Stock Talk Update: $RIMM Research In Motion play cost me 18.5%

Posted by Investing Freak on June 28, 2011
General

I last wrote about $RIMM a day or two before their 6/16 earnings “Research in Motion near 2009 Lows” and at the end of that article I mentioned that I had an intention of Buying some RIMM within the week.
Well ladies and gents in honor of full transparency I did create a small position on 6/15 at 35.43 and closed it the day after earnings at 28.86 for a loss of -18.5%.

Plenty of things I wrote in the previous article including the charts were a clear warning for me to steer clear especially near earnings but my fatal flaw of chasing risk got the better of me.

Once again here is the chart I posted on the 15th at midnight (after which I acquired shares right before close that trading day). Clearly this is a downtrend with the major moving averages on top which naturally become resistance (plenty of gap-downs too).

I also mentioned that in the SEC filings the company made it clear that one of their biggest risks is being too slow to roll out competitive products and they have patent infringement aplenty which haven’t been settled. And as soon as I acquired my stake even before earnings came out I missed this news:

Dolby Laboratories said Wednesday it has filed patent infringement lawsuits against Research In Motion in the United States and Germany and is seeking to halt sales of devices made by the Blackberry maker.

RIM is using Dolby’s patented technologies in its Blackberry smartphone and Playbook tablet computer without having obtained licenses, Dolby said.

Dolby said all of the other major smartphone makers have agreed to license the Dolby technologies.

Source: Associated Press (Jun 15, 2011) “Dolby files patent infringement lawsuit against RIM”

What blinded me the most in this case is the magically low PE ratio which I mentioned being at 5.63 and even here I laid it out in the article i wrote to the world!

“P/E ratio isn’t always indicative of an undervalued stock and it might well be the case that RIMM has lost its edge.” I don’t listen to myself too well it seems and that cost me dearly.

Of course now that the PE is at 4.48 and the stock suffered another gap down isn’t it time it fills them all? This is a good long term investment now right? Well dear trader/investor/friend that is up to you and your trading rules. Nobody can predict the future of a stock or anything in life but educated guesses lead to better probabilities. Alas this is the end of RIMM coverage from the freak. 🙂

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