Since we've got Thanksgiving the day after tomorrow, we've identified an idea we can't wait any longer to get out there. We're going to give you a stock today that may surprise a lot of readers. This particular idea is not only looking very attractive based on what they've potentially got going operationally, the stock's chart recently confirmed one of the strongest reversal signals a chart can possibly give you.
We mentioned recently Microsoft (MSFT) may be a good long-term conservative investment with excellent risk/reward propositions. I honestly never thought I would say that. The premise for today's idea is similar in nature. We've talked about the fact we're seeing a divergence among technology stocks lately with darling big caps like Apple (AAPL) falling from grace. One could make the argument stocks like Apple have just been subject to the recent pullback for no apparent reason other than they ran too much too fast in the face of economic concerns and cloudy earnings visibility. However, when you start to take a closer look at the landscape of the consumer technology space, there's an awful lot of shifting going on that is starting to make some real sense.
There was a time not all that long ago when nobody ever thought Apple could become subject to fierce competition, then again, there was also a different time period when stocks like Nokia (NOK), Motorola (MSI) and Microsoft could do no wrong either. And by the way, technology can be a very cyclical space, since it's always about what have you done for me lately? Well, Research in Motion (RIMM) appears to be making a return that they believe is going to give Apple a serious run for their money, and their growth.
You see, Apple has always had a tendency to be very private and protective over their technology and more specifically, their operating systems. That was the Company's demise the first time around and it very well may be their demise this second time around. RIMM's Blackberry 10 and new OS is set to launch in February, and although it remains to be seen if their new product and OS will wow consumers, I think it's extremely important to remember there was a time when Blackberry was absolutely the strongest brand on the Street. If you remember, no matter where you went or who you were with on Wall Street, EVERYONE had a Blackberry. Now don't go telling me I'm living in the past, that's not my point. My point is, if you give all of those Crackberry addicts a real reason to come back to what they used to love so much, they will. I personally know people who would jump the Apple ship in a NY minute if Blackberry rolled out a product that even remotely rivaled Apple's Iphone.
RIMM's fall from grace was primarily due to their lack of understanding and forethought regarding the APP world. However, their new OS is set to launch with anywhere from 100K to 150K new APPs, the most any new OS has ever previously launched. Additionally, they understand the value and strategies surrounding open source far better than that of current stepmother, Apple. Let's face it, the Iphone is a wonderful product, but it has its problems which I won't get into here. There is most definitely room for RIMM to make a huge comeback considering they still have 80M die hard subscribers using a less than desirable mobile unit and OS. In short, I think the upset angle and potential upside in RIMM far outweighs the potential investment returns in AAPL looking out over the next couple of years. It just doesn't appear AAPL has anywhere to go that will provide the necessary catalyst for the stock to appreciate and provide the kind of returns we're looking for.
RIMM still has over $2B in cash on the books and no debt. That's not chump change, and when you consider their fat and happy ways of the past, that rug was pulled out from under them years ago. The Company should be hungry, a little ticked off and have an awful lot to prove. That's a good recipe for success in my book. AAPL appears to be the RIMM of the past and RIMM now has taken on Apple's attitude when they vowed to crush Microsoft after Microsoft almost completely closed the books on them roughly 14 years ago. How things can change, eh?
As you can see, I've got my fundamental reasons why we like RIMM so much right now, although much of it is very speculative until we see how the markets receive the new BB10 and its new OS. However, if you wait around too long to draw a line in the sand, much of the gains can simply pass you by. The biggest reason we like RIMM right now is strictly technical in nature. Here's why...
My single most favorite long-term reversal indicator when looking at charts is the "double re-penetration of the 3X3 DMA." If you've been reading our newsletter for a good while, you've read my explanation of this reversal indicator. If you haven't don't worry, I'll likely explain it again in some future edition. In the best interest of your time, let's just say it's not 100% full proof, but it's pretty darn close. I've included a weekly chart of RIMM for your review here. As you can see, the reversal indicator I'm referring to was confirmed in late September when the rest of the markets basically started to implode (and AAPL led the implosion). I've circled the double repo I'm referring to here. Now look at what shares of RIMM have done on the heels of that confirmation. While most every stock has been pounded in the face of the recent selloff, shares of RIMM have completely bucked the bearish trend on increasingly higher volume. Coincidence? I don't think so. It appears there's an awful lot of potentially savvy investors making their bets on RIMM over the last few months. So much so the stock has gone from six and change to almost ten bucks in the blink of any eye. A very stealth like move in a bad market.
As it stands right now, RIMM has traded up to its 200 day simple moving average on the daily chart, so there's a good chance the stock is due for a pullback, however, if you start drawing some fib retracement levels into the long-term chart, the stock appears to have every reason to move toward to at least $16, or possibly even $30 per share before it's all said and done. That's a lot of money to be made, and assuming the Company's new BB10 and OS make a real positive splash in the mobile space, the potential upside in RIMM is enormous.
For the record, I use an Iphone and like it fine enough. I've been a RIMM naysayer for years, recommending it as a short just after the stock ran to new all-time highs back in '08, so as you can see, I'm simply being objective about all of this. We recommended AAPL back when it was $15 per share, and have made it pretty clear ever since the stock made new highs this year that we thought investors had likely seen its best days for at least a good while.
As you start to peruse the web for info on this newly developing argument between Apple and RIMM, you're going to find editorial opinions that are all over the map. All I can say is that's what makes a market, and somebody's going to be right. We believe it's going to be us. Sure, BB10 may not be enough for every Apple user to jump ship, however, it may well be enough for shares of RIMM to provide much better returns in the coming quarters ahead than that of its previous Crackberry killer, Apple. You've got to love competition.
We're going to make RIMM a Featured Stock on the site starting today, so if you're interested in what everyone is saying, you'll likely start to find more and more commentary on the topic here: http://www.smallcapnetwork.com/Research-In-Motion-Limited/s/quote/p/s/RIMM/.
Do your diligence and make your own call, but we believe the next four years for RIMM are going to be an awful lot better than the last four. Yes, timing is everything, and right now we believe the time is finally right for RIMM.