Three Lessons Every Investor Can Learn from BlackBerry
Once in a while, I get an odd call from my friend Mr. Speculator, asking about market conditions and asking for advice on his portfolio. I received one such call a few days ago, but instead of opening with “How are you?” he said, “Do you think BlackBerry has any room to grow? Will there be more buyers? Is the share worth more than $9.00?” He seemed tense and wanted answers fairly quick. And when I told him that I have no opinion, he was rattled.
What Mr. Speculator is doing is trying to hit “home runs.” He wants to take higher risks to grow his trading portfolio exponentially.
For investors who are trying to grow their portfolio, they need to stay far away from the investment strategies that Mr. Speculator employs. Long-term investors need to keep in mind that speculations not working in their favor can make a massive dent in the nest egg that is their portfolio.
Yes, BlackBerry Limited (NASDAQ/BBRY) has been in the headlines, and a $9.00-per-share deal is currently in the talks. I completely understand it, but speculating as to what’s next for the company is dangerous. Even when we know there’s a possible buyer at $9.00.
Instead of trying to speculate on whether the company will go private or if the deal will go through, investors need to learn from the company’s mistakes. That way, investors can use the same analogy to make a better investing decision in the future.
Here are three places where BlackBerry lost sight:
The company didn’t innovate as much as its competitors. I will be the first person to admit that I was a big fan of the company and the product, but then nothing about the product was new. It appeared the mindset was that what we have is good enough and can’t get any better. Fortunately, they realized they were wrong, and then innovated—but by then, it was too late.
Lesson Learned: If long-term investors see a company constantly innovating, it might be a better bet in the portfolio than the one that’s lagging behind. It may also be wise to look at trends in their research and development costs.
Companies really need to be aware about the competition and their abilities. It seems BlackBerry didn’t take its opponents seriously: while companies like Apple Inc. (NASDAQ/AAPL) and others were busy coming out with new products, BlackBerry did nothing and arrived very late to the party.
Lesson Learned: Before adding a company to their portfolio, long-term investors should see how the company is reacting to its competition.
“Keep going” is the name of the game. At certain points in time, BlackBerry has lacked clear answers and has been slow to act during rough patches. Only recently has it started to get its act together by cutting some costs.
Lesson Learned: If long-term investors do plan to add a stressed company to their portfolio, they need to at least see how willing the company is and what its plan is. Remember, actions speak louder than words.