Saturday, November 10, 2012


In a recent meeting, a colleague who is a Blackberry fan remarked that the trade to put on is to buy RIMM and short AAPL, largely on the basis of positive buzz about the newest device, the Blackberry 10. At that point, I shuddered. Putting on such a trade has two implicit bets:
  1. Apple (AAPL) is losing its franchise and competitive edge
  2. RIMM's Blackberry 10 will be a big winner
While AAPL's stock price has been deflating lately, talk that it is losing its competitive edge may be premature. To double down and then bet on the Blackberry 10 is like putting your money down on a long-shot exacta at the track - a risky proposition.

To be sure, this pair trade has shown a positive reversal and it does show recent positive momentum in favor of RIMM. The pair has been in a long relative downtrend as AAPL has outperformed RIMM for over five years. If you were to look at this chart, how confident are you further upside?

A more risk controlled pair
I suggested to my colleague that a better risk-controlled pair trade would be to buy RIMM and sell NOK. Both are perceived to be failing brands among wireless device makers, though RIMM is exhibiting positive momentum.

The pair is in a relative uptrend in RIMM's favor and there is more potential upside.

Warning: This is not a high conviction idea for me, but if someone wanted to speculate on the Blackberry 10, this is probably a better and more risk-controlled way to make that bet.

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.

1 comment:

Anonymous said...

Actually, I would do the opposite. Sell RIMM, Buy NOK. Nokia has the low end market in developing countries - I dont believe that everyone will have a smartphone in the next 10 yrs so while they may be a smaller company, they will still be alive. Yet RIMM may be gone in 5 years with all the competitors.