Why did Blue Ridge Capital buy Blackberry shares in 3Q 2013?
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According to 13Gs Blue Ridge Capital filed last month, the hedge fund disclosed new positions in Zulily (ZU) and PBF Energy (PBF). The filings stated that Blue Ridge currently owns 6.05% in Zulily, with 799,811 shares, and a 7.82% stake in PBF, with 3,095,000 shares.
A November 13G filing showed that Blue Ridge increased its position in Avis Budget Group (CAR) and at present owns a 6.17% stake, with 6,613,700 shares.
For more information on Blue Ridge Capital and its investment strategy, please see the last part of this series.
Blue Ridge Capital’s top new buys in 3Q 2013 per its 13F filing were American Homes 4 Rent (AMH), Tesla Motors Inc. (TSLA), Cliffs Natural Resources (CLF), and BlackBerry Ltd. (BBRY). The hedge fund exited its positions in Owens Corning (OC), Equinix Inc. (EQIX), and Realogy Holdings Corp. (RLGY).
Blue Ridge Capital’s two largest stock holdings are Priceline.com Inc. (PCLN) and American International Group Inc. (AIG), which account for 4.88% and 4.52% of the hedge fund’s portfolio, respectively.
Why buy Blackberry (BBRY)?
The Canada-based mobile handset maker Blackberry Ltd. is a 0.22% position in Blue Ridge’s 3Q 2013 portfolio.
Blackberry posted a $4.4 billion loss in 3Q 2014, and its smartphone sales have fallen. But the company’s share prices rose 17% after earnings results, as CEO John Chen said Blackberry will eventually post a profit on the back of a new manufacturing deal with China’s Foxconn. The company has struck a joint device development and manufacturing agreement with Foxconn. The initial focus of the partnership is developing a consumer smartphone for Indonesia and other fast-growing markets in early 2014.
Revenue for 2Q 2014 was approximately $1.2 billion, down $380 million or 24% from approximately $1.6 billion in the previous quarter and down 56% from $2.7 billion in the same quarter of fiscal 2013. According to Chen, “While our Enterprise Services, Messaging and QNX Embedded businesses are already well-positioned to compete in their markets, the most immediate challenge for the company is how to transition the Devices operations to a more profitable business model.” The company saw a number of management changes last year. It rebuffed buyout offers and took the private route to raise $4.7 billion or $9 per share from a private investment group led by Toronto-based insurance firm Fairfax Financial Holdings.
Analysts have remained largely neutral on the stock, as they believe the company has a huge challenge ahead because the market is highly competitive, with many players such as Apple, Samsung, and Google.