BlackBerry Straddles the Line Between Gastronomy and Scatology

As my harshest critics love to point out, I am apparently the dumbest contributor for InvestorPlace. If it makes anyone feel better, I genuinely try not to be. But BlackBerry (NYSE:BB) is certainly a case where that accusation fits sadly enough. I gambled on BB stock and I am currently holding a bag of canine excrement.

A BlackBerry (BB) sign out front of a corporate office in Silicon Valley, California.
Source: Shutterstock

Before we get into this sordid tale of my second career in scatology, I’d like to explore my other favorite topics of investor psychology and what I would term variable intelligence.

Several months ago, I decided to take an IQ test but under extremely difficult circumstances. When taking the test, I deliberately made sure I was tired, hungry and just plain miserable. The reason? I knew from various resources, including Psychology Today, that under duress or other forms of emotional stressors – excitement, anger, depression – you tend to lose about 10 to 15 IQ points.

Essentially, I stress-tested my IQ. And while on social media, I may be intellectually deficient, on paper, I was quite pleased with my results. That said, I must have really been under severe emotional pressure when I bought BB stock.

Thinking back to that moment – and I placed a limit order, which makes the situation all that worse for me – I knew better than to execute the trade. Yeah, there is, as a longshot argument, a fundamentally bullish case for BB stock. The underlying company offers technical solutions for our increasingly digitalized and connected economy. But that was no excuse for my usually disciplined self.

I took a bet on the short squeeze and meme stocks phenomenon. Yeah, I had a case of the FOMOs or fear of missing out. Now that I’ve come down from my heightened emotional state, I wish I missed out or WIMO.

BB Stock Is a Trade on Collective Emotions

Interestingly, InvestorPlace analyst Thomas Yeung, who is one of the brightest assets on our team, stated that BB stock “will emerge as the clear long-term winner” of the Reddit-inspired meme stock craze. By that, he specifically called to attention GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC).

For full disclosure, I own both GME and AMC. Moreover, I bought into these shares well before the term meme stock existed. One obviously did very well for me and the other – not so much. Such is the fate of gambling on meme stocks.

Anyway, Yeung points out that BB stock has longer-term relevance because the underlying company offers cybersecurity software solutions which may end up dominating the Internet of Things and connected vehicles.

Looking at his disclosures, he doesn’t have a dog in this fight so he’s definitely not emotionally vested in BB stock. Thus, with his unhindered intellect and acumen at work, he may be onto something. We’ll see.

A Lot to Prove

Personally, I believe BlackBerry has a lot to prove. With the company disappointing in revenue growth over the years combined with its frequent red ink on the net income line, I’m not really sure if analyzing the fundamentals makes sense for an investment like this.

That’s because the fundamentals are not what’s driving sentiment these days. I’ve been pointing this out a lot and I’ll continue to do so. According to data from FINRA, equities trading on margin has hit the highest point on record. Arguably, if investors at large were soberly analyzing both corporate financials and the real picture of the domestic and global economy, they wouldn’t lever up like they have.

Look at it this way. Year-over-year in January, stock trading on margin increased 42%. In other words, this may be one of the few times in history where leverage increased – and dramatically so – after a calamity.

As an example, between September 2001 and September 2002, stock trading on margin decreased nearly 56%, just like you’d expect.

Maybe an Opportunity for One Last Swing

Fortunately, I did listen (partially) to my better angels. I didn’t gamble that much. So my losses are very minimal – I treated the exercise as a pull of the lever at a Las Vegas casino.

But perusing through social media posts, I can see that my approach was not the normal one. People are piling into meme stocks for God knows what reasons, if any at all.

So forget the income statements and balance sheets and analyst projections – it’s all nonsense at this point. You’ve got to respect the current environment, which incentivizes and emboldens risk taking. In that context, BB stock could have one last swing at greatness.

You treat it as a gamble – maybe, just maybe – it will work out for you, just like GameStop stock is apparently back in business. But learn from my mistake as well. Scatology is not a fun business.

On the date of publication, Josh Enomoto held a long position in BB, GME, AMC.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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