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RIM, Christmas, and the Fiscal Cliff

Santa-Claus has given investors a nice Christmas rally this year, in an annual investing rite of passage. Like many astute investors, I don’t try to time the market. Since I haven’t had the extra cash to invest or wanted to sell any of my positions, I’ve been quite content to let the dividends roll in. However if we all fall off the Fiscal Cliff in January, I am ready to deploy capital via cash and selling off another chunk of bond ETFs. One thing is for certain, I won’t be buying RIM.

Did You Get Caught Up in RIM?

Research in Motion (RIM)

One year chart for Research in Motion (RIM)

When Research in Motion (RIM) shares sunk to a nine-year low of $6.18 on September 23rd, I had thought about buying a few hundred shares for a swing trade at the $7 mark. That’s certainly not part of my dividend investing strategy. However, there was certainly an investment opportunity with gains to be made. The goal would have been to ride the potential hype on the new BlackBerry 10, then dump RIM shares in January before the release. I’m not ready to take on swing trading, so I decided not to make the trade. Three points held me off, first that there was still further room for more declines. Second, RIM is in the tech sector with struggling sales and margins, and third it simply doesn’t pay a dividend.

Starting with an analyst at the National Bank of Canada, as well as Goldman Sachs, there were numerous upgrades on RIM throughout October and November. RIM shares rose sharply, to close at a high of $13.95 on December 19th, 2012. Many investors started to buy in past the $12 mark, believing they were buying a quality company at a bargain price. However, the bubble burst this morning when the same analyst at the National Bank changed his tune, and downgraded RIM. That sent shares of RIM plummeting some -22.1%, to close today at $10.86 per share, a decline of over $3.09 per share.

The takeaway – don’t get caught up in the hype; keep to the solid dividend paying companies!  You will always beat the hare to the finish line.

Are You Ready for the Fiscal Cliff?

Concerns over resolving the Fiscal Cliff were looming over global markets this morning, with the DOW closing down 120 points for the day, a mere 0.9% decline.  Although more media hype and spin than substance, U.S. political wrangling has been shaking global markets. If there is a market sell-off this coming January, and the Fiscal Cliff materializes, that would be a nice bonus. I’m ready to add capital into my favourite companies if that happens. In the meantime, I’ll just let the dividends roll in. ;)

The Weekly Lineup

Check out these great reads from around the web!

The Dividend Guy analyzed Emera, a Canadian utility, in Emera EMA Dividend Stock Analysis. I agree with Mike, I prefer Fortis. ;)

Dan Mac wrote a stellar post on U.S. Railroads. Check out his detailed analysis of UNP in, An Investment in Union Pacific. Dan also purchased shares of Norfolk Southern recently, as did my friend Dividend Mantra, and I may even do the same.

Dividend Mantra wrote an in-depth and insightful post on his investment approach with Holding vs. Deploying Cash.  Timing the market? Mantra tells you don’t bother. He says take a fundamental view of your portfolio instead.

Over on the Web Ninja, I discussed Buying Blogs vs. Building from Scratch. Even if you’re not buying blogs, I think you will find the comparison to dividend stock investing interesting. Drop by and let me know what you think. ;)

Over on Pat Flynn’s Smart Passive Income blog, Todd Tresidder wrote a phenomenal guest post on How to Profit by Giving it All Away. This is a must read post! I first met Todd at the Financial Bloggers Conference in 2011. He has really stepped up his game since then, publishing his eBooks on Amazon.

Also, just to let everyone know I’ll be writing again for the Canadian MoneySaver Magazine, starting in February.  I missed contributing over 2012, and am delighted to be back onboard. Since Peter Hodson has taken the helm, they have really done a great job of redesigning the site, and taking CMS to the next level. Be sure to go and check them out!

Have a nice weekend everyone! Christmas is almost here. :)

Filed in: The Weekly Lineup Tags: , ,

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13 Responses to "RIM, Christmas, and the Fiscal Cliff"

  1. Hassaan Khan says:

    Dividendninja, looks solid blog! Good Luck!

  2. Ninja,

    Thanks for the mention! I appreciate it.

    That RIM roller coaster looks like something that would make my stomach queasy. No thanks! I’d rather put the future of my investment in the hands of a company that has a long history of making money and returning that cash to shareholders – not an analysts predictions.

    Have a great weekend and a wonderful holiday!

  3. Dan Mac says:

    Thanks for the mention Dividend Ninja. I tried my hand at swing trading awhile back before finding my way to dividend growth investing. I didn’t have much luck and ended up picking more losers than winners. I believe dividend growth investing to be the better strategy over the long term and I’m glad I figured it out.

    • Dan, thanks! I have never taken the plunge into swing trading. I just feel its too much of a gamble, and there is the problem as you mentioned. You may win once, but you can easily lose more times than not.

      I’m also glad I found the dividend investing strategy. As tempting as it was to buy RIM at $7 I am glad I didn’t. I may have gotten over-confident, and then lost on the next one. I’m glad I got this out of my system…

      Right now I am very pleased with my results following the dividend growth strategy. And my index investments are doing well too.

      Cheers

  4. Marvin says:

    I have been a long term owner of RIMM and am so happy to be rid of my shares. When I purchased shares it was an absolute value trap. The company has a SOLID balance sheet but a deteriorating product/service. With that said I have written calls on RIMM for the past year and FINALLY had them called away during this rally.

    • Marvin, I’m assuming that is a good thing, since I don’t use call options. ;)

      All the best,
      Cheers

      • Marvin says:

        Definitely a good thing! I’m so glad I’m done with RIMM, never again will I get caught in a value trap.

        • Staples Inc. (SPLS) was my value trap. Great management and a great company, but the low profit margin was the red-flag I should have paid real attention to. It just couldn’t produce the earnings.

          I’ve decided since then I’m not looking to try and play the value game or try to second guess the market. I’m going to stick with the solid dividend paying companies, diversify my portfolio, and keep to fundamentals. I won’t be the first to the finish line, but I won’t be the last either.

          Cheers, Merry-Xmas btw. :)

  5. I am not sure about RIMM. But, I have a feeling that AAPL will likely follow RIMM’s footsteps in a few years..

    • DGI, while a few years off, this is something I completely agree with. ;) People forget that every successful product Apple created was under Steve’s Jobs helm. In fact I argued that point specifically:

      http://www.dividendninja.com/should-you-take-a-bite-into-apple-aapl

      The other point that many dividend investors keep throwing around with AAPL is that it has a low PE Ratio. So what, all tech companies have low PE Ratios. It doesn’t mean anything. Just don’t tell Six Figure Investor I said that, he gets upset when I criticize AAPL. Though I still think its a great company. ;)

      Season’s Greetings DGI and thanx for the continued support!
      Cheers

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