Why Research in Motion is STILL a buy

Research in Motion (RIMM - $200) - I continue to believe the open end potential for RIMM is huge these next couple of years. The world is expected to have a mind numbing 3 BILLION mobile phone users by 2008. Their opportunity comes from the fact that RIMM has just 9.3 million subscribers out of a potential 3 billion. There is no doubt that the massive shift to smart phones is just getting started. People are moving up to a mobile device that can make a call, email, text message, take photos, listen to music, & surf the web. The newest Blackberry devices do all these things and far cheaper price than the Apple iPhone. I can see RIMM getting to 13 million users quickly (this year)...then increasing another 50% again next year. If (when) they get to 20 million users, it would still be less than 1% of the world market. In addition, RIMM has 2-3 new Blackberry devices coming out in the next 6 months (details are still a secret). This will continue to fuel their growth all over the world (never forget to think global with situations like this).

RIMM’s Blackberry’s are sold in 100 countries on 300 carriers.
The iPhone is sold in just 1 country (U.S.) and by 1 carrier (AT&T).

It took Research in Motion 5 years to get to 1 million Blackberry subscribers. It took 10 months to add the 2nd million. In the last quarter they added over 1.2 million. I expect this pace to continue to pick up steam and there is no reason the can’t start adding 1 million per month in the not too distant future. I have traded RIMM a lot over the last year and recently recommended the December $240 calls to subscribers at $1.45 (currently $8).

61% of the World's Population

Asia - It is estimated that Asia will be home to a staggering 61% of the world's population by 2020. The ramifications of this massive demographic and economic shift are mind boggling. One thing is for sure...their demand for natural resources shows no end in sight. The rise of a middle class, and the massive numbers of young people makes it essential that we continue to focus on companies with a global footprint (especially in Asia). More than half my ideas are based in Asia or have big exposure to their markets.

Favorite Quote

"Lack of money is no obstacle. Lack of an idea is an obstacle."

-- Ken Hukata

Catch Crocs

Crocs (CROX - $43) - These guys may make some of the ugliest shoes in the world, but they are also one of the fastest growing and most profitable companies ever. Look at this sales growth. 2004 sales - $13.5 million. 2005 sales - $108.5 million. 2006 sales - $354.7 million. The estimate for 2007 is for sales of $686 million. Longer term, at least one analyst thinks they have potential to get up to $3 billion in annual sales. How do they do it? Crocs' proprietary closed-cell resin, called Croslite™, enables them to produce a soft and lightweight, non-marking, slip and odor-resistant shoe that are popular with all ages & genders. They have also entered into licencing deals with NASCAR, the NFL, Disney, Nickelodeon, Marvel & various Universities. At a mere $30 a pair, many people buy several pairs to fit their mood (they are now selling 5 million pairs a month). Interestingly, Crocs' "Croslite" technology is not patented, but instead is a trade-secret. The reason they didn't get a patent is so they wouldn't have to share the magic formula and manufacturing process with imitators...much like the recipe for Coke (very smart in my view). People who spend a lot of time on their feet like kitchen staff & nurses live in these things. Kids beg parents to customize their shoes with little $2.50 charms called Jibbitz (Crocs bought this accessory company last year).
Earnings estimates should keep going up along with price targets...this could happen after the recent conference where they announced the new fall line-up with some higher price points and more fashionable shoes. There is also likely to be more Wall Street coverage and support as the company has now passed fad status in a big way. I live in Baltimore and have a friend who works at Under Armour...they just lost a key design person to Crocs. The current highest earnings estimate for 2008 is $4 (meaning the stock sells at just 21x the current est.) I think they have potential to earn $4.50-5 next year. They have beaten earnings est. by an average of 37% the last 4 qtrs. More importantly, they are still being conservative on guidance in my humble opinion. As of May 10th - 25% of the float was still short (what a nightmare for those betting against these guys so far). On factor that doesn't get a lot of attention is, they have a lot more opportunity outside of the U.S. than most currently realize (they currently sell in 70 countries and this is the fastest growing part of the company). See "Think Global" article below. I caught the move from $47 to $70 but feel it is time to get back in this stock. The stock will split 2-1 on June 15th.

