RIMM: Why Rising Tides Do Lift All Boats

Let me just begin by elaborating on the title.  As I see it,  Research in Motion (RIMM) is the ultimate example of the “a rising tide lifts all boats maxim.”.  To me, the story truly is mind-boggling.  Let’s examine my thesis a little further…

To start, anyone not living under a rock has undoubtedly noticed the recent phenomenon affectionately titled the “Mobile Internet Tsunami,” courtesy of Jim Cramer.  People are increasingly trading in their old, clunker phones for mobile internet-capable, technology-laden smartphones.  Articles about mobile advertising’s exploding potential profitability and mobile OS marketshare are nearly as ubiquitous as the iPhone itself.  With this being said, I submit the following…

1.  RIMM’s Blackberry had a sizable first mover advantage, while Apple’s (AAPL) iPhone came a later.  The latter, however is now clearly considered the gold standard in the industry and is on pace for near supreme domination based on nearly every metric.  

Having owned a Blackberry, I gladly paid my Verizon (VZ) Wireless early cancellation fees to trade up to the far-superior iPhone, despite reports of poor AT&T (T) service.  Note to VZ… stop playing hardball with AAPL, cut your losses, and jump on the “iBandwagon” ASAP!

2.  VZ is clearly putting a great deal of might behind its advertisements for the Google (GOOG) / Motorola (MOT) Droid and the HTC-produced Droid Eris.  Having extensively sampled both devices, I can conclude that while they are no iPhone, they will poleax the Crackberry.

It’s increasing marketing for the Android based phones will leave RIMMs products playing second fiddle.  

3.  RIMM must learn to innovate.  Period.  The Curve, the Bold, the Tour… the list goes on and on… what the heck is the difference.  I can tell you, as I do my first-hand research… Not a whole lot!  And the Storm / Storm 2?  Who cares… 

4.  Last but not least, I put forth my anecdotal evidence.  Through my daily routines, I bump into increasing numbers of uninformed consumers who are excited to upgrade to a “Blackberry.”  With the “look at what I just bought” grin they sport, I smile and patronize with a “wow… cool.” response.  

In almost every case, I bump into the same person weeks later and inquire about the phone.  The answer is always the same.  ”Eh, it’s ok.”  Now go out and ask an iPhone (or even an Android) user about their brand loyalty.  I’m pretty sure you get my point.  The smiling young fella’s at the Apple Store tell me that almost every customer who purchases an iPod or iPhone is back shortly for a computer or other AAPL product… expect big earnings folks!

To sum it all up, innovation is king as  Mr. Steve Jobs will attest to I am sure.  Blackberry “just ain’t got it.”  Trust me.  The conclusion: invest based on future prospects, not the present.  Take the quick gains in RIMM and spend them on AAPL or GOOG.  You can post me a thank you comment later.  

Oh, and RIMM… congrats on your EPS ($1.10 vs. est. $1.04) and top line ($3.92B vs. est. $3.78B)!  And good luck…

Bettin’ on Boone

This morning in my haste, I rolled up to the local Wawa to grab a quick, unhealthy breakfast on my way to work. As I maneuvered my 1997 Honda Civic through the always-aggravating parking lot, I had the misfortune of parking next to what I will call “the beast.”

The beast, my friends was quite possibly the biggest truck in existence… no exaggertion, I promise. This gargantuan steed was some form of Ford’s King Ranch model F150, and it’s driver, a pampered and completely ungrizzled white collar fellow whose only cargo was his briefcase, as opposed the the hay bale you would expect a real ranching king to be hauling. After this titan of the suburbs fiddled with a nav screen the size of my bedroom television, I rolled my eyes as I watched him leave his truck running in front of the no idling sign, to descend upon the store for his morning repast… Ah… It’s good to be king of the ranch.

