Guest Post - RIMM

Marshall Brandt, a friend of mine, have been discussing RIMM - we have opposing views, but I do feel like the discussion is worth having. His views are below:

--start quote--

Whether RIM is able to ever rise to the point that it can challenge AAPL or GOOG remains to be seen. Whether it needs to, however, for the stock to double, or triple, is also not known, but signs point to yes the more we know about blackberry 10.

In 99% of occaisions, you don't want to be long a stock that isn't growing--or lacks the perception of growth. That 1% is reserved for companies in extremis, that are down 90% or more--that have been written off for dead. Think, for example, of the banks in winter 09--they were pricing in more than zero growth--they were pricing in death. They didn't die, and the stocks, many of them, doubled or tripled.

Whether RIM makes it back is an unanswered question, but the reasons it has been pronunced dead are questionable.

A lack of apps.

Anyone wanting to know why apps aren't the issue need do only one thing--get out a piece of paper and write down every app you want for your smart phone. Then add any app you think you might ever want. Then add any app you think people you know might want. Can you get to 100 let alone 1,000, let alone 700,000 that aapl offers? Its not realistic to think that there's millions of people ditching blackberry because they wanted some spanish to swahili app.

Moreover, android apps, of which there are 600,000 to ios 700,000, are compatible with blackberry 10. So it appears you can get that swahili app after all.

VHS vs Beta

Some even RIM enthusiasts say this is like vhs vs. betamax. This analogy doesn't add up. If you held on to your beta after every local store adopted vhs, then you simply couldn't watch anything. In contrast, rim still does basically what you wanted your smart phone for--emailing and calling people.

Is there anything andriod can do that blackberry 10 cannot?

No. Now that blackberry has a competent browser, anything android does can be done on blackberry--and from videos on blackberry 10, it appears blackberry can be lots easier to use. See (find vid link)

Is there anything blackberry 10 can do that android cannot?

Yes. Its the most secure messaging system. IT professionals still love the BES. It seems to offer a new 

Why did people ditch RIM?

Though lack of innovation is often cited, its not so much RIM failed to innovate, they just assumed that their customers dindnt actually want to surf the web. Crazy right? Kinda like microsoft thinking the internet wasn't going to be a big deal.

It turns out the business customers that love RIMs messaging also want to be able to watch youtube videos of cats sent to them by their kids. A lot. And thus, with RIM not offering a credible browser, until now.

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Why GRPN is even more of a short now than at 20$

Groupon Inc. (NYSE: GRPN), the daily-deals company which in 2011 was the largest web IPO since GOOG, has followed the typical fad boom-bust cycle almost perfectly.

It was the perfect fad - daily deals, network effects, largest company in space! Only problem? It by definition is a price-competitive business, offering little if any long term benefits to customer (i.e. merchants who sold deals on Groupon)

Remember This article? Over a year ago, insiders were selling hundreds of millions of dollars worth of shares even pre-ipo!

The rest is history:

Now:
GRPN has admitted that the daily-deals "business" is not that good and has resorted to accounting tactics/schemes to keep cash flow up (while actual net income, including contractually obligated payments is negative and will balloon on the back-end). From that article: "a significant amount of its cash flow is the result of Groupon collecting coupon revenue up front, then paying it back to the merchant over a period of weeks or months". In other words, current cash hides just poorly the business is doing, and how reliant it is on every great numbers of new customers (a pseudo pyramid-scheme).

But perhaps most importantly - Andrew Mason, the CEO, wants GRPN to be the operating system of commerce, to become the middle man in commerce.

Let me get this straight - Mason has decided the reinvent the business less than a year after ipo and essentially go back to the drawing board for new business. Its choice(s)? Hyper competitive fields such as mobile payments (Ebay, Square), booking management system (OpenTable), and reaching local businesses (roughly YELP).

So prospective investors, you get to buy a start up all over again! Only costs about $3B!

I believe the cash burn and the sectors-wide slowdown of hot commerce/tech ipos will mean $1.5 per share is possible

Careful investing to all,
-Stanley

*Disclosure, am short GRPN.  

The Case for AIG

American International Group (NYSE: AIG) has been one of the worst performing stocks over the 5 years, losing 95%+ since the start of 2008. 



However, there has been growing interest (since 2010) among the investor community about buying the equity. Funds such as Fairholme putting 30% of their fund in it, and more recently the hedge fund Blue Ridge Capital putting 5% in the last quarter or so.

The basic arguments for buying are simple: 
1) Price to book discount. AIG trades at ~1/2 of book value, I believe because of (previous) government control and recovery since the initial bailout in 2008. This compares with 0.8x of the rest of the industry.

2) A fundamentally good company - revenues have been increasing and the reason for the bailout was a one specific section of AIG - AIG FP (Financial Products), and its crisis was that of liquidity driven by that one unit, not the rest of the (market-leading) businesses of Chartis and SunAmerica.

What I'd like to add is:

-Timing
All executive officers have been buying the stock outright (most recently at 31.70-90 in May 2012) and exercising buy Not selling stock. In fact, there has been no insider seller of AIG in 2012 except for the US Govt, which is a politically-forced seller (want to eliminate). (Source: Morningstar)

-Psychology/Technicals
On September 11th, the US government sold $20 billion dollars worth of stock. Let me be clear, an insider sold over 30% of a $58 billion market cap company in one day on record volume - And it ended the day up!




 Forget fibonacci's, moving averages, or other indicators - this is supply and demand. If there are enough buyers to buy $20B of AIG without missing a beat, I think there is demand for the stock.

Careful investing to all,
-Stanley

An introduction

Welcome!

This blog serves as a journal to keep track of and review ideas for trading and investing.

It serves to track an ongoing experiment with regards to investing, namely a strategy where:

1) Valuation is more art than science, less about numbers and more about a few key insights that drive future profitability.

2) Market psychology, in terms of trend-following can provide the timing. In particular, being first doesn't help if a catalyst doesn't show up for many years.

-Stanley