Stocks to Hold Forever
Buy them, forget about them, and never sell them
Three months ago, Marketocracy Master Mike Koza told us what Blackberry (NASDAQ:BBRY) needs to do to deliver a double. The following week, I published the second half of the the article and included the Marketocracy community’s thoughts on how Blackberry can produce the double within the next 2 years. Since our last article, Blackberry has been volatile but the stock has risen appreciably, a bit over 28%, and Mike is not selling.
. In a press release dated June 19, included these highlights:
• Cash and investments balance of $3.1 billion at the end of the fiscal first quarter, up from $2.7 billion in the prior quarter
• Adjusted Q1 gross margin of 48%, up from 43% in the prior quarter
• Reduced adjusted operating expenses by 57% year over year and 13% quarter over quarter
John Chen, Blackberry’s CEO, seems to have stemmed the negative cash flow and thereby reduced the risk that the company would have to accept a bad deal for shareholders in order to raise cash. Stabilizing the company’s cash flow is a great first step on the way to a double and in my view justifies the increase in the stock price we’ve seen so far.
The next item on Mike’s list is for the company to start growing again by focusing on the services that a security conscious professional needs in order to conduct real business.
Blackberry will never sell as many phones as Apple (NASDAQ:AAPL) because its products are not geared for users whose mobile messaging needs are mostly 3 character text messages or 140 character tweets. But while Blackberry’s core users are not as numerous as Apple’s, they value their mobile messaging service highly and are willing to pay a premium for it because it enhances their ability to conduct business.
Apple recognizes the attractiveness of the security conscious professional market because they recently announced a joint venture with IBM (NYSE:IBM) to go after it. The threat of Apple and IBM taking market share away from Blackberry in their core market is a new development that needs to be monitored.
It is too early to tell if John Chen will be successful in growing the business, but he is already taking some needed steps. On July 21, Chen hired Marty Beard (who he worked with at Sybase) to be his new COO. John Chen can’t rebuild Blackberry on his own. His success depends on getting great people to join his team. The fact that someone with Marty Beard’s background and credibility would risk his career to join Blackberry at this time is a big vote of confidence for John Chen’s plans for Blackberry.
When a stock moves up 28% in a few months, it is tempting to sell it and lock-in a gain. But the stock market does not offer many opportunities for doubles so routinely selling stocks just when the market is starting to agree with your investment thesis is a sure way to cut your winners off before they come to fruition thereby generating a poor long-term investment track record.
Great value investors like Mike Koza do their homework so when events start to play out in their favor they have the confidence to hold on for bigger gains, and the track record to back up their confidence.