs. 4.2% for the S&P 500; 11.5% for Fairfax's bonds vs. 6.1% for the Merrill 1-10 Year bond index)

 

You don't see 15 years as a long enough time period?  Do you think they're excluding some major investing losses from these numbers?  Using the wrong comparables?  You don't think it's good enough beating the indices by 5-7 percentage points?  I assume financial engineering wouldn't touch these numbers, but am I wrong about that?

 

I'm curious where you're coming from here. "One of the most overrated investors of all time" is such a strong claim that I figure I'm probably missing something obvious. (Because to me, these numbers look excellent, and the bond number looks ridiculously great.)

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I think you cherry picked...  Latest letter (2014) say: "annual average  8.9% over our 29-year history." Compare this to S&P 500 during same period of time.  ::)

 

They would have done much better, investing index-fund and focusing running their insurance operations. They're not good investors.

 

Ah, I see.  You think that the best benchmark for a mostly-bonds portfolio is the S&P 500.  Or maybe that the float for an insurance operation should be 100% invested in equities.  Either way, I think I understand how you reached your conclusion.  Thanks!

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Just to recap this last interaction because I thought I was drunk at first...:

 

Value^2 - Asks to know (a rhetorical question seemingly) FFH's "investment performance", not just book / share growth, because that has been improved some by equity buybacks below book, and sales above.  Value^2 says this would be interesting because he feels that Fairfax is an overrated investor.

 

Richard - Highlights "investment performance" for both bonds, and stocks.

 

Value^2 - Clarifies that overall investment portfolio performance should be compared to the S&P, not just equities, but the entire portfolio.  Notable something no other insurance companies do.

 

Richard - Says politely, ok....

 

Value^2 - Then implies his metric "total investment performance" is the metric favored by Berkshire, when in fact the metric favored by Berkshire is equity per share growth (compared to the S&P)... the exact metric that Value^2 threw out the window in his first post dismissing Fairfax's "investment abilities".

 

------

 

Had to write it down to make sure I could follow along with sophisticated trolling; use of ignore activated.

 

Ben

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http://www.insidermonkey.com/blog/blackberry-ltd-bbry-losses-lead-to-another-quarterly-beating-for-prem-watsas-u-s-portfolio-360271/

 

Disappointing but not surprising considering several of their most recent and larger purchases are at 52 week lows. Can't imagine it's much fun around that office right now as they must be scratching their heads at some of their decisions. Having a harder and harder time justifying my investment here. Here's hoping their Macro bets pay off and compensate for their "seemingly" atrocious stock picking.

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Just to recap this last interaction because I thought I was drunk at first...:

 

Value^2 - Asks to know (a rhetorical question seemingly) FFH's "investment performance", not just book / share growth, because that has been improved some by equity buybacks below book, and sales above.  Value^2 says this would be interesting because he feels that Fairfax is an overrated investor.

 

Richard - Highlights "investment performance" for both bonds, and stocks.

 

Value^2 - Clarifies that overall investment portfolio performance should be compared to the S&P, not just equities, but the entire portfolio.  Notable something no other insurance companies do.

 

Richard - Says politely, ok....

 

Value^2 - Then implies his metric "total investment performance" is the metric favored by Berkshire, when in fact the metric favored by Berkshire is equity per share growth (compared to the S&P)... the exact metric that Value^2 threw out the window in his first post dismissing Fairfax's "investment abilities".

 

------

 

Had to write it down to make sure I could follow along with sophisticated trolling; use of ignore activated.

 

Ben

 

lol. ::thumbs up::

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