RIM: Objects in Motion
Buy despair and sell hope.
“We have heard the company is looking for more than $10 billion for a full sale, likely somewhere in the $12 billion to $15 billion range, or between approximately $22.90 and $28.60 per share. RIM’s market capitalization currently sits at about $8.5 billion, though several analysts think that even $8.5 billion is more than an interested party would consider bidding at the moment."
I’ve been involved in this stock since December 2011 given my sense that this once-noble brand would rise from the ashes after it was purged by fund managers into year-end. In fact, I offered last week that my antennae vibed move into the low to mid-twenties, although I had "nothing" by way of a legitimate edge (which is precisely the reason you always define your risk).
I’ve aggressively "traded around" this position, buying dips to sell blips, while keeping my ear to the ground. In fact, I bought more stock last week (in real-time on the Buzz), which gave me the ammunition to steadily feed the ducks (read: make sales) into this outsized move.
Yesterday, in real-time on the Buzz & Banter (which we’re opening for FREE for one week; click here to launch your gratis trial), I posted the following fare:
Do I think they get bought? I haven't the slightest idea, nor was that central to my trade thesis.
Is there a slew of fast money in the name now—folks who bought it for the takeover? Absolutely.
Could they be right? I suppose but again, I've never made money buying takeover targets, although I've made a lot of money buying strong companies that happened to get taken over.
Either way and anyway, I’ve used this 10% lift as an opportunity to scale out of most of my stock and lock in some well-earned gains. I'm keeping the proverbial placeholder in hand—about 10% of the common stock position I entered the day with—and will either add back exposure on a pullback or will punt the leaves into additional strength.
It’s better to be lucky than smart and I’ve reminded myself of that axiom. The question I must now wrestle with is the forward plan; I punted most of my exposure because 1) it was up 44% from the December low and 2) it felt frothy given all the “fast money” in the name.
I will monitor the price action and trade accordingly as a function of time and price. I still like the name, but it’s entirely more crowded now than it was in December, and if we’ve learned anything of late, it’s that crowd mentalities sometimes act irrational.
As always, I hope this finds you well.
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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