While I must admit that it’s been a little while since I poured through the pages of T Boone Pickens’ “The First Billion is the Hardest,” run-ins like this make his messges ring true more than ever. Mr. Pickens emphasizes our need to end our country’s dependence on foreign oil for the sake of our national security first and foremost. His “Pickens Plan,” to my knowledge, is the only comprehensive energy plan which makes any sense and has been created without the typical beaureaucratic wrangling that typically waters down any effective legislation.

If not only for the sake of national security, we should take heed of Picken’s message for the future of our planet. As I write, the from pages of Yahoo News highlights the manner in which the climate summit in Copenhagen is off to a contentious start with a nice round of international finger-pointing.

So how can you bet on Boone, aside from greening your habits? Four simple letters…C-L-N-E… Clean Energy Fuels Corp. With ExxonMobil (XOM) signaling the importance of nat gas as a bridge fuel through its planned acquisition of XTO (XTO), I am even more apt to want to back up the truck with CLNE. You too should plan on getting in before this one really takes off.

I leave you with one final though on this one:

In Pickens’ book he describes a point in his life where he has lost close to everything. At the ripe old age of 68 he is losing clients’ money, going through a divorce, and diagnosed clinically depressed. Upon hearing that Pickens has managed to lose 99% of the money he invested in him, a wealthy friend is asked if he will ask for a redemption from Boone’s fund. The answer (as best I can summarize) is not a chance… He is sticking with Boone. In the end, this guy makes out like a bandit because of his faith in Pickens. Moral of the story? Stick with Boone, and stick with CLNE…

Position: Long CLNE

Surprise, surprise…

Not much about today’s action surprised me.  As I awoke this morning from my blissful slumber, I was cognizant of the fact that Federal Reserve would be making interest rate decision this afternoon.  I flicked on the TV to see positive futures on the US indices, and immediately thought… “hmm… guarantee we are setting up for a classic buy on the rumor, sell on the news move.”  

While this was just a gut feeling, it is sometimes important to listen to your gut.  Well, guess what…  while equities traded solidly in the green for the majority of the day, they sold of right after Ben Bernanke’s announcement.  No surprises here.  

  

Almost everybody who follows the market expected the Fed to keep rates the same.  Bernanke clearly acknowledges the persisting weaknesses in our economy, and is doing his best to combat the myriad negatives like 10% unemployment, etc.  In the short term, it is clear the negatives outweigh any threat of looming inflation.  

In my humble opinion, Ben got it right.  He knows that inflation is much easier to reign in once the velocity of money increases again.  I am confident he will act appropriately when the time comes to raise rates, but for the short term… I think he earned the title of “Person of the Year” that Time Magazine bestowed upon him today.  I also have no doubt he will be reconfirmed in tomorrow’s decision on his post…  

Despite this, the negative moves of the market late in the day still frustrated me.  Making less money is never good.  My Jan $20 calls on ArcSight (ARST) were my saving grace today.  Also, I am thankful for my recently increased gold (GLD) position, and I have my eye on big G (Google – GOOG) like a hawk… you slip once… just once… and I pull the trigger… But for now… just a bit overbought for me.

Position: Long GLD, ARST through call options

Oh, Google…

No longer can I resist your charms, and thus I must opine that I am smitten. While I will be the first to say that your Droid does not impress me in the least, I will say that almost everything else about you does.

In modern society, we no longer search for information… We “Google” it. You know you have made it when your name is used as a verb. You have found a way to cleverly monitize your offerings, thus securing a dominant foothold in the lucrative, yet ever-expanding market of Internet advertising. From here you take it a step further with Google Chrome, your fantastic web browser and soon-to-be mobile OS.

The list goes on and on, but what most impresses me is your strategy… You move in on end markets swiftly, providing disruptive technology and almost certain domination. Your leadership is an unparalleled team, and while you continue to challenge my beloved Apple Inc. (AAPL), I have no doubt that you soon will join my portfolio as a long term holding.

Position: None… yet.