Think Global

When thinking about Google, don’t ask yourself if your dry cleaner, owner of your favorite restaurant, dentist or neighbor own GOOG shares (trust me, they don’t – and that’s bullish)…ask yourself if the big institutions who manage trillions of $ around the world in Europe, Asia, North & South America and Asia want (need) to own this stock. The money managers in Tokyo, Honk Kong, Singapore, NY, Chicago, LA, Toronto, Frankfurt, London, Rome, Madrid, Mexico City, Sao Paulo, Zurich, Sydney, Bombay, Riyadh, Dubai, Johannesburg, Moscow, Tel Aviv, Athens, Cairo, Paris, & Beijing are the people who want to own a position in the leading technology company on the globe.

I cannot emphasize this global thinking enough. Those of you who have experience traveling to various places around the world understand what I mean and you have a huge advantage in my view. It is critically important to think about the 95% of the people who do not live in the U.S., and the vast amounts of wealth that there is around the globe. Intellectually of course, I have known this fact and have traded stocks with international exposure many times…but I never really gave it enough weight when making my investment decisions. Unconsciously, I clearly have known this because so many of my favorite stocks have big global business, but I am just now consciously considering these facts and realize there will be no going back to thinking only of what’s hot in the U.S.

The double position of Google (GOOG) June $520 calls recommended to subscribers in my newsletter reached my sell target and were sold at $12 today (we paid $.85). That's 1310%. We still own the July $550 calls.

Ga Ga for Google

Google (GOOG - $500) is ready to rock after a year of underperformance. New services are being rolled out at a very fast pace - Google Docs & Spreadsheets are here now, and presentations are coming this summer; Google Maps are leapfrogging every other online mapping site (now with traffic, free calls to businesses, & customized maps where you can draw, make notes or upload photos); Google Checkout is a sleeper nobody talks about, Blogger (GOOG’s free blogging service) continues to lead; real estate listings and search are now available; free 411 is a huge convenience so we don’t have to pay the phone company $1.50 every time we need the number for the Mexican restaurant down the road; mobile search will be the next frontier; Google Finance is improving all the time; & YouTube is still the go to online video site and will likely get more deals with networks and studios in the months ahead. Their massive cap-ex ($1.9 billion per year) for better and faster search and service for you and me almost guarantees continued leadership. I have been advising out of the money calls to define the risk and get the most bang for the buck.

Goldman is as good as gold

Goldman Sachs (GS - $230.70) - Goldman is the world leader in investment banking, securities trading and principal investments, & investment management services worldwide. They were an advisor in over $1 trillion in deals in 2006. Revenues are now exceeding over $200 million per business day. Profits last quarter were an amazing $51 million per business day. With a PE of just 10 and a market cap of $94 billion, this is very undervalued compared to their revenues and profits (I expect them to make over $25 per share in 2007). They hire the best and brightest from around the world and they are buying back stock hand over fist which should help support the stock in any downturn. Last quarter, they bought back an average of 210,000 shares per day. If MasterCard (MA) can trade at 26x next years earnings estimates, and the New York Stock Exchange (NYX) can trade at 24x earnings estimates, then certainly GS can trade for 12 x earnings (assumed $25 per share) or up to $300 a share. I have been recommending out of the money calls for subscribers.

Nintendo

Nintendo (NTDOY - $44) was originally recommended in the Trade in the Zone newsletter on January 3rd 2007 at $31.35. NTDOY is still in the model portfolio and is still buyable. The Nintendo Wii is the best selling video game console in the world in 2007 and will widen this lead in 2008. The Wii is cool, fun, and easy for the masses. While hard core gamers (male, ages 15-25) will continue buying the Xbox and PS3; the mass market will gobble up millions of the Nintendo Wii (it sells out all over the world as soon as the shelves get re-stocked). Because of the widespread appeal, I believe analysts are way underestimating the earnings power for Nintendo. Girls, women, parents and grandparents all love this game. It's a ton of fun and easy to play because of the natural movement remote controller. Players use the Wii remote controller to mimic the actions of swinging a racket, bat or club, roll a ball down an alley or bring the left jab. This is still the gaming stock to own for 2007.