Avoid Diving into RIMM Just Yet

 | Dec 13, 2011 | 11:45 AM EST  | Comments
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Whenever Research In Motion (RIMM) seems to find investors with just a little bit of hope in it, the stock finds a way to disappoint them. After drubbing it took Monday, RIM shares are below its 52-week low of $15.93 a few weeks ago.

When the stock hit that low previously, investors started to nibble again. First it was because famed value investor Lee Cooperman, of Omega Advisors, had stepped in to buy the stock. After that news broke, within a couple of days the stock was back above $18.

The problem was that Cooperman had taken far from an activist position in the company. Later, he would quip, "I got so many calls from the press it was like I was taking control of the company." But, as he explained, the position was a speculative one, based on what he believed to be a "constructive" new operating system and that the company could "resurrect" itself. Moreover, he had invested less than 1% of Omega's portfolio in the stock, whereas some of the firm's bigger investments comprised 3% to 5% of the fund.

Cooperman had said he was looking forward to RIM's next earnings report, confident the company had "seen the worst." But, unfortunately for Lee and other longs, at the beginning of the month RIM warned of bad earnings on deck for later this week. That's in addition to all the European drama this month, which has served to further pummel the stock.

In a lot of "deep value" situations, I would agree with Lee: It's wise to take a flier on a company such as this, whose stock has been unmercifully punished. The problem with that theory, and with RIM, is theh company will likely come out with its new QNX phones next calendar year. My guess -- and it's just a guess -- is that it will be next August -- not "early next year," as RIM has already promised without failing to provide any specifics.

I believe that, when the phones come out, they're likely to disappoint yet again. It's at that time when I believe we could see the mother of all RIM selloffs. It could lead to a 30% drop in the stock within a couple of weeks.

At that point, there could be a lot of merit to wading in to the BlackBerry pool for a dip. However, until then, watch for sharp objects at the bottom of the pool before you dive in.

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