The Tycoon Report

The Profits in Patience

Good day, folks!

And a good day it is indeed -- well, that is, if you happened to read and take my recommendation a few months ago to buy some stock in RIM (SYM: RIMM).

Whether you followed my advice or not, I’m sure you’re aware of the news that hit the wire last Friday: RIM has finally settled its long-running patent dispute with NTP!

So, for those of you who had the foresight, the confidence in your logic, and the patience to buy and hold this company (even though it’s had its up and downs over the past few months), CONGRATULATIONS. The stock is up nearly 15% today, and up roughly 35% from where I first recommended buying it. I would certainly take profits off the table at this point.

Please understand that I’m not talking about RIM to pat myself on the back. I just want to illustrate a point about investing in general. You can’t let emotion dictate your market operations. So many people were so scared about RIM that they practically gave this stock away, especially when it began to pull back last week.

But great investors are those of us who are able to see clearly through the “fog of war” to find great companies selling for discounted prices. How do you see past the fog of war? By having such a solid understanding of the facts that the headlines become meaningless. Let ignorant investors trade off the headlines and emotions. We’ll make money trading off the ignorant investors.

Let me do a quick recap on why I originally felt RIM was a buy around $60 per share:

1. The stock had dropped from $85 to $60 in roughly 3 months. Most of this was due to a couple pieces of negative news, and the excess pressure the patent dispute was putting on the company.
2. The P/E for the stock was low, relative to its tremendous growth rate.
3. The company had a strong brand name.
4. The likelihood of the company developing a software workaround was likely.
5. And this was the biggest reason: Even if the company was forced to make a payment to NTP, they had $2 billion in the bank.

The settlement wouldn’t have approached that mark, thus leaving the company in great financial health if and when a settlement was reached.

As it turns out, RIM did eventually have a software workaround in place and ready to go. It also turned out that the company reached a settlement with NTP, most of which was already accounted for in an escrow account RIM had previously established. This takes a tremendous amount of pressure off of the stock and off of the company.

I think we can expect to see some great things from RIM going forward this year as the company continues to grow, unencumbered by these legal issues.For those of you who are Tech Stock Insider members, we will certainly have many more recommendations like these coming to you this year.

Until next time, folks ...