Monday, May 31, 2010

Research In Motion 2

This is not my usual stock (TSX-RIM, NASDAQ-RIMM), but I do like tech stocks and I do like investing in something more interesting than banks and utilities. I first bought this stock in December 1999. I sold some in 2006 and some more in 2007. To date, I have made a return of 21% per year on this stock. I will eventually sell this stock, as non-dividend paying stock is not the sort I keep for the long term.

Whenever you look at Insider Buying and Insider Selling on this stock, you always find a ton of insider selling. During the last year, there has been some $407M of insider selling. However, this only amount to 1% of the market value of the stock. Insiders seem to be getting lots of stock options and they are selling them off as soon as possible. The CFO and other officers of this company seem to have more stock options than shares. CEOs have lots more shares than options. The directors also have more shares than options.

When I look at the 5 year average Low P/E ratio it is 18.2 and the 5 year average High P/E ratio is 40.4. So a current stock price of $63.60 gives a P/E ratio of 10.7 and this shows a relatively good price. Also, P/E ratios around 10 are good in absolute terms. When I look at the Graham Price, I get one of $42.81 for 2010. This is some 49% below the current stock price. Since the stock price is usually much higher than the Graham Price, the current stock price is relatively good. However, a good absolute stock price is one that is at or below the Graham Price.

When I look at the Price/Book Value Ratio, I find that the current one of 4.21 is some 80% of the 10 year average P/B Ratio of 5.23. This also shows a relatively good current stock price. Since this stock has no dividends, we can not look at that measure. However, the good thing about this stock is that both the Revenues and Cash Flows are growing. The thing I do not like is the high Accrual Ratio. When it is over 5%, you have to wonder about the quality of the earnings. The current Accrual Ratio on this stock is 8.7%.

When I look at analysts’ recommendations, they cover Strong Buy, Buy, Hold, Underperform and Sell. The vast majority of the recommendations are Strong Buy and Hold. The consensus recommendation would be a Strong Buy. (See my site for information on analyst ratings.) It is obvious there is a huge diversity of opinions on this stock. Most of the analysts seem to like this stock. However, the ones that do not, worry about the competition they will get from Apple.

I am happy with this stock and for the moment will retain what I have left. However, since this is not a dividend paying stock, I will sell at sometime in the future.

Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, internet and intranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific. Its web site is here RIM. See my spreadsheet at rim.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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