Two things have caused plenty of value investors to take a long look at BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY).
The first was the company’s share price. After hitting a high of $241 per share on the Toronto Stock Exchange in 2007, shares have fallen more than 95% in the last nine and a half years. Most value investors are attracted to companies that have fallen that much.
The other is BlackBerry’s largest shareholder, which is Prem Watsa of Fairfax Financial fame. Watsa -- the man many call Canada’s Warren Buffett -- is so famous, many investors simply copy his trades. In other words, if he’s interested, there must be something there.
But BlackBerry doesn’t have many of the other factors value investors look for. The company has a book value of $2.09 billion U.S., or $3.94 U.S. per share. Shares currently trade hands on the NASDAQ for $7.31 per share. If you deduct intangible assets, book value is even lower.
BlackBerry did manage to post positive free cash flow for fiscal 2016, and is poised to do so again once it posts fiscal 2017 results in April, 2017. It has also gotten very close to break-even again on an earnings basis, another encouraging sign.
Management is working on putting some of the company’s $1.3-billion U.S. cash hoard to work buying software companies, which is a smart strategy. BlackBerry made two software acquisitions in 2016 alone.
BlackBerry is very much a turnaround story. Investors may be starting to get impatient, but there’s significant upside potential if CEO John Chen and his management team get it right.
