Is Joel Greenblatt the latest victim to try and catch the falling knife that is Research in Motion’s stock, or does the presence of the legendary value investor signal a bottom for the beleaguered Waterloo mobile giant?
Recent filings reveal that in the first quarter of this year, Greenblatt added to a small position in Research in Motion, possessing 120,797 shares as of March 31st. He joins a group of value investors who feel the negativity about RIM might be overdone, including Donald Yacktman, Charles Brandes, David Einhorn, Mario Gabelli and, perhaps most notably, Fairfax Financial Chairman Prem Watsa, who now owns 26.8-million shares and sits on RIM’s board.
Greenblatt, who was born on Long Island in 1957, is the founder of Gotham Capital, a hedge fund he started in 1985 with $7-million in funding from junk-bond impresario Michael Milken. Greenblatt’s legend was made when Gotham Capital produced 40% annualized returns in the two decades following its founding. In 2005, Greenblatt’s book “The Little Book that Beats the Market” gave the average investor insight into how he produced outsized returns for so long. In the book, he details an approach he calls “Magic Formula Investing” which, contrary to the title’s suggestion that slight of hand might be the root of his advantage, is actually just common-sense advice about picking “good and cheap” companies that have high earnings yield and return on capital.
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RIM faithful are hoping new CEO Thorsten Heins can reverse the fortunes of the company and the stock, which is trading near decade lows. Media this weekend, meanwhile, were reporting that major layoffs would hit the company this week, with cuts of approximately 5000 of the remaining 16,500 staff expected.
The Toronto Star’s Jeff Rubin talked to one analyst who predicted that anyone working on RIM’s new BlackBerry 10 platform, however, would be spared. The release of new BlackBerry 10 devices, which feature an operating system developed by Ottawa innovator QNX, (acquired by RIM in 2010) will be a major milestone in the company’s history. Early in May, at the company’s BlackBerry World Conference in Orlando, Heins unveiled a sneak peek at some of the features expected in the new devices, including a platform-wide flow interface, a new virtual keyboard, as well as an innovative camera app developed by Swedish imaging software company called Scalado.
Shares of Research in Motion on the TSX closed Friday up 3.3% to $11.34.