Bad News, Pressured Banks, & Clean Energy

Lots of negative news out there today. Early on we hear about a spike in wholesale inflation, and later we see that the homebuilder sentiment index is the lowest it has been since June. With or without the news, today’s action played out similar to what I expected, with today being the first day of the 2-day FOMC meeting. While the S&P closed down 0.55%, I am surprised it wasn’t uglier, given the bad news. Perhaps this is a testiment to the resiliance of this market? On the other hand, the market could simply be holding back any real moves until the Fed announcment.

While I suspect the latter, I also expect the Fed to keep rates lower and continue to focus on getting the economy moving again. As always, the language accompanying the statement will be the most important part, as Bernanke will have to be careful to indicated that his hand is on the trigger when it comes to reacting quickly to eventually raise rates and prevent rampant asset bubbles and inflation.

With all of this in mind, one of the groups that saw the most selling pressure today was the financials. While the larger banks were certainly in the red, the smaller regional players saw the most negative action. This is no doubt due to our government’s increasing cries that the banks are not lending. With all opinions on executive compensation aside, I would submit that I would definitely rather see banks lending fewer, loans based on more conservative standards rather than the flood of easy money that lead us to our current debacle.

On a better note, my position in Clean Energy Fuels Corp. (CLNE) continued its upward trajectory, closing up 3.9% at $14.12. Again, I continue to feel that yesterday’s move by ExxonMobil (XOM) signals a big shift, and despite Washington’s reluctance to embrace natural gas as a bridge fuel, the writing is on the wall… Nat gas is our best choice in the short term for a cleaner world and a reduced dependence on foreign oil.

As a final point, it was nice to see shares of ArcSight (ARST) moving up. My call options are starting to see some life!

Position: Long CLNE, ARST through call options

The Pepsi Challenge

I’m concerned about my shares of PepsiCo (PEP) today. While I like the company for the long haul, I am concerned that I am seeing a breakdown in the company’s recent prolonged uptrend that has propelled the company from less than $50 up to its current greater-than-$60 price tag.

Long term, I know the story is intact. It’s acquisition of its major bottlers Pepsi Bottling Group (PBG) and Pepsi Americas (PAS) will create a more nimble company, help PepsiCo adapt to the ever-changing beverage environment, and realize cost savings. I also like the recent renegotiations of bottling rights with Dr Pepper Snapple Group (DPS). One last thing I love… Frito Lay.

With all of these pros in mind, I still think the shares could break down in the short term if the stock closes south of its 50 day SMA. I may consider trimming my position and accumulating when the indicators show me the stock is more oversold.

Bottom line… For the long haul… Stick with PEP. If you are a trader-type, think about profit taking if we break down through the 50 day.

Position: Long PEP

A Crude Awakening…

Wow… How things can change in an instant when you take your eyes off the game for even a second! This morning, I had started typing a piece about the oil supermajors. It began something like this:

“With all contango and backwardation aside, has anyone had their eye on crude futures lately? This morning I see West Texas crude around $68 a barrel, and Brent only marginally higher… …”

Before I could swipe another keystroke, I was whisked away into an enthralling morning meeting which monopolized my time and drained my soul. My premise behind the post was to be about how I am considering nibbling a bit more on Chevron (CVX) as the stock comes down a bit and the yield grows. To me, CVX is becoming increasingly attractive as it approaches the $75-76 level and boasts a mid-3% yield. A buy right around its 50 day SMA is looking good, and the dividend is certainly secure as CVX is well capitalized.

With that being said, I crawl out of my meeting to see my Clean Energy Fuels Corp (CLNE) stock soaring over 10%! While I would never make bets against T. Boone Pickens or Andrew Littlefair, the company’s fantastic CEO, I still didn’t know the reason for the pop… And then I checked the headlines.

The pop can be summed up in one word… ExxonMobil (XOM). Apparently the biggest of the big had decided to acquire XTO Energy (XTO) in a deal worth $41 Billion. So what does this mean? Put simply, this could be a total game-changer for the natural gas stocks. XOM is easily one of the most disciplined of the supermajors, and its move to tap into XTO’s 45 trillion cubic feet of natural gas could signal a shift in strategy for the major integrated oil companies. No doubt that if XOM is making a huge bet on natural gas, others will soon follow suit.

