Sunday, July 24, 2011

RIM is the next Nortel ? Nope, Not at all, Buy RIM now.

I went to Future shop to check out the playbook. Though I would never spend 600$ on a gadget playbook or Ipad as you can see my previous post. Other people do buy such devices and pay a lot for it. I took a look at the device, played a game of tetris on it, watched some movie previews. it seems like perfectly good tablet. 

I also spoke to my cousin, who is a doctor that does not know anything about investing his money other than buying high MER mutual funds. When I suggested RIM to him he said that RIM is going to go bankrupt like Nortel. so that makes me think that the sentiment is very very negative.

Now here are the reasons why you should invest in RIM at 26$

1. Each share has 5.48$ worth in cash.
2. The remaining 21$ of valuation is 4.3 P / E

For those who do not understand P / E it means assuming that RIM does not grow its earnings 1 cent more, even thought the smartphone sector is exploding. Each share will earn the remaining 21$ in 4.3 years.
This compares with 4.9 P/E for nokia ( RIM is now cheaper than nokia !!! ) and 11.8 P / E for Apple

Here is what The CIBC analyst had to say, with a price target of  65$ :

At these depressed levels, we continue to recommend buying the shares. Our view is that the product transition is now well advanced with delays
already anticipated in the share price. The product refresh will help restart
shipment growth later in F2012.
so to recap, go buy some RIM shares,
you have panic,
you have good valuations
you have experts calling it cheap
you have limited downside

Disclaimer I have a covered call position in RIM


  1. You're a "dividend lover" but I can't tell when was the last time RIM paid a dividend? This is purely speculative growth play!

  2. yes there is no dividend, only the covered call premiums.