Yahoo Finance Market Lessons: What a big BlackBerry win can tell you about investing
Market Lessons is a series that explores the biggest wins, losses and lessons across a variety of investor experiences. We spoke to Alex Sasso, chief executive officer and small-cap portfolio manager at NCM Investments, a Toronto-based money management firm, about the biggest win of his career.
Inside the investment: Betting on the first BlackBerry
The biggest win of Sasso's investing career came during his private equity days in the mid 1990s, when the company he worked for invested in what was then a relatively unknown firm called Research in Motion (RIM), well before it became known as BlackBerry (BB)(BB.TO).
It was the two-way pager rolled out by RIM in 1996 that got Sasso excited about the company. At the time, the pagers were mostly being used in large factories.
"We thought that the two-way pager could be something more," he said.
"In dealing with the company, and getting to know (management) a little better, we started to see the commercial and consumer applications. Then they merged the two-way paging aspects to email, voicemail and that was kind of the Holy Grail."
BlackBerry becomes the most valuable company in Canada
"It became one of the biggest names of any tech company in the world. We had a brilliant entrepreneur, a very business-minded CEO, and it was a great combination," Sasso said.
The spectacular rise and fall of RIM's BlackBerry is a story Canadians know well (and was recently given the movie treatment with Matt Johnson's film BlackBerry.)
Not long after Sasso's investment, the company debuted its pager featuring email, called the BlackBerry 850, in 1999. From there, RIM grew to become the world's biggest smartphone maker. At its peak, the company – which formally changed its name to BlackBerry in 2013 – was one of the world's biggest smartphone producers. In 2007, Research in Motion briefly held the title of the most valuable Canadian company, based on market capitalization, with a valuation at the time of around $67 billion.
"Unfortunately, they didn't see the benefit of open-sourced apps to the platform and especially in the consumer world. In the consumer world, those apps really helped Apple differentiate itself," Sasso explained.
The rest is history.
BlackBerry officially stopped making smartphones in 2022, and today makes software for cars and cybersecurity. It has a market cap on the Toronto Stock Exchange of about $4 billion. Bloomberg reported last month that private equity firm Veritas Capital made an offer to buy the company a few months after the former smartphone maker began a strategic review.
Still, given how early it was, the investment more than paid off, even after the decline of BlackBerry.
"We had sold (our stake in BlackBerry) at different times, but we sold well before the writing was on the wall that Apple was going to win that war," Sasso said.
While Sasso doesn't get into the specifics in terms of how large the investment was (he no longer works for the private equity firm that made the investment in RIM), he says the return reached a high of 50 times what his company had initially invested.
So, what's the lesson?
Throughout his career, Sasso says the biggest wins and losses have come in the private equity world, but that these massive RIM-type wins don't happen as often as people may think.
"I want to emphasize that this kind of win is extremely rare," Sasso said, adding that he's had many "multi-baggers" throughout his career – stocks that have multiple returns on the investment – "but I don't think I have had anything close to 50 times."
"There's no such thing as 100 per cent probability. There's no such thing as getting on base every single time you get up to bat," he said.
Today, Sasso is not focused on trying to find the next RIM. He says he aims to take the emotion out of investing, focusing on quantitative analysis, learning a company's fundamentals and reading its financial statements to determine its value.
"You will invest in companies that underperform, you will invest in companies that outperform. You have to be disciplined. It can't just be 'I have a really good feeling about this management team, or a really good feeling about this upcoming product.' You need to have more of a balance and really strong discipline," he said.
"You have to dig deep. Get to know the company, get to know the competitors of that company."
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj. If you have a story about an investing win or loss you'd like to share, feel free to email her.
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