As I look across the board, companies with strong nat. gas exposure are sporting solid gains. What other companies will make similar acquisitions? Could XOM move on another, similar prospect? But most importantly… What are the most attractive targets? With this, I’m sticking with my CLNE, and urge you to stick with this or companies like Devon (DVN), Apache (APA), or Anadarko (APC). Be nimble and play “follow the leader!”

Position: Long CVX, CLNE, and T. Boone Pickens

Futures Lookin’ Good

US equities futures are looking positive this morning on surprise news that Dubai’s big brother Abu Dabi will help out with the recently disclosed debt crisis. Abu Dabi will be lending Dubai $10 Billion, a large chunk of which will go towards the indebted commercial real estate giant Dubai World.

This is good news for the major European banks with large stakes in Dubai. If my memory serves me correctly, the only US bank with a large interest in Dubai is Citigroup (C), whose holdings are far smaller.

Will we now see the return of the “risk trade?” As we near the end of the year, it remains to be seen whether we will have a “Santa Claus rally” as the big funds play catch up, or if we will see the big guys take the market lower on profit-taking.

Position: None

Midas, Liddy, and the Shiny Yellow Metal…

We’re talking about gold here folks.  (But I’ll assume you guessed as much by now… especially coupled with the presence of the  King and Liddy in the title.)  I’ll start off with the fact that I wasn’t all that impressed with the action in the market today, and we saw sort of a mixed close.  The “Naz” was very slightly red with the S&P and Dow slightly green.  The heat maps provided us with a multi-colored patchwork quilt-like visual today.

One thing that did interest me today was the SPDR Gold Shares ETF (GLD), which I locked in some cash gains through my deep-in-the-money puts a few days ago.  Since then, the precious metal has continued its tumble on pressure from a dollar index rebound.  

Short term, the precious metal is looking a bit oversold, and I am starting to like the metal as it reaches its 50 day SMA.  It is at least due for an oversold bounce for you short-term traders, and for you longer term investors… I think this is definitely something to take a look at as our government continues to print money and devalue our currency.  

There will be small speed bumps along the road due to Fed Rate hikes as our economy gets back on track, but over the long term, I like to keep around a 10% position in precious metals… almost like an insurance policy on my portfolio.  I bulked up my position at $109.20.

Position:  Long GLD 

Bang… uh, or not…

I’m on the road a bit today, but I plan on checking in periodically.  With that being said, I had a draft post entitled “Bang…”, and I had planned on seeing US equities off to the races off of some positive catalysts.  Apparently, we are not seeing the action which early futures indicated.  Lets take a look at the tape… 

Early on, we had some very positive futures off of strength in Asian trading, a weakened dollar index, and some positive news hitting the wires.  China’s industrial production numbers came in better than expected, and US November retail sales numbers did as well.  Something I particularly keyed in on was the 2.8% jump in sales at electronics and appliance stores.  To me this would indicate positive action could be on the horizon for some of my favorites such as Apple Inc. (AAPL) and maybe even players like Whirlpool (WHR) and Best Buy (BBY).  

Moving towards the open, futures reined in a bit with strength in the dollar index, and as I write, I am seeing flat trading and continued relative underperformance by AAPL.  Google (GOOG), and Goldman Sachs (GS).  To see any meaningful rally, we are going to need some leadership from the big tells.

My take is that strength in the dollar index coupled with the continued negative media sentiment is going to keep us range bound for a while.   However, my money is with the call by Jim Cramer that the pundits are too negative.  I’m sticking with my convictions in AAPL, and still looking for some positive movement in my Jan $20 calls on ArcSight (ARST) while languishing in the red.  ”In Cramer we Trust.”  

Positions:  Long AAPL, ARST through call options, and of course James J. Cramer